More U.S. employers are using employee cost sharing in their prescription drug programs, according to Buck Consultants' Prescription Drug Benefit Survey, completed in July 2009.
Cost sharing is part of a consumer-directed approach that encourages plan participants to consider price when selecting among drugs that might be similar in terms of outcomes but vary greatly in cost, such as an over-the-counter medication vs. a prescription drug, generic vs. brand-name drugs, or a heavily advertised new entry vs. a lower-priced but similarly effective alternative that actress Sally Field isn't pitching on prime time.
The survey reveals that 76 percent of respondents use employee cost sharing as a utilization management tool, up substantially from 51 percent in 2008. The most common target cost-sharing range is 11 percent to 20 percent of claim costs (used by 39 percent of respondents).
“This year, plan sponsors are clearly focused on controlling costs in response to budget cuts,” says Michael Jacobs, a principal and national clinical practice leader at Buck Consultants.
Controlling Plan Expenses
More than 140 U.S.-based organizations participated in the survey, representing a broad range of industries and employer size. Nearly all provide prescription drug coverage as part of their health care program for active employees. The two reasons given as most important for providing this coverage: the health of employees and business competitiveness issues.
“While the cost of prescription drug coverage varies widely, 30 percent, or the largest group of respondents, said pharmacy benefits represent between 11 percent and 15 percent of total health care costs,” says Jacobs. “This is down from last year’s survey, when the largest group indicated their drug benefits made up between 16 percent and 20 percent of total health care costs. This may be the result of many expensive brand medications moving off-patent and being replaced by lower-cost generics.”
According to survey respondents, the most important clinical management steps they are taking to control pharmacy benefit costs are broader based than prescription drug coverage. These include care management, disease management and low-cost generic pricing programs offered by retail pharmacy chains.
“Our survey revealed a disconnect with using low-cost generic pricing as a cost-management tool,” says Jacobs. “While 73 percent of respondents cited are taking advantage of low-cost generic pricing offered by retail pharmacy chains as a high priority, only 26 percent require their mail service provider to match these low-cost retail generic prices.”
The survey found that the following top the list of strategic initiatives for long-term cost management:
• Providing employees with tools and information.
• Providing employee education.
• Adding consumerism to the program.
Employers are increasing their efforts in managing specialty medications — complex drugs that are often injected or infused. According to the survey, 59 percent of respondents have included adherence to clinical guidelines as part of their specialty drug management programs.
“Employers are also more actively managing these specialty drugs to control costs,” Jacobs notes.
The top priorities in managing specialty drug therapies are:
• Adherence to clinical guidelines.
• Clinical management.
• Coordination with case managers.
• Centralized distribution.
Drug Price Rollback Impacts Plan Sponsors
Starting on September 26, 2009, the average wholesale price (AWP) of more than 400 brand-name drugs will decrease as the result of final settlements in a class action lawsuit involving two major publishers of AWP information.
With the rollback of AWP prices pending, pharmacy benefit managers (PBMs) are attempting to amend financial terms of contracts to create cost neutrality with plan sponsors prior to the AWP rollback date in order to ease PBM administrative burdens and simplify their internal processes.
"As plan sponsors review these proposed amendments, particular attention should be given to current costs along with the long-term feasibility of the suggested changes as well as the potential to revise pricing terms once a more viable pricing benchmark emerges,” says Sean Brandle, national pharmacy practice leader at The Segal Company, a benefits, compensation and human resources consulting firm.
The Segal Company’s national Rx practice reviewed the suggested methodologies of the three major PBMs (CVS/Caremark, Express Scripts, Medco). All of the methodologies attempt, in different ways, to adjust either the plan sponsor guaranteed drug discount levels (Express Scripts and Medco), or the published AWP costs (CVS/Caremark) in order to maintain drug costs at pre-rollback levels after adjustments are made to published costs.
According to Brandle, the only way to validate cost neutrality is via an electronic analysis of claim data after Sept. 26, 2009. “We suggest at least a six-month data period (three months prior and three months after the rollback date), which would mean, ideally, an analysis period extending over the second half of 2009 to capture both pre- and post-rollback time periods,” he concludes.
Stephen Miller is an online editor/manager for SHRM.
More Turn to Aggressive Health Cost Strategies, SHRM Online Benefits Discipline, July 2009
High Rx Co-Pays Discourage Newly Diagnosed from Treatment, SHRM Online Benefits Discipline, May 2009
Brand-Name Drug Costs Soar, Generics Hold the Line, SHRM Online Benefits Discipline, April 2009
Value-Based Insurance Design Sparks Increased Interest, SHRM Online Benefits Discipline, February 2009
SHRM Online Benefits Discipline