Managing the rising cost of prescription drugs is no easy task for any organization. According to research from Buck Consultants in 2014, employer-sponsored plans spent about 18 percent of their annual health care budget on pharmacy benefits. The trend is leaving many organizations looking for options.
“Prescription drug costs have increased dramatically over the last several years and organizations are feeling pressure to adjust their benefit designs,” says Veronica Hawkins, Medical Mutual Vice President, Government Accounts. “As a result, more organizations are integrating their medical and pharmacy benefits to have a more coordinated approach.”
Smart Business spoke with Hawkins about some of the recent trends in prescription drug costs, what it means to integrate benefits and how doing so could lower overall medical costs and promote better health for employees.
How do prescription drugs factor into rising health care costs?
There are just so many options on the market today. It causes confusion about what people really need. Beyond brand name and generic drugs, there are specialty drugs that are often used to treat rare or complex diseases.
Specialty drugs are usually the most expensive option. According to some reports, they represent about 20 percent of prescription drug spending for organizations that offer pharmacy benefits. This figure is understated, however, because it does not include the growing volume of specialty drugs administered through providers’ offices and outpatient facilities.
Experts predict specialty drug use will increase to 45 percent of all pharmaceutical sales by 2017. That’s why it’s so important for organizations to have the tools to manage these costs.
How can organizations structure their pharmacy benefits?
Organizations typically have two options to provide pharmacy benefits to their employees. Most insurance carriers are contracted with a pharmacy benefit manager (PBM). Organizations can go through their insurance carrier to build pharmacy benefits into their medical plan, or create a direct relationship with any PBM they choose.
Each organization’s involvement is different. Some choose to separate the pharmacy benefit from their medical coverage and work directly with a PBM. They believe it will save them money. This approach can, however, lead to higher costs and misaligned care management policies for the members. With integrated pharmacy and medical claims, organizations work with their health insurance carrier to manage medical and prescription drug utilization and costs in one cohesive package.
What are the advantages of integrated benefits?
From the convenience standpoint, having integrated benefits makes it easier for many organizations to manage their health plan. They only have to work with one vendor, so there is less administrative responsibility. Employees have one ID card and a single online portal to access their health benefits. But it goes beyond convenience. Integration gives organizations the tools they need to take a holistic, coordinated approach to managing the health of their employees.
It also allows insurance carriers to maintain a uniform strategy for managing the physician, hospital and pharmacy needs of its members. Medical Mutual, for example, has programs to manage drug use and costs through medical benefits the same way it does through the pharmacy benefit. These programs make sure members meet specific criteria before receiving costly medications.
What else should organizations consider?
In the past, prescription drug costs didn’t count toward the same out-of-pocket limit as medical costs. That changed for many organizations in 2015. In those cases, employees can use both expenses to reach their limit and have their plan start paying at 100 percent. That may affect how some organizations choose to structure their pharmacy benefits.
In addition, it’s important to realize that the ‘cross accumulation’ of expenses doesn’t happen automatically. Integrating pharmacy and medical benefits into one coordinated approach makes the administration much easier and, in many cases, can reduce costs.
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