Empowering Counties Through Smart Prescription-Drug Management
The Essential Role of PBMs — and How the NACo Public Promise PBM Coalition Delivers Superior Results
NACA thanks NACo EDGE for being a 2025 Friend of NACA and for supporting counties across the country.
Introduction | Prescription Drugs: A Significant Cost Driver for County Health Plans
County governments shoulder ever-rising health-plan costs, and pharmacy spend alone can top 30 percent of total medical outlays. Virtually every self-insured county already relies on a Pharmacy Benefit Manager (PBM) to run this complex slice of their health plan.
A self-insured county* is a county government that decides to pay its employees’ and retirees’ health-care claims directly, using its own budgeted funds, instead of buying a traditional “fully insured” group health plan from an insurance carrier.
Annual Average Employer-Sponsored Health Insurance Premiums (2021-2024)
Average family premiums rose from $22,200 in 2021 to $25,600 in 2024, while single‑coverage premiums increased from $7,700 to $9,000. Public-sector employers, including counties, monitor these trends as they purchase coverage from the same market and share similar utilization patterns. Source: Kaiser Family Foundation Employer Health Benefits Surveys, 2021‑2024.
So, the question is not whether to use a PBM—it is how to secure the best possible PBM contract to protect employees, taxpayers, and budgets.
Chapter 1. PBMs 101—What They Do and Why It Matters
Where PBMs Sit in the Drug Supply Chain
PBMs sit in between drug manufacturers, pharmacies, and health plans, orchestrating five core functions:
Formulary design* is the process of creating and maintaining the list of prescription drugs—called a formulary—that a health plan will cover, and the rules that govern how members access those drugs.
Discount/Rebate negotiation with manufacturers.
Pharmacy-network contracting at agreed-upon reimbursement rates.
Real-time claims adjudication and compliance oversight.
Utilization-management tools (prior authorization, step therapy, quantity limits) that improve quality and/or manage cost.
Effectively managing, these levers is critical to the overall financial health of the County’s health plan.
Chapter 2. From “Having a PBM” to “Having the Right PBM Contract”
Because most every county already employs a PBM, the competitive edge now lies in procurement strategy—leveraging scale, data, and airtight contract terms to:
Lock in the best multi-year unit-cost guarantees,
Maximize available rebates,
Embed auditable performance metrics, and
Ensure clinical oversight to monitor quality, safety and improve outcomes, all which lower overall cost.
Counties that treat PBM contracting as a commodity can often leave significant savings on the table. Those that treat it as a strategic purchase see markedly better financial and clinical outcomes. However, scale matters when negotiating the most favorable contract terms. Having the best buying strategy does not in and of itself necessarily lead the most favorable purchasing terms. Even very large counties have to compete with the nation’s largest employers when trying to secure the best possible deals from PBM’s.
Chapter 3. The NACo Public Promise PBM Coalition
Strategic PBM Coalition vs Stand-Alone County PBM Contract
What it is: A national purchasing pool created by NACo and serviced by CVS Caremark that leverages the combined purchasing power of the 3.6 million county employees.
What it delivers: Best in market pricing, rebates and performance guarantees, along with dedicated implementation support—all while allowing each county to maintain control of their own plan design.
Pooled scale means a mid-size rural county can now buy pharmacy benefits on the same terms normally reserved for Fortune 100 corporations, with CVS Caremark’s analytics, specialty-pharmacy infrastructure, and 66,000-pharmacy retail network baked in.
Chapter 4. Proof on the Ground
Mecklenburg County, NC projected first-year savings of 28.1 percent—$7.5 million—after moving from a standalone CVS contract to the Coalition model, with no member disruption. Click here to watch a recorded webinar and learn how Mecklenburg County saved millions.
Chapter 5. How to Join
Data Review - Share 12–24 months of claims data for a free savings projection.
Consultation - NACo PPI walks HR and procurement teams through contract terms and plan-design options.
Implementation - Work directly with CVS for the migration, typically within one plan year.
Eligible participants: counties, county-administered pools, or other public employers with ≥1,000 self-insured participants (employees and dependents).
Conclusion
Using a PBM is already the standard for purchasing pharmaceuticals for American counties. The NACo Public Promise PBM Coalition allows counties to leverage their combined purchasing power to convert a necessary vendor relationship into a high-performance, taxpayer-friendly contract that scales with the county workforce’s unique budget and workforce realities.
Author: Spencer Taylor, National Operations Director at NACo EDGE
NACo Public Promise Insurance provides a platform of voluntary employee benefits solutions, along with a Pharmacy Benefits Management (PBM) Coalition, built exclusively for public sector employees and their families. These benefits help counties recruit and retain top talent, while managing skyrocketing costs of prescription drug benefits.
NACA thanks NACo Public Promise Insurance for being a 2025 “Friend of NACA” at the Partner Sponsorship Level.
Additional information
*Key features of a Self-insured or a Self-funded county:
Aspect // How it works in a self-insured arrangement
Financial risk // The county, not an insurer, is responsible for the cost of each medical or pharmacy claim. Large claims are paid from the county’s health‐benefit fund.
Funding mechanism // The county sets aside money—typically in an internal service or trust fund—built from departmental contributions (the “premium” equivalent) and employee payroll deductions.
Administration // Most counties contract a third-party administrator (TPA) to process claims, manage provider networks, issue ID cards, and provide customer service, mimicking an insurer’s back-office functions.
Stop-loss coverage // To cap catastrophic exposure, the county usually buys stop-loss (reinsurance) that reimburses costs above a set threshold for any single high-cost claimant and/or in aggregate.
Plan design control // Because they own the risk, counties can customize benefit design, wellness incentives, formulary rules, and vendor partnerships (e.g., PBMs) more freely than in a fully insured plan.
Regulation // Self-insured public entities are generally exempt from most state insurance mandates but remain subject to federal laws such as HIPAA, ACA employer mandates, and public-finance rules.
Why counties choose to self-insure
Cost transparency & savings: They avoid insurer profit margins and state premium taxes, and any unspent funds stay in the county’s reserve rather than with an insurer.
Flexibility: Benefits, networks, and wellness programs can be tailored to local workforce needs and adjusted mid-year if necessary.
Cash-flow management: Claims are paid as they occur, which can improve cash flow compared with paying fixed monthly premiums.
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*What is Formulary Design?
Formulary design is the process of creating and maintaining the list of prescription drugs—called a formulary—that a health plan will cover, and the rules that govern how members access those drugs.
What it involves
Clinical selection:
A Pharmacy & Therapeutics (P&T) committee of physicians and pharmacists reviews safety, efficacy, and therapeutic value to decide which drugs (brand, generic, specialty) qualify for coverage.
Tier structuring & cost-sharing:
Drugs are placed into cost-sharing tiers (e.g., Tier 1 generics, Tier 2 preferred brands, Tier 3 non-preferred brands, Tier 4 specialty) that determine the copay or coinsurance a member pays.
Utilization-management rules:
Step therapy, prior authorization, and quantity limits are added to ensure drugs are used appropriately and cost-effectively.
Financial negotiation:
PBMs negotiate rebates and discounts with manufacturers; those economics influence which drugs earn “preferred” placement.
Periodic review & updates:
Formularies are revisited quarterly or annually to incorporate new drugs, generic launches, price changes, and updated clinical evidence.
Why it matters
Clinical quality: Ensures members have access to safe, evidence-based therapies.
Affordability: Directs utilization toward lower-cost but clinically equivalent options (e.g., generics), helping plans contain pharmacy spend.
Transparency & equity: A well-designed formulary communicates clear choices to prescribers and members, reducing surprise costs and encouraging rational prescribing.
In short, formulary design is the strategic blending of clinical science and cost management to decide which drugs are covered, at what member cost, and under what conditions—a core lever PBMs use to balance patient outcomes with plan affordability.