Pharmacy and outpatient care costs are pushing expenses higher — here’s what franchise owners need to know.
Healthcare expenses continue to rise sharply. According to the 2025 Milliman Medical Index, the cost of healthcare for a typical family of four has increased to $35,119, with the average cost per individual reaching $7,871—a 6.7% jump from last year.
The biggest contributors?
- Pharmacy costs rose 9.7%
- Outpatient facility care climbed 8.5%
Together, these categories account for nearly 70% of the total annual cost increase.
“Pharmaceutical costs have been a leading driver of health care spending in recent years,” says Dave Liner, principal and consulting actuary at Milliman. “Outpatient facility services and pharmacy costs combined drove the majority of this year’s increase—especially high-cost drugs administered in outpatient settings.”
What This Means for Franchisees
While employers still cover most of the cost, their share has declined from 61% in 2005 to 58% in 2025. At the same time, employee payroll contributions have increased from 21% to 27%, shifting more of the financial burden to workers. Interestingly, employee out-of-pocket expenses have decreased slightly—from 18% to 15%—as more costs are absorbed through paycheck deductions rather than direct payments at the point of care.
As a franchise operator, this trend underscores the importance of offering benefits that balance affordability and coverage. Rising costs can directly affect employee satisfaction, retention, and recruitment.
Outpatient and Drug Costs Are Reshaping the Landscape
Outpatient facility costs are being driven up by:
- A surge in high-cost drugs like radiopharmaceuticals and oncology treatments
- Complex procedures that now use advanced implants and minimally invasive tools
- Payment models based on billed charges, which can amplify drug and implant cost inflation
These cost pressures are often outside of your employees’ control—and yours—unless you take a proactive approach to plan design and provider networks.
Will It Get Better?
Not immediately—but there may be relief ahead. Last year’s trends highlighted increased use of GLP-1 medications and new drug approvals as primary drivers of pharmacy inflation. Looking ahead, Milliman expects continued price pressure but also points to the growing availability of biosimilars—lower-cost alternatives to expensive biologic medications—as a potential cost-containment tool.
“Annual healthcare cost growth has averaged 6.1% over the past two decades—far outpacing every other household expense,” says Milliman Principal Deana Bell. “Outpatient care alone has increased 286% since 2005, reflecting how much more care is now delivered outside of inpatient settings—and how much it costs.”