Employers Reducing Prescription Drug Coverage

By SHRM Online staff Oct 28, 2011

As employee benefit budgets remain tight, employers in the U.S. are adopting plan design changes that reduce drug benefit coverage and improve pricing, according to findings from the 2011-2012 Prescription Drug Benefit Cost and Plan Design Report by the Pharmacy Benefit Management Institute (PBMI), a provider of education and research for industry professionals.

“Employers are implementing prescription management approaches consistent with their strategy for overall medical benefits. As a result, the complexity of cost-sharing continues to grow, driven by increased use of four-tier plans and co-insurance designs that require additional member education,” said Brenda Motheral, PBMI executive director.

The 2011 survey was completed by drug plan sponsors representing 5.2 million covered employees, spouses and dependents. Key findings include:

Plans using a four-tier design increased from 17 percent to 25 percent from 2010 to 2011. Nearly 50 percent of large employers (more than 20,000 covered persons) now have a four-tier plan design, typically providing the most generous coverage for generic versions of brand-name prescription drugs.

Specialty drug co-pays increased by 37 percent in 2011. (Specialty drugs are high-cost and highly complex pharmaceuticals, often developed through biotech research, that increasingly are being used to treat serious medical conditions.) The average specialty co-pay grew from $61 in 2010 to $84 in 2011. Nearly 1 in 4 employers now place specialty drugs on a fourth tier, requiring the most cost-sharing.

Reduced coverage of specialty drugs is on the rise, as 24 percent of employers now restrict coverage of specialty pharmaceuticals under the medical benefit, up from 12 percent in 2010.

Pharmacy benefits management (PBM) pricing pressure is mounting on mail delivery programs as the average discount from the average wholesale price (AWP) rose by 10 percentage points for generics dispensed through the mail, increasing from 58 percent in 2010 to more than 68 percent in 2011.

Managing Specialty Drug Benefits

A 2011 national survey by the nonprofit Midwest Business Group on Health, representing private and public employers, also shows that most U.S. employers are using a traditional benefit design for specialty drugs, including tiered formularies, co-payments and co-insurance, instead of value-based benefit designs that might be more appropriate for biologic/specialty pharmacy medications, according to the group (see the SHRM Online article "Employers Misunderstand Specialty Drugs and Costs").

value-based designs might include lowering, rather than increasing, co-pays for specialty drugs deemed necessary for patient treatment and providing health coaching to ensure compliance with medical regimens and proper use of these drugs—to avoid hospitalization and other costs down the road.

Related Articles:

Employers Misunderstand Specialty Drugs and Costs, SHRM Online Benefits Discipline, October 2011

Rx Consumers Prefer Pharmacies over Mail, Want 90-Day Supply, SHRM Online Benefits Discipline, January 2011

Rx Trends: Employers Crunch Data, Add Clinical Management to Pharmacy Programs, SHRM Online Benefits Discipline, October 2009

value-Based Insurance Design Sparks Increased Interest, SHRM Online Benefits Discipline, February 2009

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform Resource Page

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