Three Approaches to Controlling Rx Costs

The article below was published on May 11, 2017 by the Mercer Signal, written by David Dross.

With all the uncertainties around healthcare legislation swirling, cost control of pharmacy spend remains top priority for employers. On one hand, employers obviously want their employees to have access to the medications they need: drugs like insulin, blood pressure treatments, and cholesterol blockers have long played a critical role in employees’ health. But now new specialty biotech drugs – some of them true medical breakthroughs – are flooding into the market, at costs much higher than previous therapies. Drug prices spiked by 9.8% between May 2015 and May 2016, and there are more sharp increases ahead. Drug costs are quickly becoming unsustainable, for both employers and, increasingly, plan members. Many high-cost brand name drugs may have rebates to reduce their net cost, but the member or patient typically does not see these rebates so their out-of-pocket cost is still high. And even the cost of some generic drugs has risen dramatically.

Fingers are being pointed everywhere—from regulations and research to the cost of lawsuits when new drugs perform poorly. While other stakeholders work on those issues, there are actions employers can take to shift the equation in their favor. Here are a few ideas:

Analyze the data on prescription drug spend in your plan

Prescription drugs are the top driver of health benefit cost increases today. In a recent report by the Pharmacy Benefit Management Institute, pharmacy benefit costs increased 10.2%, driven by 19.2% growth in specialty pharmaceuticals.

It’s important to know what’s driving cost growth in your program. When looking at your data, here are a few things to focus on:

  1. Drugs – What drugs are plan members using?
  2. Channel – From where patients receive their drugs and are they leveraging the lowest-cost channels?
  3. Supplier – Are you maximizing the prescription benefit manager relationships?
  4. Care – How do the drug therapies match up to best practices and evidence based medicine?

Educate employees on what they can do to lower their Rx costs

Employers can help employees be smarter when talking to their physician about their medications and making purchasing decisions. If your program includes any of these cost-saving Rx benefit features, make sure your employees understand them:

  • Lower copays for generic drugs
  • Lower copays for drugs in formularies
  • Preferred pharmacies
  • Mail-order suppliers
  • Prior authorization requirements
  • Step therapy requirements (members try lower-cost drugs first before they can move up to higher-cost prescriptions)

Focus on specialty drugs now

Specialty drugs for complex conditions account for 38% of all prescription spending even though they are used to treat about 1 to 2% of all patients. (Consider this recent example of how one employer discovered just two plan members were accounting for 2.5% of their total health budget due to specialty medication prescriptions.) The most expensive biologic breakthrough treatment regimens can exceed $750,000 per year. For the entire US healthcare market, specialty medication spending has nearly doubled since 2011, reaching more than $160 billion. With 40-50 new specialty medications set to enter the market each year, there is no end in sight.

To help gain control over your spending on specialty drugs, consider working with an expert to conduct a specialty diagnostic of medical and pharmacy plans to assess the current state and identify areas for improved management. Once the diagnostic results are in, employers can make informed decisions on revisions to their plan structure. We see savings typically in the 5-10% range. However, these savings occur in the short-term, and so it is a good idea to revisit the plan structure at least semi-annually as provider capabilities change over time.

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