Healthcare costs continue to climb with the average per-person expense rising 6.7%—from $7,378 in 2024 to $7,871 in 2025. This increase is being driven primarily by two categories: pharmacy and outpatient facility care. Pharmacy costs alone grew by 9.7%, while outpatient facility care costs have risen by 8.5%. Collectively, these service areas are responsible for 69% of the year-over-year cost increase for the average individual.1
These rising costs can place significant financial pressure on health plans, employers, and patients alike. Rising pharmacy costs, in particular, are a complex area, with new high-cost therapies, increased utilization, and shifting coverage all contributing to the challenge. Without clear visibility into what’s driving these expenses, organizations risk making decisions based on incomplete or outdated information.
1. The rise of biologics in pharmacy management
Biologic drugs (many of which are specialty medications) are complex therapies derived from living organisms. They have become a cornerstone of modern medicine, particularly in the treatment of chronic and complex conditions such as cancer, autoimmune diseases, and rare genetic disorders. Their ability to target disease pathways with precision has led to remarkable clinical advancements and improved outcomes for many patients. However, demand for these innovations also comes at a significant financial cost. In 2021, spending on biologics in the United States was approximately $260 billion, accounting for just under half of the nation’s total drug expenditures.2 Spending on biologics has risen considerably due to greater adoption of these treatments and their generally higher costs compared to traditional small-molecule drugs.
2. Harnessing the potential of biosimilars
Unlike traditional small-molecule drugs, which can be easily and inexpensively replicated as generics once their patents expire, biologics are large, structurally complex molecules produced by living organisms that cannot be precisely duplicated. Instead, manufacturers develop biosimilars—products that are highly similar to the original reference biologic in terms of safety, mechanism of action, efficacy, and strength. These have no clinically meaningful differences from the reference product, but are not identical, because minor differences will naturally occur between batches produced from living sources. The introduction of biosimilars was intended to foster competition and help lower costs, much like generics have done for small-molecule drugs. The development process for biosimilars is rigorous and costly due to the complexity of biologics, involving extensive analytical, preclinical, and clinical studies to obtain U.S. Food and Drug Administration (FDA) approval by demonstrating similarity and comparable efficacy to the reference biologic product.
As of May 2025, the FDA has approved a total of 72 biosimilar products across a range of therapeutic areas, signaling significant progress in this market segment.3 According to Health Affairs, an estimated 76% of commercial payers’ coverage policies listed two or more products (originator or biosimilar) as first-line options. However, there are several challenges that have slowed the uptake of biosimilars. As barriers to adoption are addressed and more biosimilars enter the market, their role in managing specialty drug spending is expected to grow, offering new opportunities for healthcare stakeholders to optimize value and improve patient care.
In some cases, biosimilars are approved for only a subset of the indications held by the original reference product, meaning they may not be used for all clinical uses. This can complicate formulary decisions and the adoption of biosimilars in healthcare settings.
3. Leveraging analytics for improved utilization management
Finding opportunities to optimize pharmacy drug utilization and spending is where advanced analytics can provide valuable insights.. By analyzing historical utilization data, patient populations, and prescribing patterns, analytics can help payers and providers anticipate the potential impact of switching to biosimilars. These insights can inform strategic planning, optimize cost savings, and ensure the continued delivery of safe and effective care to patients.
By harnessing comprehensive data and sophisticated analytical tools, healthcare organizations can accurately identify the drivers behind rising pharmacy spend, spot utilization trends, and reveal new opportunities for cost control. Analytics equip decision-makers to create targeted strategies, such as refining formulary management, enhancing utilization protocols, and pinpointing members who may benefit from alternative therapies.
For example:
- Formulary strategies: Multi-tier formularies improve access to and management of preferred drugs, supporting effective utilization and optimal care outcomes. Pharmacy and Therapeutics (P&T) committees—comprised of clinical pharmacists and medical professionals—can use analytics to evaluate safety and efficacy evidence, monitor current utilization patterns, identify adverse events, and assess cost profiles. By leveraging analytics, these committees can make more informed, data-driven decisions when selecting preferred drugs for the formulary and developing Clinical Practice Guidelines that reflect the latest insights and trends.
- Prior authorizations: Analytics can streamline the prior authorization process by facilitating confirmation of medical necessity, evaluating prescribing trends, and forecasting which requests are likely to meet clinical guidelines. This allows payers to automate approvals for straightforward cases, ensuring patients receive timely access to needed medications and enabling manual review teams to focus on more complex scenarios.
- Reducing administrative burden: Advanced analytics help organizations identify workflow inefficiencies, unnecessary steps, and key pain points. These insights drive automation and process improvement—streamlining paperwork, lowering expenses, and freeing clinicians to focus more on patient care.
- Removing re-authorization requirements: Some pharmacy benefit managers (PBMs) are using analytics to assess when it is appropriate to remove re-authorization requirements for certain chronic therapies. By analyzing real-world data on patient outcomes and adherence, PBMs can eliminate redundant steps for stable patients, reducing provider and patient frustration without compromising safety.
- Step therapy optimization: Step therapy protocols require patients to try lower-cost medications before progressing to higher-cost options. Analytics ensure these programs are clinically sound and cost-effective by monitoring patient outcomes, progress, and exceptions. This approach allows for greater flexibility and responsiveness, delivering value while supporting patient needs.
- Days’ supply limits: Determining the right days’ supply for high-cost medications requires careful consideration. Analytics model the impact of various supply limits on adherence, outcomes, and overall costs. Ongoing monitoring enables payers to fine-tune these policies in real time, ensuring patients have access to necessary medications while curbing excess spending.
4. Measuring how GLP-1 drugs impact the total cost of care
In today’s healthcare landscape, transforming data into actionable insight is essential for success. The rising demand for effective weight loss solutions, such as glucagon-like peptide-1 (GLP-1) receptor agonist medications, highlights both the promise and complexity of modern treatment options—these drugs can help manage obesity and type 2 diabetes, as well as a growing range of chronic clinical conditions. Payers are concerned that high costs and adherence challenges associated with GLP-1s may result in wasted spending, and the long-term health benefits of sustained adherence are still under investigation. As pharmacy costs increase, organizations that harness advanced analytics will be better equipped to manage financial risk, improve patient outcomes, and provide lasting value to the populations they serve.
5. Don’t miss out: Watch our latest webinar
Want to see how advanced analytics can transform your pharmacy management approach? Sign up to watch our webinar, “Data-Driven Strategies for Effective Pharmacy Management,” with a special focus on GLP-1s.
References
1. 2025 Milliman Medical Index
2. The evolution of biosimilars in the United States
3. Biosimilar Product Information | FDA
