One need not look very far these days to gauge the pervasive role prescription drugs play in the American lifestyle. Surf the TV lineup or thumb through many magazines and you’ll see a dozen ads expounding the virtues of today’s most advanced remedies.
Americans spent four times as much on prescriptions drugs in 2002 as they did in 1990, according to the Kaiser Family Foundation. People are using more prescriptions (one-third of adults use between one and three per day), and they often choose newer, more expensive drugs over older, cheaper alternatives.
This is no surprise to employers, many of whom have seen their pharmacy costs rise faster than the overall expense increases in their medical plans. Such increases are consistent with a national trend reported by the Kaiser Foundation — between 2001 and 2002, prescription spending increased 15 percent, compared with an 8 percent increase for physician and clinical services.
In response to rising drug costs, many employers are adopting aspects of consumerism in their pharmacy plans that are designed to preserve employee choice while providing information and incentives designed to reduce unnecessary costs.
Tiered plans
One of the most common methods employers use to reduce pharmacy expenses is to adopt a tiered structure in their plan. With this approach, employees pay a smaller percentage of their prescription cost when they select a generic drug.
If they prefer name brands, employees save money by choosing from a list of approved formulary prescription products. The employee pays the most for drugs that are neither generic nor on the formulary list.
These tiered plans can be accompanied by a shift from fixed co-payments to a co-insurance model, in which the employee pays a variable percentage of the drug’s cost depending upon the tier in which that drug resides.
For self-funded employers, such a program reduces claim costs because their share of the cost of generics costs is lower and their health plan can provide a lower price on formulary prescriptions due to advantageous discounts from drug manufacturers.
Mail order
Many employers overlook a very powerful tool in managing their pharmacy costs: a mail-order program. These programs allow employees to buy larger quantities of certain maintenance drugs via the mail with a lower relative co-payment.
The mail-order provider is able to buy discounted medications in bulk from manufacturers and pass these savings on to employees. Employers see savings through reduced overall pharmacy claim costs.
Specialty pharmacy
A very costly subsegment of many employers’ pharmacy expenses consists of what are called specialty drugs — treatments for such conditions as cancer, hemophilia, hepatitis, immune deficiency, infertility, multiple sclerosis and pulmonary diseases. These drugs often are injected and require special handling and administration.
It is not uncommon for such a drug to cost hundreds of dollars and, according to pharmacy market researcher IMS Health, spending on such drugs is expected to increase 20 percent annually for the foreseeable future.
Fortunately, some health plans are offering specialty pharmacy services that provide these drugs less expensively by providing economies of scale due to advantageous vendor contracts. Some specialty pharmacy service providers may even offer around-the-clock counseling operations — with care coordinators, pharmacists and registered nurses — to support employees with disease-specific treatment programs. This kind of responsive service can improve the employee’s health and, as a result, reduce unnecessary claim expenses for the employer.
Take steps to save
Your insurance broker or consultant can help you investigate some of these and other useful approaches to manage rising prescription drug costs.
The effect of these approaches — combined with plan designs that provide useful information and incentives to employees for making cost-effective decisions — can help your work force remain healthy and productive, while your health benefits costs become less of a burden to your bottom line.
Mark Hanrahan is vice president of sales and service for Aetna’s north central west region. Reach him at (312) 928-3104 or [email protected].
