As a self-funded employer, figuring out how best to manage your pharmacy benefits is one of your most important choices. Do you keep things simple by bundling them with your medical plan under one carrier, or do you “carve them out” and choose to manage them by contracting directly with a pharmacy specialist instead?
This decision shouldn’t be about convenience alone. It can have a big impact on your costs and long-term control. And, bundling everything together often masks your customization options.
In fact, more employers are taking notice of carve-out models according to recent research. They are being driven by a desire for greater transparency, flexibility, and expert support. As awareness grows and the push for cost control and clarity continues, turning to a pharmacy specialist continues to be a popular move for those who want real insight and savings in their benefits plans.
The limits of the integrated carrier model
Integrated carriers often present a simplified “bundling” experience, rolling medical and pharmacy benefits into one package. The sales pitch suggests that their scale will lead to cost-effective rates,easier management, and improved outcomes. However, this can come at a high price.
One major issue is limited flexibility. Integrated carriers typically provide standardized, off-the-shelf pharmacy solutions. This one-size-fits-all model restricts an employer’s ability to tailor a plan that meets the unique needs of their workforce.
Another concern is lack of transparency. These large carriers can exert significant control over drug pricing, which often means less visibility into actual pharmacy costs, rebate strategies, and overall plan performance. Limited pharmacy specific reporting is often cited as a concern as well. Without clear data, it’s impossible to know if you’re getting a competitive deal and how your plan is performing.
Finally, conflicts of interest can arise, as many integrated carriers own their specialty or mail-order pharmacies. This can lead to preferential practices, such as requiring members to use these affiliated pharmacies, which may not be the most cost-effective or convenient option.
The advantages of carving out your pharmacy benefits
By separating pharmacy benefits from medical coverage, employers gain a significant advantage. A carved-out model puts the focus squarely on managing prescription drug costs and improving member care. This approach aligns with several key client priorities:
- Greater cost control: Carving out provides direct visibility into cost structures and contract terms. This transparency ensures sustainable savings and allows for more rigorous negotiation and auditing.
- Enhanced flexibility: A pharmacy-focused partner can tailor solutions to the specific needs of your company and its employees, rather than locking you into a rigid, long-term contract.
- Dedicated clinical expertise: Independent clinical experts, motivated by patient care rather than corporate profits, can deploy advanced strategies to manage high-dollar specialty medications and address unique cost-containment goals.
- Uncompromised focus: A dedicated pharmacy benefits partner puts innovation and expertise at the forefront. Their sole mission is to optimize your pharmacy plan, ensuring it receives the same diligence as your medical benefits.
From soaring costs to sustainable savings: a real-world example
The story of a California-based home healthcare provider with 1,600 members powerfully illustrates the difference a carved-out approach can make. The provider partnered with RxBenefits successfully for five years but were lured back to their former integrated medical carrier by the promise of lower medical fees.
The result? Pharmacy costs surged. The lower medical fees did little to offset rising drug prices and uncontrolled specialty spending. Within the first 18 months with the carrier, their per-member-per-month (PMPM) cost had ballooned from $60.25 to $90.21 – a nearly 50% increase. And, their total spend on specialty drugs increased from 37% of their total pharmacy spend to 58.3% of their total spend.
Recognizing the need for a change, the company re-engaged with RxBenefits. The impact was immediate and dramatic. By the third quarter of their renewed relationship, their PMPM had dropped to $66.25 and specialty spend was reduced to 44.7% of the total. This turnaround was achieved by returning to a partner with a client-aligned financial model, flexible contracts, and transparent reporting – advantages the integrated carrier simply couldn’t offer.
Why a carved-out model makes a difference
This client success story highlights a clear lesson: for employers seeking maximum value, the advantages of a carved-out pharmacy benefits partner are unmatched. While integrated carriers promise simplicity, a specialized partner delivers tangible results with industry-leading focus, savings, and transparency without sacrificing member care.
Rather than accepting rising costs as inevitable, you can act now to ensure your pharmacy benefit arrangement is working for you. The first step is to evaluate your current plan’s performance and compare it to a carved-out alternative. Making a strategic choice that aligns with your objectives is the best way to secure a sustainable, cost-effective pharmacy plan.
Learn more:
- The HR Leader’s 3-Step Guide to Optimized Pharmacy Benefits, Nov. 20, 2025
- Four Strategies for Managing GLP-1 Cost Trends, Nov. 10, 2025
- 5 Questions to Test a Pharmacy Plan’s Transparency, Sept. 3, 2025
