Employers must be ready to deal with pharmacy disruption

Richard P. DeBartolo
Senior Vice President, Certified Employee Benefit Specialist

If you have been paying close attention to the pharmacy cost and utilization in your health plan the last few years, you likely noticed that utilization and cost are rising at an alarming rate. The Centers for Medicare and Medicaid Services (CMS) projects that by the year 2022 prescription drug costs will grow to $355 billion. In contrast, $40.3 billion was spent on prescription drugs in 1990. 

One explanation for the explosion in pharmacy is the result of wonder drugs coming into the market.  For example, Luxturna, a new gene therapy medication, has been created to cure adolescent blindness at a cost of $850,000. Incredible breakthroughs in medicine lead to consumer demand for these drugs in treatment; however, pharmacy costs like this were never anticipated and employers are facing tough decisions on how to cost share for these kinds of treatments. 
 
On the other extreme, employees may receive a prescription when over-the-counter options are available and just as effective. For example, the drug Vimovo simply combines two over-the-counter medications – naproxen (Aleve) and esomeprazole (Generic Nexium) that can be purchased for a few dollars each but costs more than double when sold as a prescription. Employers must have the necessary processes in place to review and reject these kinds of tactics, which could cost a health plan thousands of dollars.

Employers have to be ready and willing to deal with disruption when a prescription provides little value to employees or employees’ family members. Not only is it important for employers to understand the trends behind prescription drug costs, they need to review what they have in place with their medical carrier/third-party administrator. At a minimum, pharmacy should be reviewed annually in order to stay current on contract changes. Staying on top of pharmacy makes it easier to ask the right questions. 

The equation for inflation in a health plan is increased utilization times rising cost per unit. With drug costs increasing at a rate faster than other health spending, now is the time for employers to review prescription cost-saving options.

Several cost control strategies can be implemented in an effort to curb rising prescription drug costs. One solution gaining popularity is pharmacy employer coalitions, where employers combine their efforts to negotiate and implement state-of-the-art solutions with pharmacy benefit managers. This strategy is all about purchasing power, and in many instances, coalitions are delivering more savings than medical carriers.

It’s important to note, some insurance carriers are doing a superior job of managing pharmacy. For some plans, a carved-in solution with the carrier can be just as effective as a carved-out employer coalition.

Pharmacy is for certain the new “tiger by the tail” problem for employers to face! LMC can help you understand and respond to these rising costs. Contact a member of our employee benefits team for more information.