Pharmacy Benefit Management for Self-Funded Roofing and Construction Employers

Prescription drug costs are now the fastest-growing line item in employer health insurance spending, and roofing and construction employers are not exempt from this trend. For contractors running self-funded or level-funded health plans, prescription drug claims come directly from the claims fund. There is no carrier absorbing the cost. Every dollar the pharmacy benefit manager adds to a drug transaction is a dollar the construction company pays.

The pharmacy benefit manager is the most powerful cost lever in a self-funded health plan that most construction employers have never pulled. Most contractors can name their general contractor, their workers' comp carrier, and their bank. Far fewer can name their PBM, describe how their PBM contract prices a prescription, or say whether they received any manufacturer rebates last year. That gap represents real, recoverable money sitting in a contract that most employers have never read.

This guide explains how PBM contracts work in the context of self-funded plans for construction and roofing companies, where GLP-1 medications and specialty drug exposure are becoming increasingly material budget items, and what employers should be demanding from their advisors before their next renewal.

How Pharmacy Benefit Management Works in Self-Funded Construction Plans

The PBM as the Hidden Cost Driver

When a crew member fills a prescription, the claim runs through a pharmacy benefit manager before it reaches the employer's claims fund. The PBM negotiates drug prices with manufacturers, determines which drugs are covered and at what cost tier (the formulary), sets the reimbursement rates paid to retail pharmacies, and manages prior authorization for high-cost drugs. In a self-funded health plan, where the employer is the direct payer, the PBM contract terms determine what the company actually pays for every prescription transaction.

The three largest PBMs in the country, Express Scripts (owned by Cigna), CVS Caremark, and OptumRx (owned by UnitedHealth Group), collectively process approximately 80% of all U.S. prescription drug claims. For most self-funded construction employers, the PBM was selected by the carrier or third-party administrator, not by the employer. The pricing terms in that bundled contract were negotiated at the carrier's scale, not the employer's. Understanding whether those terms are favorable requires reading the contract, which most employers have never done.

Spread Pricing Versus Pass-Through: Why It Matters for Contractors

There are two primary PBM pricing models. In spread pricing, the PBM charges the employer more for each drug than it pays the pharmacy, and keeps the difference as profit. The employer has no visibility into what the drug actually cost at the pharmacy level. In pass-through pricing, the employer pays exactly what the PBM pays the pharmacy plus an explicit administration fee. Every transaction is auditable, and the employer can verify that the billed cost matches the actual drug cost.

For a construction company running a self-funded plan, spread pricing means every prescription claim is potentially being billed at a markup the employer cannot see or challenge. Pass-through pricing eliminates that markup and gives the employer full transparency. The administrative fee for a pass-through PBM typically runs $2 to $8 per prescription claim. For a 100-person construction company with 300 claims per month, that is $600 to $2,400 per month in transparent fees versus an unknown spread on every claim under a spread pricing arrangement.

The GLP-1 Problem for Construction and Roofing Employers

Why This Drug Class Is Different

GLP-1 receptor agonist medications (Ozempic, Wegovy, Mounjaro, and related drugs) are the fastest-growing drug cost category in commercial health plans. These medications carry retail prices of $800 to $1,400 per month, or $10,000 to $17,000 per year per patient. For a self-funded construction plan with 80 employees, a single GLP-1 user at full retail represents a pharmacy claim that exceeds what many crews' entire annual pharmacy utilization would have cost just five years ago.

For roofing and general contracting companies with a workforce demographic skewed toward middle-aged male workers, the population most likely to be prescribed GLP-1s for type 2 diabetes management and weight-related conditions is not a theoretical risk. It is the core workforce. Without a specific prior authorization requirement and formulary tier policy, GLP-1 utilization on a self-funded plan can grow rapidly and without cap.

What Your PBM Policy Needs to Address

Managing GLP-1 exposure requires three PBM-level policy decisions that the employer or their advisor must make explicitly:

1. Prior authorization requirements: Requiring prior authorization for GLP-1 prescriptions, documentation of a diagnosed condition such as type 2 diabetes, obesity with a qualifying BMI threshold, or cardiovascular risk factor, is the primary mechanism for limiting speculative prescribing. Plans without prior authorization requirements see significantly higher GLP-1 utilization rates.

2. Covered indications: GLP-1s are approved for both type 2 diabetes management and chronic weight management (under the Wegovy/Ozempic distinction). Some self-funded employers choose to cover GLP-1s only for diabetes management, which eliminates the broader weight management indication and significantly reduces potential utilization exposure. This is a plan document decision with compliance implications. Consult your ERISA counsel before restricting coverage for any drug class.

3. Preferred formulary positioning: When biosimilar or lower-cost generic alternatives to a branded GLP-1 are available, the formulary can designate them as the preferred first-step medication, requiring step therapy before the branded drug is covered. This controls cost without necessarily eliminating coverage of the therapeutic class.

Pharmacy Carve-Out Strategy for Mid-Size Construction Contractors

What a Carve-Out Means in Practice

A pharmacy carve-out means the employer contracts with a separate, independent PBM rather than using the one bundled with their medical carrier or TPA. In a self-funded arrangement, the medical and pharmacy claims are already financially separate. The carve-out simply makes the pharmacy administration contract explicit and independently negotiated.

For construction employers in the 50 to 250 employee range, the primary benefit of a carve-out is pricing transparency and contract negotiability. Independent PBMs competing for mid-market business actively pursue construction industry accounts, and many offer pass-through pricing, 100% rebate passthrough, and audit rights that carrier-bundled PBM contracts do not. The advisor relationship is critical here: a construction employer negotiating a PBM carve-out alone has limited leverage. The same employer working through a benefits advisor with aggregated PBM relationships can access pricing and contract terms previously available only to much larger groups.

The Multiemployer Trust Alternative for Trade Employers

For construction and roofing employers exploring multiemployer trust plans (Taft-Hartley trusts), the trust's existing PBM contract is one of the key cost advantages these arrangements offer. Trust-administered pharmacy programs pool purchasing volume across all trust members, producing unit drug costs well below what a single mid-size contractor could negotiate independently. When evaluating a multiemployer trust, ask specifically for the trust's pharmacy cost per claim by drug tier and compare it against your current PBM's effective rate. The pharmacy economics are often a significant part of the overall cost advantage these trust plans provide.

Auditing Your Current PBM Arrangement

The Five Questions Every Self-Funded Contractor Should Ask

1. Is our PBM contract spread pricing or pass-through? If your broker cannot answer this immediately, you are almost certainly in a spread pricing arrangement.

2. What percentage of manufacturer rebates do we receive? In a pass-through contract, the answer should be 100%. Anything less means the PBM is retaining rebates that are negotiable.

3. Do we have a prior authorization requirement for GLP-1 medications? If not, your pharmacy spend on this drug class may have already started growing or will start within the next plan year as prescribing rates continue to increase.

4. Are specialty drugs required to be dispensed through the PBM's affiliated specialty pharmacy? Independent specialty pharmacies often accept lower reimbursement than affiliated pharmacies. Flexibility on specialty dispensing can reduce cost on your highest-dollar claims.

5. Do we have audit rights in our PBM contract? Without contractual audit rights, you cannot independently verify that billed drug costs match actual pharmacy costs. This is a non-negotiable term in a transparent PBM contract.

Frequently Asked Questions

What is a pharmacy benefit manager and why should construction employers care?

A pharmacy benefit manager is the intermediary that processes prescription drug claims, negotiates drug prices with manufacturers, and manages the formulary. For construction employers in self-funded or level-funded health plans, the PBM contract directly determines what the plan pays for every prescription. Unlike fully insured plans where the carrier absorbs pharmacy costs above a fixed premium, self-funded construction employers pay every prescription claim directly. The PBM contract terms are a direct line item in the company's benefits budget.

How much can a roofing or construction company realistically save by carving out the pharmacy benefit?

Pharmacy carve-out savings vary significantly based on the current PBM arrangement and drug mix. Construction employers switching from a spread pricing bundled PBM to a pass-through independent PBM typically see 10% to 25% reductions in total pharmacy spend. Companies with one or more employees on GLP-1 or other specialty medications see higher percentage savings because the absolute costs involved are larger. Companies with a predominantly younger workforce using primarily generic medications see smaller percentage savings but still benefit from improved transparency and audit rights.

Should construction employers cover GLP-1 medications in their health plan?

This is a plan design decision with both cost and compliance dimensions. GLP-1 medications have proven clinical benefit for type 2 diabetes management and, increasingly, for cardiovascular risk reduction. Coverage decisions that restrict or exclude an entire drug class require careful ERISA and ACA review to ensure they do not create discriminatory coverage rules or run afoul of mental health parity requirements. The practical approach for most self-funded construction employers is to cover GLP-1s with a robust prior authorization requirement and covered-indication restriction, rather than excluding the class entirely. This controls cost while managing compliance exposure.

Do construction companies with fewer than 50 employees have enough scale for a PBM carve-out?

Yes, through aggregated PBM arrangements offered by benefits advisors who pool mid-market accounts for purchasing leverage. A single 40-person roofing company negotiating a PBM carve-out alone has limited scale. Working through a benefits advisor who has aggregated 30 similar-sized construction accounts can access the equivalent of a 1,200-person group's PBM pricing. This is one of the underutilized advantages of working with an advisor who specializes in the construction industry and has established PBM relationships at scale.

How does pharmacy cost management interact with our stop-loss coverage?

In a self-funded plan, stop-loss insurance covers catastrophic claims above a per-person attachment point (typically $75,000 to $150,000 per individual per year for mid-size employers). Pharmacy claims count toward that attachment point. A single employee on a high-cost specialty drug or biologic, combined with significant medical claims, can reach or exceed the stop-loss threshold. For construction employers, this interaction is most relevant when a crew member is both on a high-cost specialty medication and has a significant injury or illness requiring major medical care in the same plan year. Your stop-loss carrier's specific terms on what pharmacy claims count toward the attachment point is worth reviewing explicitly with your advisor.

References

1. Business Group on Health. "2025 Large Employer Health Care Strategy Survey." 2024. businessgrouphealth.org
2. Drug Channels Institute. "2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers." February 2024. drugchannelsinstitute.com
3. Kaiser Family Foundation. "2024 Employer Health Benefits Survey." October 2024. kff.org/health-costs/report/2024-employer-health-benefits-survey/
4. IQVIA Institute. "The Use of Medicines in the U.S. 2024." April 2024. iqvia.com/insights/the-iqvia-institute/reports-and-publications
5. Associated Builders and Contractors. "2024 Construction Workforce Shortage Data." abc.org/News-Media/News-Releases/
6. SHRM. "Self-Funded Health Plans: What Employers Need to Know." shrm.org/topics-tools/tools/toolkits/self-funded-health-plans

This analysis is provided for educational purposes and does not constitute financial or legal advice. Consult your compliance counsel and benefits advisor for guidance specific to your organization's situation.