15 Prescription Drugs Killing Employers

Written by Joanna Morrow

Joanna Morrow, Principal and Founder of Employer Benefits & Advice, is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU).

15 Prescription Drugs Killing Employers

As prescription drug costs continue to increase it is important for employers to understand the trends behind the costs as quite often it’s the company medical plan picking up the bulk of the tab.

In 2013, the United States spent $329.2 billion on prescription drugs—eight times more than the $40.3 billion spent in 1991. Although prescription drug spending has historically been a small proportion of national health care spending compared to hospital and physician services, in recent years, it has grown rapidly.

In 2014, prescription drug spending in the United States increased 13.1 %—the largest increase since 2003. This jump was due to a number of factors—a major one being a 30.9 % increase in spending on specialty medications, which are high-cost drugs used to treat complicated conditions like hepatitis C, cancer and rheumatoid arthritis.

The chart below lists just a handful of some of the most serious illnesses employees may have to deal with at some point in their lives well as the cost of the current most effective medications used in their treatment.

Most Expensive Specialty Drugs on the Market Today

* Source: American Cancer Society
** Source: National Center for Disease Control

The Good News

As you can see, life-saving drugs don’t come cheap. However, employers can work with an employee benefit consultant or broker to determine what their pharmacy benefit managers (PBMs) are doing to control specialty drug costs.

Here are a few strategies employers can layer over one another to create the greatest impact:

1. Require Pre-Authorization

Prior authorization provisions are built into drug plans to screen for members who meet the criteria for a high cost specialty medication. The goal is to ensure the right drug for the right patient at the right time. Preauthorization is useful for not only new products, but any specialty drug.

2. Construct a Closed Formulary

A common cost-containment strategy used by pharmacy benefit managers (PBM) is the “closed formulary”, which excludes coverage for certain drugs altogether. Unlike an open formulary in which a member can purchase a non-preferred prescription drug (one the insurance company has deemed costly) simply by paying a higher co-pay, the closed formulary limits this opportunity.

3. Limit Pharmacy Networks

When it comes to specialty medications the trend toward narrow pharmacy networks is expected to grow in 2018. By driving prescriptions and members to certain pharmacies, improved discounts and enhanced rebates can be realized, the savings for which are passed on to both employer and employee.

4. Leverage Industry Expertise

For employers looking to lower prescription plan costs, understanding the impact of specialty drug trends is key. If you are a self-funded employer interested in exploring the savings opportunity around your pharmacy benefits, have your broker or benefits consultant draft a Request for Proposal (RFP) and float it out to a few different PBMs.

Prescription for Success

There are a number of tools available to assist employers in better identifying and implementing the best cost containment strategies relevant to specialty drugs.

As an advisor our goal is to ensure companies have the information they need to make the most informed, objective decisions that will help save money for both employer and employees.

To learn more about reducing your company spend on specialty medications, or to obtain a sample RFP for shopping your PBM contact me at 602-903-4047 or email me at [email protected].