Employers looking to rein in drug spending often turn to carve-out pharmacy models. Blue Cross Blue Shield of Massachusetts looks at why this can cost more than it saves and how an integrated approach to pharmacy and medical benefits is a better way to keep budgets under control.
Written by: Blue Cross Blue Shield of Massachusetts (BCBSMA)
Rising costs, particularly for specialty and chronic-condition therapies, are one of the hardest line items for employers to plan around.
According to Pharmaceutical Strategies Group's 2025 Artemetrx report, per-member-per-year specialty drug costs rose from $1,333 in 2023 to $1,641 in 2024. The direction is clear, and this is a category of drugs that already makes up a disproportionate share of most employers' total pharmacy spending.
In response, many employers have turned to carving pharmacy benefits out of medical coverage, hiring a dedicated vendor to manage drug costs specifically. Importantly, the appetite for this runs deeper than a single administrative function. According to research by PSG, around 40% to 50% of its survey respondents reported moderate to high interest in carving out specialty pharmacy services and rebate management.
The appeal is easy to see. A vendor focused solely on pharmacy promises sharper cost control and clearer visibility into that spend.
Why fragmented benefits cost more
But a person's health doesn't separate as neatly as a benefits budget does. A standalone pharmacy benefit can often see that a member has stopped refilling a prescription, but what it can't do on its own is connect that signal to the rest of a member's care. An integrated approach can help clinical teams identify appropriate lower-cost therapies, contact members proactively, and coordinate medication decisions alongside their broader medical care.
Our own figures point in the same direction. Employer groups with integrated medical and pharmacy coverage see 8% lower hospital inpatient costs, 2% to 3% fewer emergency room visits and 10% to 12% lower emergency room costs compared with groups on separated benefits. These groups also see a 13% to 14% lower incidence of high-cost claimants, and chronically ill members on integrated plans cost 9% to 10% less to cover.
Clinical teams identify 12% more members for the plan's Chronic Condition Gap in Care Campaign as a result, and across the board, employer accounts with integrated benefits run roughly 5% to 6% lower in total medical expenses than those with non-integrated plans.
Carve-outs are built to control the cost that's easiest to see, which is the pharmacy bill. What they miss is the larger cost that can follow when a health issue isn't caught early enough: the hospitalization or ER visit that a coordinated view might have prevented.
Employer groups with integrated medical and pharmacy coverage see up to 14% fewer high-cost claimants than those with separated benefits.
How integration changes the picture
A coordinated view is exactly what integration provides. When a payer holds both medical and pharmacy data, a missed prescription refill can be seen alongside a rising blood sugar reading, or a new specialty drug alongside the diagnosis that prompted it.
Nothing sits in isolation, and this makes earlier intervention possible. A care team can reach a member before a manageable condition turns into an emergency room visit.
This integrated approach yields major administrative and member benefits. Blue Cross Blue Shield of Massachusetts data shows that by using medical claims to automatically validate pharmacy prior authorizations (SmartPA), 32% of eligible prescription claims are approved instantly at the point of sale. This automation allowed approximately 47,000 members to bypass the traditional, manual prior authorization process in a single year, eliminating 47,000 redundant administrative reviews for local healthcare providers.
Multiply that kind of connection across an entire membership, and the value proposition becomes compelling. A carve-out model asks two separate systems to each manage their own piece well, whereas an integrated model asks one system to see the whole person and act on what it finds. The result is a continuous view of a member's health, with medical and pharmacy data informing each other instead of sitting in separate files.
What this looks like in practice
When medical and pharmacy benefits work together at Blue Cross Blue Shield of Massachusetts, the benefits of doing so are apparent.
Let’s look at an example from a Blue Cross MA member"Blue Cross: Let’s look at an example from a BCBSMA member. Because the plan holds both medical and pharmacy claims, the clinical team could see that she wasn't filling her prescriptions and that the resulting non-adherence was likely driving a pattern of high emergency room use. Her provider had no way to know this, as nothing on the medical side alone pointed to a prescription issue. Digging further, the team found she was struggling with the copays on several medications at once.
Working from both sides of her care, they identified an alternative that combined her prescriptions into a single therapy and brought her out-of-pocket cost down to $0 a month, with no extra steps required on her part. Her monthly medication costs fell from more than $350 to zero, and her costly ER visits dropped along with them.
This is only one example of what this connected view makes possible. The same combined data set supports a dedicated pharmacist team whose job is to look for opportunities to prevent waste and improve the quality and affordability of care across the whole plan.
Because that team can see medical and pharmacy claims side by side, it can spot patterns that would stay hidden if the two data sets were kept apart, such as a prescription that doesn't match any diagnosis on file or a billing pattern that only becomes visible once both halves of the picture are put together.
Crucially, money recovered this way goes back into keeping the plan affordable, and it doesn't add administrative cost for the employers who rely on it.
The same combined data set that lowers one member’s costs also helps catch waste across the whole plan.
Making the case for connected care
Carve-outs can look like control on paper. But the data suggests they trade a smaller, visible saving for a cost that stays hidden until a claim shows up months later.
As renewal conversations come around, it's worth asking whether your pharmacy benefit is being managed alongside medical claims, or sitting in a separate system that rarely talks to the rest of your plan.
Blue Cross Blue Shield of Massachusetts is the connected partner, managing pharmacy and medical benefits together as a single, coordinated plan built around the full picture of a member's health.
Talk to your broker or your Blue Cross Blue Shield of Massachusetts account representative to learn more about what managing benefits this way could mean for your organization.