Employers dealing with the steadily rising cost of employee health benefits are unlikely to see relief anytime soon, particularly as the price of drugs continues to increase, according to a new report about the cost of healthcare by consulting firm Segal.

“Health plan cost trends continue to rise, with outpatient pharmacy benefits projected to continue seeing double-digit increases and medical benefits not far behind,” the 2026 Segal Health Plan Cost Trend Survey reads. “Inflation and regulatory shifts are straining plan sponsors’ ability to maintain competitive benefits and access to care.”

High demand, supply chain dynamics and policy-related factors are driving drug price inflation, according to the report. A primary contributor is the lack of competition in the pharmaceutical market, especially for brand-name drugs protected by patents. Drug prices rose more than five and a half times between 1985 and 2024, outpacing overall inflation by a factor of three.

See also: How large employers are driving a shift in health benefits to control costs

Non-specialty drugs saw increases in the use of costly new therapies for chronic conditions such as diabetes, migraine headaches and mental health disorders. The use of new high-cost specialty drugs in place of lower-cost therapies is also driving price increases. Among the top cost drivers is a substantial growth in specialty drugs to treat conditions such as forms of dermatitis and psoriasis.

GLP-1 drugs have rapidly reshaped the prescription drug landscape in recent years because of their effectiveness in both glycemic control and weight management. Their expanded use for conditions such as sleep apnea and cardiovascular risk reduction have further increased demand and likely will result in this therapy class being a driver of pharmacy costs for the next several years.

5 strategies to reduce cost of pharmacy benefits

Around 60% of plan sponsors cover GLP-1s for obesity management. In 2024, plans that covered GLP-1s for obesity management had a prescription drug rate increase of 14.8%, with GLP-1s accounting for 7.8% of that increase. Among plans that did not cover the drug for obesity, the rate was 9.2%, with 1% attributed to GLP-1s covered for diabetes.

The survey identified five strategies that respondents are using to mitigate pharmaceutical expenses without compromising the quality of care:

• Control the specialty drug mix by offering less expensive biosimilar and generic drugs.
• Implement strategies to address diabetes and GLP-1 use.
• Consider strategies for specialty drug management, such as site-of-care optimization, formulary management, copayment assistance and step-therapy management.
• Expand pharmacy-management programs, including quantity limits, prior authorization and step therapy.
• Adopt a custom or narrow drug formulary.

Economic uncertainty adds to the headwinds. The Trump administration has imposed tariffs on medical devices and supplies and is weighing additional tariffs on pharmaceuticals. These measures could intensify existing shortages, disrupt patient care and increase operational costs in the health care system. With so many cost factors beyond their control, employers need to keep a close eye on the things they can control.

“As treatments and workforce needs evolve, plan sponsors face growing challenges in assessing financial impact and coverage implications,” the report said. “To stay ahead, they must actively monitor industry trends and manage their benefit programs with precision.”

This article was originally published on BenefitsPRO, a sister site of HR Executive. For more content like this delivered to your inbox, sign up for BenefitsPRO newsletters here.