Since 2014, prescription drug prices have risen by 33%, and many employers are seeing climbing pharmacy costs hit their bottom line hard. The drivers of these rising costs are multi-faceted, including rising prevalence of chronic conditions, dramatic increases in specialty medication cost, and a complex distribution channel.
The truth is there’s no silver-bullet solution for rising pharmacy costs. But the good news is there are tangible, smart strategies that can create savings now and help your bottom line for years to come. Before you renew your pharmacy coverage this year make sure your plan includes these cost savings strategies.
1. Effective formulary management.
A formulary is the list of drugs covered by a health plan, sometimes known as an Approved Drug List. This list informs employees and their health care providers what drugs are covered by their employee pharmacy benefits. Your health insurance carrier determines which drugs are covered on your formulary. With drug prices changing often and new therapies coming to market quickly, you’ll want to ensure your pharmacy partner is diligently reviewing the formulary to ensure proper coverage, reducing waste and saving you money.
Signs of effective formulary management:
- A frequent review process with diverse perspectives. A formulary should be reviewed by clinical experts including physicians, pharmacists and specialty providers on a regular basis, ideally six times per year. This ensures that the formulary is being reviewed for clinical and cost effectiveness frequently.
- Immediate implementation of positive changes. When new therapies come to market they often open treatment options for your employees. These new therapies may have less side effects, treat different symptoms, provide cost savings, etc. so ensuring your partner is adding these treatments as soon as they’ve been reviewed for clinical efficacy is important.
- Limiting negative formulary changes to two times per year. Your partner should be diligently reviewing the formulary and that means making “negative” changes when appropriate. This could include removing drugs from the formulary, changing a drug’s tier (which impacts the cost to your employees) or adding additional requirements to access. These changes are necessary to optimize utilization of other, more cost-effective treatments that deliver similar medical outcomes. However, negative changes can cause employee disruption, so they should be limited to twice a year and your partner should have a member engagement process that helps your employees and their physician understand and prepare for the upcoming change.
2. Intentional utilization management.
Utilization management is just a fancy way of saying that your pharmacy partner is working with your employee’s physician to ensure they’re receiving the right medication, at the right time, for the right cost. Examples of utilization management programs include prior authorization, step therapy and quantity limits. These programs are crucial to ensuring safe distribution of medications as well as reducing overall cost by directing your employees to a lower cost treatment while still delivering high-quality medical outcomes.
For example, the commercials you see for the brand name medications often come with a long list of potential side effects. Programs like step therapy ensure employees try a less intense treatment first before graduating to those higher intensity, higher cost treatments.
The manufacturer of those high cost, brand name drugs may also offer rebates to help offset the cost of the therapy. Your pharmacy partner should maximize use of available rebates from the manufacturer, but only after optimizing the utilization management program to guide members to lower cost alternatives first. Focusing too heavily on rebates can actually increase overall spend if not coupled with an effective utilization management program.
3. Medical and pharmacy benefit integration.
Some employers have their pharmacy and medical benefits administered by different insurance carriers or partners. If that’s the case for your business, you may want to consider the cost impact of keeping these programs separate. Without access to both the medical and pharmacy information for a member, carriers may not be able to provide holistic support.
For example, some treatments are pharmaceutical therapies but must be administered in an office or hospital setting. These treatments are often called medical injectables and treat conditions like cancer and other chronic conditions. Since the cost of these treatments crosses both your medical and pharmacy benefits, it may be difficult for multiple carriers to connect the dots and ensure the member is receiving the right medication in the right location. In fact, a simple change in where a treatment like a medical injectable is administered could save you and your employee thousands. But when benefits are managed separately, it results in a lack of transparency leading to less coordinated care.
Want to learn more about these strategies and other cost-saving pharmacy solutions? Join Priority Health on May 13 at 1 p.m. ET, for a webinar featuring three experts sharing their insider pharmacy knowledge with Michigan-based employers. Register online here.