Shifting Landscape: Small Employers Lead Change in Pharmacy Benefit Managers

The landscape of pharmacy benefit managers (PBMs) in the United States is undergoing a transformative change, particularly among small employers. According to the 2026 Pulse of the Purchaser survey conducted by the National Alliance of Healthcare Purchaser Coalitions, there has been a significant drop in the percentage of employer-sponsored health plans utilizing one of the three largest PBMs—CVS Caremark, Express Scripts/Evernorth, and OptumRx. This decline, from 63.4% in 2025 to 54.3% in 2026, marks a pivotal moment that is largely driven by smaller employers, those with fewer than 1,000 employees. Understanding the implications of this trend is crucial for both employers and employees, as it signals a shift towards greater scrutiny of healthcare costs and contract terms in a market that has historically favored larger entities.

The survey, which included responses from 408 employers, highlights a growing discontent with traditional PBMs, particularly among smaller organizations. The findings reveal that the proportion of small employers utilizing one of the Big Three PBMs plummeted by 26 percentage points, from 69.7% in 2025 to just 43.8% in 2026. This movement reflects a broader concern regarding transparency, cost-effectiveness, and the overall management of pharmacy benefits, as these employers seek better options for their healthcare spending.

Understanding the PBM Landscape

Pharmacy Benefit Managers serve as intermediaries between insurers, pharmacies, and the pharmaceutical industry, playing a crucial role in managing drug benefits for health plans. They negotiate discounts and rebates with drug manufacturers and pharmacies, aiming to control costs for plan sponsors and ultimately for patients. However, the complexities and lack of transparency in PBM operations have led to growing scrutiny and dissatisfaction among employers, especially smaller ones.

Current Market Dynamics

The recent survey data signifies a notable shift in the market dynamics surrounding PBMs. While larger employers tend to remain with the Big Three due to their capacity to handle high volumes of claims effectively, smaller employers are increasingly exploring alternatives. Among mid-sized employers (1,000 to 9,999 employees), the usage of the Big Three remained relatively stable at around 51%. In contrast, the largest employers, those with 10,000 or more employees, experienced a slight decrease from 75% to 72.1%, which the report regarded as not statistically significant.

• Small Employers (under 1,000 employees): 43.8% using Big Three PBMs in 2026
• Mid-Size Employers (1,000-9,999 employees): 51% continue with Big Three
• Large Employers (10,000+ employees): 72.1% using Big Three

The Role of Transparency and Contractual Concerns

Transparency in PBM contracts has emerged as a critical issue for employers. The survey revealed that among clients of the Big Three PBMs, 23.4% were uncertain about the terms of their contracts, compared to only 11.7% of those using alternative PBMs. This lack of clarity can lead to significant implications in terms of costs and the overall management of drug benefits.

Contract Protections: A Comparative Analysis

When it comes to specific contract protections, the differences are stark. For instance, only 21.3% of Big Three clients reported having no-spread pricing terms, versus 38.3% among other PBMs. Similarly, regarding the disclosure of affiliated entities and lowest-net-cost formulary designs, the Big Three showed significantly lower percentages. This discrepancy highlights the advantages that smaller PBM alternatives may offer in terms of contractual protections and transparency.

Fiduciary Concerns and Employer Sentiment

Fiduciary duties refer to the legal obligation of PBMs to act in the best interests of plan sponsors and their members. The survey indicated that 36% of Big Three clients expressed concerns about the integrity of PBM administration, whereas only 12.9% of those with other PBMs shared similar concerns. Additionally, when it came to the reasonableness of PBM compensation, 34.8% of Big Three clients raised red flags compared to just 12% from smaller PBM users.

The Impact of Regulatory Changes

The recent enactment of the Consolidated Appropriations Act, 2026 (CAA 2026), introduces significant changes to the PBM landscape. Set to take effect in 2029, the CAA mandates that PBMs pass through 100% of rebates to ERISA-governed group health plans, eliminates spread pricing, and requires detailed disclosures regarding drug pricing and compensation. These regulations are poised to enhance transparency and foster competition in the market, ultimately benefiting employers and employees alike.

Future Implications for Employers and Brokers

The findings from the National Alliance survey indicate a growing momentum among smaller employers to reconsider their PBM relationships. With 87.6% of employers identifying PBM reform as critical in addressing healthcare affordability, brokers have a unique opportunity to assist clients in navigating this landscape. Brokers who initiate PBM contract reviews now can position themselves and their clients to leverage the new rights afforded by the CAA 2026 when it takes effect.

Strategic Considerations for Employers

As smaller employers take the lead in exploring alternative PBMs, they must consider several factors:

• Contract Transparency: Seek PBMs that provide clear and comprehensive contract terms.
• Cost Management: Evaluate potential savings from alternative PBMs without compromising service quality.
• Data Access: Ensure full access to pharmacy claims data to make informed decisions.
• Compliance with CAA 2026: Prepare for upcoming regulatory changes to maximize benefits.

Key Takeaways

• Small employers are increasingly moving away from the Big Three PBMs.
• Transparency and contract terms are critical factors influencing employer decisions.
• Upcoming regulatory changes will enhance PBM accountability and transparency.
• Employers and brokers should proactively review PBM contracts to prepare for future reforms.

Frequently Asked Questions

What are Pharmacy Benefit Managers (PBMs) and what role do they play?

Pharmacy Benefit Managers act as intermediaries in the healthcare system, managing pharmacy benefits for health plans. They negotiate pricing and rebates with drug manufacturers and pharmacies, ultimately aiming to reduce costs for plan sponsors and members. However, their operations have faced scrutiny regarding transparency and the actual savings provided to employers and their employees.

Why are small employers switching away from the Big Three PBMs?

Small employers are increasingly dissatisfied with the lack of transparency and unfavorable contract terms associated with the Big Three PBMs. Many are seeking alternatives that offer better contract protections, clearer pricing structures, and a more straightforward approach to managing pharmacy benefits. The recent survey indicates a growing trend among these employers to explore non-Big Three options that align better with their cost-containment goals.

How will the CAA 2026 impact PBM operations?

The Consolidated Appropriations Act, 2026, will bring significant changes to PBM operations, requiring them to pass through 100% of rebates to group health plans and eliminate spread pricing. These provisions aim to enhance transparency and accountability in the PBM industry, making it easier for employers to understand their costs and negotiate better terms. The changes are set to take effect in 2029, providing employers time to prepare for the new regulations.

What should employers consider when evaluating PBM options?

Employers should prioritize contract transparency, cost management, and data access when evaluating PBM options. It's crucial to assess the terms of service, the ability to access pharmacy claims data, and the potential for cost savings. Additionally, employers must stay informed about upcoming regulatory changes to leverage new rights and protections afforded by legislation such as the CAA 2026.