67% of covered workers in the United States are enrolled in self-funded health plans, according to KFF’s 2025 Employer Health Benefits Survey, including 80% of workers at large firms. For the employers behind those numbers, self-funding means one thing above all: the financial risk of members’ health costs sits with the organization, not with an insurer. KFF
That risk has grown more concentrated. Among large firms, over one-third report that drug prices have significantly contributed to premium growth in recent years, and the specialty drug categories driving that growth are increasingly administered in clinical settings, billed as medical claims, and subject to manufacturer rebate programs that most self-funded employers aren’t capturing.
That’s the gap worth examining.
The Split Most Employer Plans Haven’t Addressed
Pharmacy benefit rebates are a familiar concept in self-funded plan management. PBMs negotiate them, report them, and in most cases return some portion to the plan. The infrastructure exists, the process is established, and most employers assume the rebate conversation starts and ends there.
But a substantial and growing portion of specialty drug spend doesn’t flow through the pharmacy channel. Physician-administered biologics, infused oncology agents, and high-cost therapies administered in outpatient settings are billed as medical claims, under a different benefit, a different billing structure, and a different rebate framework entirely.
According to PSG’s 2026 Trends in Specialty Drug Benefits Report, 93% of surveyed organizations receive specialty drug rebates under the pharmacy benefit. Among employers specifically, only 43% receive them under the medical benefit. For smaller employer groups under 5,000 lives, that figure drops to 36%.
That gap, 50 percentage points between pharmacy and medical rebate receipt among employers, isn’t a gap in what’s available. It’s a gap in what’s being pursued.
Why Self-Funded Employers Are Most Exposed
For fully insured plans, specialty drug cost is the carrier’s problem. Rebates, wherever they flow, are the carrier’s business.
For self-funded employers, it’s different. The employer holds the financial risk on specialty drug spend directly. Every dollar of specialty drug cost that runs through the medical benefit without an offsetting rebate is a dollar the plan absorbs in full.
That exposure matters more as specialty drug utilization grows. The drugs most commonly administered under the medical benefit, infused biologics for rheumatology and gastroenterology, oncology agents, and high-cost neurological therapies, are among the highest-cost claims a self-funded plan can carry. And they’re the same categories where manufacturer rebate programs exist, have matured over time, and are accessible to organizations that have built the process to pursue them.
Most self-funded employers haven’t built that process. PSG’s data suggests the reasons are more operational than structural.
What PSG’s Data Shows About the Gap
PSG’s 2026 survey asked employers who don’t receive medical benefit rebates to identify the primary reason. The answers fell into three roughly equal categories, and none of them describe a barrier that isn’t addressable.
34% said their health plan receives the rebates but uses them to offset premiums rather than returning them to the employer. That’s a pass-through conversation; the value exists, but the contract structure determines where it goes.
29% said their health plan doesn’t receive the rebates, so there’s nothing to pass through. That describes a situation where no process is in place on either side of the relationship.
29% said they simply haven’t discussed it with their health plan or TPA.
That third number is the most significant from a planning standpoint. For nearly a third of employers not receiving medical benefit rebates, the gap isn’t a contract issue or a structural barrier; it’s an unopened conversation. The question hasn’t been asked, which means the answer is unknown.
For TPAs serving self-funded groups, that finding has a direct implication: a meaningful share of employer clients are sitting on an unanswered question about medical benefit rebates, and the TPA is the most natural entity to surface it.
The TPA’s Role in This Conversation
Third-party administrators occupy a specific position in self-funded plan management. They administer the plan, process the claims, manage vendor relationships, and serve as the primary advisor on plan performance. For most self-funded employer clients, the TPA is where benefit strategy conversations begin.
Pharmacy rebates are a standard part of that conversation. Medical benefit rebates largely are not — despite PSG’s data showing that emphasis on maximizing medical drug rebates among employers rose year-over-year from a mean of 2.5 to 2.8 on a four-point scale. That directional shift suggests employers are becoming more aware that this channel exists. TPAs that can meet that awareness with a clear answer are better positioned than those who can’t.
The practical starting point isn’t a wholesale program rebuild. It’s a straightforward assessment for each employer group: which specialty drugs are running through the medical benefit, what manufacturer rebate programs apply to those drugs, and whether any current arrangement is capturing that value. For most self-funded groups, that assessment hasn’t been done.
What to Watch
Specialty drug cost pressure on self-funded plans is accelerating. KFF’s 2025 survey found that over a third of large employers link drug prices to premium growth, and specialty drug categories under the medical benefit are a primary driver of that pressure. As costs rise, the available offsets become more material, not less.
The cross-benefit optimization trend is creating expectations. PSG’s data shows that 50% of employers now have processes to manage their specialty formulary across both pharmacy and medical benefits, up from prior years. Organizations building cross-benefit frameworks will increasingly expect rebate strategy to follow suit. Those without it will be managing one channel actively and leaving the other to run without oversight.
The pass-through conversation is worth having explicitly. For the 34% of employers whose health plan captures medical rebates but uses them to offset premiums, the question of whether that value is being reflected in plan pricing and reporting is a reasonable one. Understanding where the rebate flows is part of understanding the plan’s true cost position.
Transparency expectations are rising. Regulatory developments under the CAA 2026 are raising disclosure standards on the pharmacy benefit side. As those expectations mature, the medical benefit, where reporting is less structured and rebate flows are less visible, will face increasing scrutiny. Self-funded employers and their TPAs who have already mapped this channel will be better prepared for those conversations.
The Practical Question
Self-funded employers took on financial risk specifically because it gives them control over plan economics. Rebate capture on the medical benefit is one expression of that control — and PSG’s data suggests most employers haven’t fully exercised it.
The starting point is a question most self-funded groups haven’t formally asked their TPA: what manufacturer rebates, if any, are being pursued on the specialty drugs billed through our medical benefit, and where does that value go when it’s recovered?
For nearly a third of employers in PSG’s survey, that question has never been asked. It’s a reasonable place to start.
If you’re a TPA or benefits advisor, how frequently does the medical benefit rebate conversation come up with your self-funded clients — and who typically raises it first? Share your perspective in the comments.
Disclaimer: This newsletter references publicly available findings from Pharmaceutical Strategies Group’s 2026 Trends in Specialty Drug Benefits Report and KFF’s 2025 Employer Health Benefits Survey. VativoRx is not affiliated with, endorsed by, or partnered with PSG, KFF, or any co-sponsor of those reports. Data points are cited objectively for informational purposes only. This newsletter does not constitute legal, regulatory, clinical, or financial advice. Rebate eligibility and outcomes vary by organization, program terms, payer contracts, and applicable laws and regulations. Readers should consult their legal, compliance, and financial advisors regarding specific circumstances.