In Plain Benefits: The 5/60 Problem

TJ Bullock | April 23rd, 2026

Dave was staring at his year-end P&L, and something just didn’t add up. Out of the fifty pieces of equipment on his shop floor, forty-nine were humming along perfectly with standard maintenance. But there was that one specialized CNC machine in the back corner. It required custom-machined parts from Germany every six weeks, and by the time the invoices cleared, that single machine was eating 60% of his entire annual maintenance budget.

If you’re a business owner or an HR director, this story probably feels familiar: not just on the shop floor, but in your health insurance renewals. In the industry, we call this the "5/60 Problem."

In almost every modern health plan, less than 5% of all prescriptions written (the high-cost "specialty" drugs) are responsible for more than 60% of the total pharmacy spend. It’s the tiny line item that’s quietly devouring your budget while you’re busy worrying about health insurance terms you need to know.

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1️⃣🔍 SPECIALTY IS WHERE THE MONEY HIDES

• Translation: Most of your employees are taking $10 generics for blood pressure or cholesterol. Those aren't the problem. The "5/60" refers to the handful of specialized medications that can cost $10,000 to $100,000 per month.
• Translation: To lower costs, don't focus on the 95% of cheap pills; focus on the 5% of prescriptions that carry six-figure price tags.

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2️⃣🧾 A 'CARVE-OUT' IS JUST SHOPPING THE PRICEY STUFF SEPARATELY

• Translation: Traditional plans bundle everything together, which often means you're paying a massive markup on those specialty drugs. A "carve-out" lets you pull those high-cost items out of the main contract to buy them through a specialized vendor.
• Translation: It’s the difference between buying a replacement part from the luxury dealership or sourcing it directly from the manufacturer for half the price.

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3️⃣🌎 INTERNATIONAL SOURCING IS GOING MAINSTREAM

• Translation: Currently, about 46% of employers are considering international sourcing for high-cost medications. This involves getting the exact same medication from Tier-1 countries like Canada or the UK.
• Translation: It’s the same pill from the same manufacturer, just without the "American surcharge" that inflates costs by 400% or more.

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4️⃣🤝 ASK FOR A PHARMACY AUDIT BEFORE YOU CHANGE COPAYS

• Translation: Before you ask employees to pay more out of pocket, find out where the money is actually leaking. A pharmacy audit reveals if you're overpaying for those top-tier drugs.
• Translation: Data is your best friend. Don't raise costs for everyone when you only have a "single machine" problem.

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It’s not your plan, it’s how you’re paying for it. You don't need to slash benefits to stay profitable; you just need to stop overpaying for the "custom parts" in your pharmacy program.

Making complicated simple.

#UBA #NABIP #employeebenefits #SpecialtyDrugs #HealthcareCosts #SelfFunding

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