How to Spot PBM Markups Hiding in Plain Sight (feat. James Murray)
TRANSCRIPT
Click here to listen to the episode, published July 21, 2026.
JAMES [INTRO]: These employers have a fiduciary responsibility to their employees to obtain the best care at the lowest price. That's the reason to do this right now, in addition to, of course, doing the right thing for your employees. That's the live exposure — not that you picked the wrong design. It's that you let a party in interest take unreasonable compensation out of plan assets. A 38,000% markup, and they allege it wasn't isolated. When an employer hears that, the 5500 stops being abstract. Government never moves as fast as we would like. The prudent move for an employer is to be able to show they looked — not to wait, do nothing, and find out.
JOHN: Thanks for joining us for another episode of Moving to Value Unscripted. My name is Dr. John Rodis, and I'm a recovering ex-hospital president and the president of the Moving to Value Alliance. Our mission is to advocate for a value-based healthcare ecosystem with the highest quality outcomes at a reasonable cost for our communities. I want to thank our members whose support makes this podcast possible. We'd like to give special recognition today to our trade member, Southern New England Healthcare. I'm joined by my fellow board members, Kim Lynch and Donovan Pyle.
KIM: I'm Kim Lynch, founder and CEO of Metis Health Technologies, where we help clinicians and healthcare organizations align revenues and deliver better patient care. I'm originally from Michigan, now based in DC.
DONOVAN: And I'm Donovan Pyle, CEO of Health Compass Consulting, author of Fixing Healthcare, and Senior Advisor at the Validation Institute.
JOHN: Our guest today is James Murray, the founder and managing director of Murray Strategic Healthcare Ventures. James has decades of Wall Street capital markets experience, meaning he's deeply familiar with the hidden, highly consolidated financial structures that drive up corporate health spend. Through his advisory group, James now empowers self-insured employers and independent pharmacies to break free from predatory marketplace tactics, encouraging employers to act as true fiduciaries of their health plans. He helps plan sponsors use public Form 5500 data to force fee transparency. His framework offers a tactical blueprint for how employers can reclaim their financial autonomy, eliminate hidden administrative profit, and protect their workforce. James joins us today to map out how changing the PBM conversation is essential to transforming healthcare in this country. Welcome to Moving to Value Unscripted, James.
JAMES: Thank you for that introduction, doctor. Appreciate that.
JOHN: First, call me John. Call me John, James.
JAMES: Okay, John.
JOHN: Unless you want a pap smear, I can't help you — I'm an obstetrician, so. But James, thank you so much for joining us, and we're really looking forward to today's conversation. Let me start, if I can, with our usual opening question. Our experience has been that for a lot of folks, there's been an event, an epiphany, or a person who was very influential in getting them to where they are today. From what I understand of your background — healthcare informatics and economics — how did you get here?
JAMES: Right, of course. I've always had an interest in healthcare and analyzing the healthcare industry. I started in the early '90s with the largest investment bank on Wall Street, and at that time the new innovative healthcare solution was the telephone — a company called Access Health Marketing, where you picked up the phone, called a nurse, and were directed to the appropriate level of care within the HMO. So I've always had that interest, and now as I sit here and look at our healthcare system — I'm also familiar with Silicon Valley, and with the technological advances we've made in this country — I look at the healthcare industry and we just haven't kept up. How is it that the nation that leads the world in technological innovation can't get our healthcare system right?
JOHN: We're still using fax machines, James.
JAMES: Yeah, I know. So — I spent a lot of time on Wall Street, and I've always had an interest in healthcare, but as I aged I realized health is the number one asset we can protect. I have my own personal experience with my father, who has Parkinson's disease — he's been battling that for nine years. So I've taken an interest in healthcare and wellness, and that led me to found Murray Strategic Healthcare Ventures, where I advise — I started off advising independent pharmacies, and I still do, but now I'm also trying to link up self-insured employers with independent pharmacies, because there have been some changes in the industry and the law, and I think it's a productive endeavor.
JOHN: Let me tee it up. In my introduction I referred to the IRS Form 5500. As a former president of a company, we had to file a Form 5500 every year — if I remember right, it's to show that employers are complying with ERISA laws dating back to the '70s regarding how we manage our employee benefits. And as I was reading that today, I thought — wait a minute, the Consolidated Appropriations Act, passed in 2020 and effective in 2021, almost five years later had very clear language about disclosure of fees for brokers. And we know from having done many podcasts that most employers are still ignoring that component of the law and don't know anything about their broker's fees and compensation. Do I have that right? And tell our listeners how that form can help employers start to pull the curtain back on some of this.
JAMES: Right, right, right. The money is already public. Every self-insured employer files a Form 5500 with the Department of Labor, and the patterns are sitting in plain sight — nobody's reading them. I've made some publications and a couple of articles on LinkedIn about how to do that, with some instructions, but I'd be happy to walk through the details. It's really just a Department of Labor search, then looking at the details of that Form 5500.
JOHN: What's the information in there that's going to make a light go off — "wait a minute, I didn't know that," or "we're not complying with the law," or "we're not optimizing our employees' money"? What's going to shift their mindset?
JAMES: Well, let me give you what I've found in the searches I've made. One example: a self-insured manufacturer, 350 lives. PBM compensation grew from $659,754 in 2020 to over $1.2 million four years later — a 92% increase on a flat covered-life count, meaning the number of members didn't change. The five-year total: $4.7 million, same broker named all five years. In this example, the self-insured employer funds coverage through an ESOP — an Employee Stock Ownership Program. The company is employee-owned; the ownership stake grew 85%, while PBM compensation grew 92%. The employees who own the company are paying for what they own. I have an institutional-type tool to pull this data, and I'm looking throughout the country — this is rampant, this is widespread, because no one is looking, or they don't know what the solution is. They may know the problem, but not the solution, because there's not really a market to resolve it. There's a West Coast employer, 470 lives — the carrier-owned PBM paid $172,000 in drug rebates to the carrier, not to the employer plan. It was labeled "prescription drug rebates and related administrative fees." The plan's filing shows the PBM as a negative number — the rebate went to the carrier. That's exactly the CAA 2026 problem, named specifically right there. Across all these state samples, there are hundreds of employers where PBM compensation disclosed on Schedule C of the Form 5500 is zero on most plans, while carrying millions in carrier charges. PBMs sit as subcontractors to the carriers and third-party administrators, so their pay never clearly lands on the form. That gap is the story.
DONOVAN: So I think what you're saying is the Form 5500s don't include the whole story — they include direct compensation, but not indirect compensation. Is that why the Consolidated Appropriations Act was necessary, the broker transparency rules?
JAMES: That's essentially the reason for CAA 2026 — it requires them to disclose the PBM compensation.
DONOVAN: So James, why aren't most employers aware of these potential conflicts of interest? It's one thing if the PBM's fees doubled because they were doing a good job — they got paid more for delivering more value. But that may not be the case. So why aren't employers aware of this?
JAMES: It's a really good question. I don't have an answer for it. It's been there — the CFO or the officer of the company signing off on them, someone knows.
JOHN: Let's jump into that for a second. I'm on the board of a not-for-profit, and I've actually raised this question myself as a trustee — "hey guys, are we complying with the law regarding our books?" And I wasn't even sure myself how good the answer was, to be frank — I'm probably going to pursue it myself. But employers — and we've had lawyers on this podcast to articulate this, some of whom went back 40 years to the early days of ERISA — say that until there was litigation, nobody really started complying with the ERISA laws either, and then people woke up. There's been some litigation in this space, though a lot of it hasn't reached final adjudication, which may be part of the problem. But — to Donovan's question — when you talk to self-insured employers, talking about a Form 5500 sounds a little abstract. What's your pitch? Is it "you need to comply with the law," which is good enough reason by itself? Or is it "you're robbing your employees of their money and not optimizing what you should do — losing money you could put back into your company or your employees' salaries"? What's the sales pitch, if you will?
JAMES: Well, it's all three of those. Look at CAA 2026 — it's a political thing. They passed it, but there are no direct rules in place right now to enforce it. The Department of Labor has it out for public comment, trying to get some standards for enforcement, but right now there's nothing to enforce it. So really the pitch is: this is what's coming, this is the law as of February, and it'd be a good idea to comply with the spirit of the law. It's also a good thing for your employees and for saving your company money.
JOHN: Let me follow up on that — let's shift gears a bit toward the pharmacy business, since I know that's really your passion. As a former employer, when I looked at our healthcare spend — and I think this holds true for almost all employers, self-funded, unions, whatever they are — about 30 to 40% of the total spend is hospital care. Trust me, as a former hospital executive, there's a lot of opportunity for cost avoidance there, but we're not going to talk about that today. A good chunk, about 30%, is usually pharmacy spend. And when you look in the weeds on that spend, a handful of drugs often account for 80% of it — correct me if I'm wrong. A lot of these are both high-cost drugs and high-cost venues of administration, like my old shop, hospital infusion centers, as opposed to outpatient or home. Is that part of the story here? If so, please elaborate.
JAMES: Absolutely — and this is the problem I'm trying to solve. If a self-insured employer can carve out those specialty therapies to an independent pharmacy, they can dramatically reduce their costs. You're correct that those specialty therapies make up a vast majority of the pharmacy spend.
JOHN: So why aren't more employers recognizing these opportunities and pursuing them?
JAMES: What I've experienced is an entrenched situation — for years you've had the standard operating setup: the broker, the third-party administrator, and the self-insured employer, with financial incentives built into that system. If you want to carve out specialty pharmacy costs, that requires the third-party administrator to play ball, for lack of a better description — they have to be amenable to carving that out and administering it. And of the covered lives, typically only 30 to 40% are actually receiving prescription medication. So if you have an entrenched TPA that claims it can't do the carve-out, that's where you get the roadblocks.
KIM: I was just going to ask you to expand on the roadblocks, particularly with carrier-loyal TPAs. On the PBM question more broadly, how can you tell when someone you're working with is a good partner versus someone giving you lip service and is actually a bad partner?
JAMES: It's hard, because a lot of them are blind to the financial incentive that's being hidden by this whole system — intentionally. It's obfuscation, on purpose.
KIM: James, I'm just curious — I always think in terms of what's going to be simplest for folks on the ground to act on. So in very simple terms: what does good look like, what does bad look like? One of my go-tos in these conversations is data sharing — are you getting the data you expect? We know many employers are not. Even at that most basic data-request level, I hear of many employers being stonewalled by their TPAs, even though there are requirements to produce that data — there are delays, old data, missing data. So that's one of my tells: if a carrier is sharing data on time and trying to make it as complete as possible, that's a good sign. If not, that's probably a bad sign and a tell that you've got issues. What else is on your list?
JAMES: I don't really get into advising the self-insured employer on how to tell, because I'm trying to align interested parties. And that's actually one of the things I wanted to bring up to the group — I need a little help, some assistance from you, because I can't go in and tell a self-insured employer "this is what you need to look at" when they don't know me — that's a bit of a conflict. So I don't really get into that.
JOHN: So James, do you have a process, or can you recommend one, for helping employers identify opportunities for improvement? From my experience, a lot of employers have been convinced there's really nothing you can do about this — just budget 10% more every year, and that's what you do.
JAMES: Well, first I'd encourage them to get as much data as possible, whether it comes from the 5500, and to educate themselves on how much they're spending and how much they don't know. There hasn't been a solution in the market for this carve-out until now — there is a solution, and there's a reason to do it right now because of CAA 2026. There's also a risk of litigation in this country right now. The sky isn't falling, and self-insured employers don't yet have clear personal liability, but that's where the cases are headed. There's a U.S. Supreme Court case — the Cunningham case, which John is nodding along to, he's familiar with it. Where we're moving is that employers have a fiduciary responsibility to their employees to obtain the best care at the lowest price. That's the reason to do this right now, in addition to doing the right thing for your employees.
JOHN: We all agree with that, for sure — and we're all frustrated on this call. My employer isn't doing what they're supposed to. Look at how they manage their pension fund — they have committees, I'm on the finance committee of a group I belong to, and we look at those numbers very carefully. But we ask questions about the health plan and it's, "oh, we rely on our broker" — and of course no one knows how the broker is compensated. Let me go back to my question about drug spend, because I think you agreed that a lot of the spend — and as you point out, most employees aren't taking a lot of drugs, so you've got a small percentage on medications in the first place, and a much smaller percentage on these high-cost drugs, which account for a disproportionate amount of the spend. Most employers, and especially CHROs, are reticent to change the plan because they don't want to upset their employees. But this is a narrow group of employees who could be affected by a high-cost drug at a high-cost venue, and there seems like a real opportunity to intervene and say, "Mrs. Jones, you can get this drug a lot cheaper at this independent pharmacy, and we're happy to help pay for it." Where's the independent pharmacy in this? We know there's tremendous consolidation in the PBM space — a few companies own 90% of the market, it's practically an oligarchy. I think independent pharmacies are a little at risk here. Where do independent pharmacies come into the picture with a self-funded employer, vis-à-vis these high-cost drugs?
JAMES: Right — well, this is exactly what I'm trying to do. A lot of these independent pharmacies — the ones that are qualified and compliant — can provide these specialized therapies that make up a disproportionate amount of the self-insured employer's pharmacy spend. It's a simple, direct contract with the self-insured employer. But I need a third-party administrator that will play ball — if they don't, it just doesn't work. It takes a very well-informed self-insured employer to tell the TPA, "you're going to play ball, or we'll find someone else." And that's where the broker comes in.
DONOVAN: James, there are about 650 TPAs in the country.
JAMES: Right.
DONOVAN: Some of them will do this and support and administer it. Why aren't employers finding them, vetting them, and seeing if it's a good fit?
JAMES: I don't know exactly — Donovan, you raise a really great question. I don't understand it. We can speculate, but speculation isn't the best way to reach a conclusion. My personal opinion is it's just become the way people are accustomed to doing their job.
JOHN: It's called inertia.
JAMES: Exactly, inertia is a good way to describe it.
JOHN: When there's no financial incentive for an HR or benefits manager to do this, beyond the goodness of wanting to help a fellow employee, you get resistance — "I'm not going to work that hard." And truth be told, HR officers usually aren't in the weeds with the financial components — CFOs and CEOs often hand that responsibility to the CHRO, and historically CHROs lose their jobs when they change a plan that upsets employees. There are books written about that inertia. One pitch I've made to employers — and you probably can use the same one — is this: the problem is we look at healthcare spend as a fixed expense. Like rent — you can't do much about it. But if you thought about it as a variable expense, you'd think, "I could shop for a better price." When I was a CEO, we had an incredible cost-accounting system — I could tell you to the penny what we spent on ink and toner, and shop around for a better price. But we never thought about our healthcare spend that way. The reality is that most healthcare spend is actually a variable expense. And we've only talked about one area — pharmacy spend. If you shift your thinking from fixed to variable, you start asking, "could we do better here?" And then you start talking to your broker about their fees, and then about the PBM. All true or no?
JAMES: True. Yep, I agree with that — you hit the nail on the head.
KIM: James, you mentioned the Cunningham case — I'm curious to hear a little more about that, especially since you hear "prohibited transaction claim" and start getting curious about what's happening there. For other plan sponsors who've never thought of themselves as having fiduciary exposure on this — what's one decision they're making today that could be a liability tomorrow? Or what's one thing they're not looking at that could become a liability tomorrow?
JAMES: Well, you touched on something with the Cunningham case. What it did is lower the bar for one specific kind of ERISA claim — a prohibited transaction claim. The court held that to state that specific kind of claim, plaintiffs only need to allege the basic elements — they don't have to plead that the exemptions don't apply, because that's the defendant's burden to prove. In plain terms, it got a lot easier for these cases to survive a motion to dismiss and reach discovery. That theory got tested on a health plan in March of this year — a federal court in New York let the prohibited transaction claim in Stern v. JPMorgan Chase proceed. The PBM there was CVS Caremark. It was the first time a court allowed a suit against a self-insured employer over excessive prescription drug costs to survive dismissal on the merits. Here's the nuance most people get wrong: in Stern, the court actually threw out the big claims — breach of loyalty and breach of prudence. The judge said decisions like which pricing model to use, or how to design the formulary, or what cost-sharing to set — those are settlor decisions, and courts aren't going to get involved in those. Business design choices aren't fiduciary acts; you can't be sued for fiduciary breach over a plan design choice. But what did survive was narrower: paying the PBM what it actually received through spread pricing and retained rebates was a prohibited transaction, because the total compensation was unreasonable. That's the live exposure — not that you picked the wrong design, but that you let a party in interest take unreasonable compensation out of plan assets. The fact getting everyone's attention: the plaintiff alleged a 30-unit prescription of a generic MS drug that retailed for $11 to $35 cost the plan $6,229 — a 38,000% markup — and they allege it wasn't isolated. When an employer hears that, the 5500 stops being abstract. I'd also point out that the J&J case and the Wells Fargo case both got dismissed on standing — same plaintiffs' firm on those cases too. So the sky isn't falling; the theory is narrow and still developing, but the direction is clear. The prudent move for an employer is to be able to show they looked, not to wait, do nothing, and find out.
JOHN: Yeah, we've been singing that song for a while — at least start by looking under the hood: what you're paying your brokers, where your spend is, trying to take advantage of a competitive marketplace. We're all beating our heads against the wall that employers aren't doing it, despite double-digit increases year over year. And at the end of the day, it's the middle class, for the most part, that's been robbed in this country for the last couple of decades — rich people are fine, and poor people have some fallback through Medicaid. The middle class has just absorbed it, in lost salary increases or higher co-pays, deductibles, and premiums. They're the ones getting hit.
JAMES: You raise a great point on the economics of it. Think about the ESOP program — that's people's retirement, you're taking from retirement assets, especially with the ESOP, which really aren't productive dollars. And when you have an artificial increase in prices from all these hidden costs, it drives up the price of everything — it's an artificial floor, essentially. In economics, that's not an ideal situation. You don't need an economics degree to understand it.
KIM: I think that's what I hope all of our listeners hear unequivocally — if you're feeling the squeeze right now, as an employer, in HR, or as an employee, you're not wrong, you are being squeezed. And you've laid it out plainly — it's your retirement, it's your potential wage increase, more and more going into a black hole that's been perfectly constructed for employers to disregard, to treat as a fixed cost they don't need to pay attention to. I'm wondering what kind of call to action you'd give — there's real opportunity in this moment to reset the table, to align the care we want for ourselves and each other with the tremendous financial resources we're pouring into this system. Do you have a thought on what that call to arms is? I hear you on wanting to align, and I think that's where most folks are, but that alignment has to be real — it can't be lip service, because people are feeling the economic and clinical strain of a system that's making things worse.
JAMES: Right — well, you need the heads of these companies to take a more serious look, and give a blessing from the leader of the company down to the HR department: "I want you to really look at this, and if you need more resources to do it, you've got them."
KIM: At a population level — and I'm curious if you have thoughts on this — I'd imagine that beyond the one-phone-call example, across a population of a thousand or ten thousand employees, these changes start having a material impact on the health of your employees and retirees, and on cost. What you're making is the point that this is a productive use of energy and time to invest in your own employees. Do you have any direct examples? We talked about direct contracting with independent pharmacies, and we love direct contracting with physicians — we think that's especially good for a local entity. We've talked to folks in Orlando who've saved a lot of money for their employees over the years, and they're fortunate to be in a relatively consolidated market with a lot of options and competition. A lot of employers in this country are relatively small, with fewer than a thousand employees, concentrated in a single town or market — their employees live in a small geographic area, which is very conducive to working with an independent pharmacy, the kind that's being squeezed out of business. Do you have examples of any companies that have actually done this — looked at the data, figured out where their costs are, realized they could do better, and worked with the pharmacy down the street to help their employees?
JAMES: It's a new emerging opportunity — it hasn't been done widespread nationwide. In Iowa, there are pockets; it's currently going on there. Nationwide, there's some direct contracting, but it's not really direct — it's through a larger carrier that's outsourcing it, so there's still a middleman administering it, not a truly direct contracting model. So the short answer is no, it really hasn't developed in this country yet. But I see an opportunity for it — there's a lot of value-add that could take place.
JOHN: Obviously it's a tough subject for a lot of people to get.
JAMES: Yeah.
JOHN: We start talking about IRS forms and PBMs, and I think a lot of people get a little confused, but we all keep saying this — you've got to just start somewhere.
JAMES: Yeah, yeah, yeah. No, you just have to start. The ink is on some contracts — it's not dry yet, but I am putting them together.
JOHN: With that in mind, let me try to bring us full circle and talk about the future. My good friend and colleague Steve Schutzer always likes to ask this question: putting on your blue-sky-thinking cap, what does the next few years look like? Maybe costs will drive this, maybe litigation — but what do you think happens over the next three to five years in this space?
JAMES: Well, in this space, I think with the Consolidated Appropriations Act of 2026 — eventually the Department of Labor will get the enforcement standards they need, and over the years it'll start pushing people toward resolving this PBM issue. I think we're moving in the right direction. Of course, government never moves as fast as we'd like — it's up to self-insured employers to take measures to implement it themselves. But I think it makes sense from an ERISA perspective too, because of the trend we already discussed in the courts — once that trend starts, it's really hard to reverse. I'm not a lawyer, but I have some knowledge of how the federal court system works, and I think it's moving in that direction and will continue to be implemented over the years. I think direct contracting is going to work.
JOHN: Yeah, I think we'd all agree. We also often talk about municipalities and unions — groups that already have a bit more structure and organization — and they're feeling the pinch here too. So I think we all agree. James, thank you so much for joining us on Moving to Value Unscripted — we really appreciate it. And thanks to my colleagues, Kim and Donovan, for joining us today. We wish you well trying to get employers and independent pharmacies together to reduce costs for their companies and improve outcomes for their employees, which ultimately is our goal here on Moving to Value Unscripted. So thank you so much.
JAMES: You're welcome. Thanks for having me.
JOHN: To learn more about MTVA and how to join our community, visit our website, movingtovalue.org. If you enjoyed this conversation, please follow us and leave a review on Spotify or Apple Podcasts. Thanks again for listening and for being part of this important movement.
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