PBMs, You Actually Can Control Drug Mix. We Are Proof.

In the PBM world, there is a concept that quietly drives how much an employer spends on prescriptions: drug mix.

Drug mix is basically which drugs people end up on. Not just the price of each drug, but the actual blend of brands, generics, biosimilars, and “next generation” therapies that members use over time. It is the difference between someone taking a lower cost biosimilar and someone taking a high cost specialty brand in the same class.

If you want to understand why pharmacy spend keeps going up, you have to look at drug mix.

Inside the industry, there is a convenient myth that PBMs cannot control drug mix. You will hear a version of this all the time.

“We cannot influence what medications people need.”

“We do not control which drugs doctors prescribe.”

Of course we cannot predict who will get sick or which condition will show up next year. That part is true. What is not true is that we are helpless once those conditions show up.

PBMs influence drug mix every day. The real question is whether they do it in a way that benefits the employer and the member, or in a way that benefits their own economics.

At SmithRx, we have chosen a different path. We lean into drug mix on purpose. It is the core of our savings story, and we have built our model to act on it.

I want to unpack what that means in plain language.

What Drug Mix Actually Is

When you strip away jargon, drug mix is the pattern of use inside a plan.

• Which drugs are on the formulary and in what position

• How often members start on a high cost brand instead of a lower cost alternative

• How many people stay on the legacy drug after a biosimilar or generic comes out

• How quickly members move from “good enough” therapies to very expensive ones
  
  

Formulary design plays a role in drug mix. So do prior authorization rules, step therapy, and how easy it is for doctors and members to stay on the drug they already know.

You cannot predict the exact mix of drugs a group will need. You can absolutely influence which drugs are used once you know the diagnosis.

That is what good drug mix management looks like in practice.

Biosimilars Are The Clearest Example

You cannot talk about drug mix without talking about biosimilars. Biosimilars are FDA approved versions of complex biologic drugs. They are different from traditional generics, but the idea is similar. After the original drug’s patent expires, other manufacturers can step in with clinically equivalent products at a much lower price. On paper, biosimilars should be a gift to employers and members. Same outcomes, much lower net cost.

In reality, the market has been messy.

Take Humira, a drug used for conditions like rheumatoid arthritis and Crohn’s disease. For years, it was one of the top spend drivers in the country. When Humira biosimilars came to market, you might expect a big shift to lower cost alternatives.

Instead, many PBMs added biosimilars to the formulary in name only. Humira stayed right next to them, “co-preferred.” Manufacturer rebate contracts made it very difficult for PBMs to actively steer members to the biosimilar. They could say “we offer a biosimilar,” but they were not allowed to truly manage it.

The member stayed on Humira. The doctor kept writing Humira. The PBM collected rebates on Humira. The employer paid the bill.

On a spreadsheet that only tracks discount percentages, everything looked fine. In the real world, the drug mix stayed expensive.

That is the core problem. Industry pressure forced legacy PBMs to further adopt biosimilars for Humira which led to two outcomes. First, legacy PBMs created “manufacturing capabilities” to be the distributor of their own biosimilars allowing them to capture revenue as they sold the product to their owned pharmacy at an inflated price. Second, they quietly allowed transitions away from Humira to newer specialty drugs with high rebates such as Rinvoq and Skyrizi. This led to a negative impact on drug mix from introducing higher cost medications when lower cost ones are available.

The Discount Obsession And How It Hides The Problem

Most PBM conversations still revolve around one idea: discounts off some list price. Clients are told they are getting AWP minus a certain number. They see large rebate guarantees. They are taught to celebrate the size of the discount, not the size of the bill. 

Here is the problem. If you negotiate a very big discount on a very expensive drug, you can still end up paying more than if you chose a lower cost alternative with little or no rebate attached. The classic analogy is the one you may have seen before. You can get 50 percent off a twelve dollar gallon of milk, or zero percent off a five dollar gallon of milk. Reliance on discount metrics makes the first option look more attractive. In reality, the second option is less expensive.

That is exactly how drug mix gets distorted.

High list price drugs with rich rebates look great in discount reports. Lower cost drugs with less rebate support can look less “competitive” on paper. If your whole story is built on discount guarantees, you will keep choosing high list price drugs with big rebate checks attached.

Drug mix is the casualty.

What It Looks Like When You Actually Manage Drug Mix

So what does it look like when a PBM treats drug mix as a lever instead of an excuse?

At SmithRx, our starting point is simple. We care about net cost and outcomes for the member and the employer, not about the prettiest discount slide. Our business is structured to build pathways that optimize patients getting the right drug, at the right price, from the right source. We call this our Drug Pathways Engine.

That plays out in a few ways.

• We favor clinically equivalent, lower net cost options whenever they exist, including biosimilars and generics.

• We build clinical programs that make those options the normal choice, not the exception.

• We have teams that do the work to move members, coordinate with prescribers, and manage transitions.

That last point matters more than people think.

Changing drug mix is not a policy on paper. It is hundreds and thousands of individual changes in the real world. Someone has to call the doctor. Someone has to coordinate a new prescription at a different pharmacy. Someone has to help the member understand the change, and make sure they remain stable on therapy.

Most PBMs are not set up to do that. They are designed to maximize throughput and protect rebate economics, not to run hands-on programs that move members to better options one by one.

We built our Connect patient advocate team for exactly this kind of work. They are not a call center. They are a team whose job is to guide people down the pathway to the right drug at the right place and price. That is how you move whole populations from a drug like Stelara to a lower cost biosimilar in a way that members can live with and employers can see in their spend.

It is not magic. It is focus, incentives, and work.

“But You Are Smaller. You Cannot Have Better Pricing.”

One fair question I hear from large employers is this: “You are a million lives. Express Scripts is more than a hundred million. There is no way you can get better prices.”

On pure unit pricing with big national chains, that is mostly right. The largest PBMs often negotiate better list discounts and bigger rebate pools. The catch is that the employer does not see all of that value. It gets carved up along the way.

So no, we are not claiming to beat the largest PBMs at their own discount game. Our model is different. We are transparent on how money flows. We focus on net cost at the claim level. Then we lean hard into drug mix.

That combination is what matters.

If a large PBM has better unit pricing but keeps moving members to high cost brands with rich rebates, the employer can still end up with higher overall spend than they would see with a smaller PBM that actively manages toward lower cost options.

Again, drug mix is the lever. You can win or lose with it, regardless of who has the biggest rebate pool.

What Employers Should Be Asking

If you are an employer trying to understand whether your PBM actually manages drug mix, there are a few simple questions to ask.

• When a lower cost, clinically equivalent option exists, what percent of my members are on it?

• How many members have you actively moved in the last year from high cost brands to lower cost alternatives?

• Can you show me specific examples in my data where you changed therapy to reduce cost while maintaining outcomes?

• When new biosimilars launch, what is your process for evaluating and adopting them?

If the answer is a general statement about discounts, or a vague “we work with providers through prior authorization,” there is probably not a real strategy in place.

Drug mix does not change by accident. It changes when a PBM is willing to design for it, stand behind it, and do the work.

Where This Goes Next

Biosimilars are only going to become more important. Specialty drugs will continue to represent a larger share of total spend. Manufacturers will keep experimenting with pricing and rebate strategies.

In that environment, the old habit of chasing the biggest discount and ignoring drug mix will become even more expensive. The future of pharmacy benefits belongs to models that are aligned with the employer, transparent about economics, and willing to manage drug mix on purpose. Even with emerging trends like “direct to consumer” pricing and low-list price models, we’re committed to bringing even lower, sustainable drug costs to our clients.

We see this every day across our book of business. When you pay attention to which drugs people use, support the right alternatives, and put real people behind those transitions, total spend comes down and access improves.

Drug mix is not an excuse. It is a choice. PBMs can control it. We choose to.