This article is part of Frier Levitt’s D2E Conference Insights series, highlighting key discussions from the inaugural Direct-to-Employer Conference co-hosted by Frier Levitt and the Northeast Business Group on Health (NEBGH).
At the Frier Levitt-Northeast Business Group on Health, Direct-to-Employer Conference, in New York City, a panel moderated by Frier Levitt Equity Partner Jesse Dresser explored one of the most significant developments in employer-sponsored healthcare: the growing movement toward direct-to-employer (DTE) pharmacy arrangements that bypass traditional pharmacy benefit manager (PBM) structures. The discussion featured Mark Cuban, Co-Founder of Cost Plus Drugs; Lisa Mostovoy, Founder of Onsera Health; Ryan Baker, Senior Vice President of Premise Health; and Jonathan Levitt, Co-Founder of Frier Levitt.
The panelists discussed a common concern among employers and plan sponsors: traditional PBM arrangements often leave employers with limited visibility into pharmacy pricing, rebate flows, formulary decision-making, and claims-level data. As prescription drug costs continue to rise, particularly in the GLP-1 and specialty drug markets, employers are increasingly evaluating alternative models that offer greater transparency, accountability, and control. Worst of all, traditional PBM relationships have sometimes limited employers’ access to innovative, lower cost structures being offered by manufacturers directly. Each of the panelists discussed the unique solutions that have emerged in the marketplace.
Employers Are Looking Beyond the Traditional PBM Model
Direct-to-employer pharmacy arrangements are gaining traction because they offer employers a potential path around some of the structural challenges associated with traditional PBM contracting. Emerging models include transparent cost-plus pharmacy arrangements, direct manufacturer contracting programs, onsite and near-site pharmacy services, and population health programs designed to improve medication adherence and long-term outcomes.
While these models differ operationally, they share a common objective: reducing unnecessary intermediary costs and giving employers greater insight into how pharmacy dollars are spent. The growing willingness of manufacturers and pharmacy providers to contract more directly with employers also signals a broader shift in the market, particularly in high-cost therapeutic categories where traditional PBM pricing structures may be difficult for employers to evaluate or sustain.
Data Access and Audit Rights Are Central Legal Issues
One of the clearest takeaways from the panel was that employers cannot effectively manage pharmacy spend without access to meaningful data.
Many employers bear the financial risk for prescription drug costs but remain dependent on PBM reports that may not provide sufficient claims-level detail or insight into upstream relationships. Without transaction-level data, employers may be unable to identify cost drivers, evaluate rebate arrangements, assess utilization trends, or determine whether their pharmacy benefit arrangement is performing as promised.
Audit rights are equally important. Employers should carefully review PBM agreements to determine whether they have the right to conduct meaningful, independent audits; access detailed claims data; evaluate pricing benchmarks; and review rebate and compensation arrangements. Audit provisions that appear strong on paper may be limited in practice if the PBM controls the auditor selection process, restricts data access, or narrows the scope of review.
DTE Strategies Require Contractual and Fiduciary Review
Direct-to-employer pharmacy arrangements may offer significant opportunities, but they also require careful legal and strategic planning. Existing PBM agreements may contain carve-out restrictions, exclusivity provisions, data access limitations, rebate-related terms, or other contractual barriers that affect an employer’s ability to implement an alternative pharmacy model.
For self-insured plans, these issues also implicate ERISA fiduciary considerations. Employers and plan fiduciaries should evaluate pharmacy benefit decisions through a prudent governance process, including review of contract terms, compensation structures, data access rights, audit rights, and available alternatives. As scrutiny of PBM practices continues to increase, employers should be prepared to demonstrate that their pharmacy benefit decisions are informed, documented, and aligned with the interests of plan participants and beneficiaries.
Price Transparency Is Only Part of the Equation
Although transparent pricing is a central feature of many DTE pharmacy models, panelists emphasized that price alone should not define success. Employers should also evaluate medication adherence, patient engagement, clinical outcomes, employee experience, and downstream medical spend.
Models that integrate pharmacy services with primary care, care management, and population health strategies may be better positioned to generate long-term value than models focused solely on reducing unit drug costs. In this sense, the most effective DTE arrangements may be those that combine pricing transparency with measurable clinical and financial outcomes.
What Employers Should Do Now
Employers and plan fiduciaries evaluating pharmacy benefit strategies should consider the following steps:
- Review existing PBM agreements for audit rights, data access provisions, carve-out restrictions, and rebate-related terms.
- Obtain and analyze detailed pharmacy claims data before pursuing alternative contracting arrangements.
- Assess whether direct contracting opportunities may be appropriate for high-cost medications and specialty drugs.
- Evaluate whether current PBM arrangements provide sufficient transparency into pricing, rebates, formularies, and compensation flows.
- Document pharmacy benefit decisions as part of a prudent fiduciary governance process.
- Consider whether alternative pharmacy models can improve both cost transparency and clinical outcomes.
Engage Experienced Pharmacy Benefits Counsel
As direct-to-employer pharmacy models continue to evolve, employers must navigate a complex landscape involving PBM contracting, pharmacy claims data access, audit rights, ERISA fiduciary obligations, direct manufacturer relationships, rebate structures, carve-out strategies, and regulatory compliance. Successfully evaluating or implementing these arrangements requires careful legal and strategic planning.
Frier Levitt represents self-insured employers, health plans, fiduciaries, union funds, and other healthcare stakeholders in matters involving PBM contracting and audits, pharmacy benefit compliance, data access disputes, direct contracting arrangements, ERISA fiduciary issues, and emerging pharmacy delivery models. Our attorneys regularly advise clients on strategies to improve transparency, reduce pharmacy spend, negotiate favorable contractual terms, and mitigate legal and operational risk.
To learn how Frier Levitt can assist your organization in evaluating direct-to-employer pharmacy strategies, auditing PBM arrangements, negotiating pharmacy-related contracts, or navigating the evolving pharmacy benefits landscape, contact Frier Levitt’s Healthcare Law team.
