Ten years ago, a family-owned food-manufacturing company with 2,500 self-funded lives came to our consulting firm for help with managing pharmaceutical costs under its group health plan. The company prides itself on providing valuable employee benefits and maintaining a healthy workforce, and the leaders were concerned that rising prescription drug costs would compromise the quality of their benefit offerings and raise the employee portion of the cost beyond a reasonable level.
We provided an extensive list of recommendations for both PBM internal programs and external vendor programs for risk management and cost containment, with a heavy concentration on high-cost drugs, specialty pharmacy medications, and J Code drugs being filled and billed through the medical benefits. The company adopted all recommendations.
Results were immediate, and leadership was elated — so much so that, a decade later, the company continues to embrace our recommendations regarding pharmacy benefit plans. And here’s the best part: Its prescription drug trend has averaged less than 0.5% per year, resulting in drug spend that is almost exactly what it was 10 years ago.
Stories of well-managed, cost-effective pharmacy benefit plans are relatively few and far between. Prescription drug spending continues to rise in the U.S., fueled by an increase in chronic conditions and the demand for specialty medications. And pharmacy benefit managers (PBMs), organizations ostensibly created to improve healthcare by negotiating lower drug prices and facilitating claims, too often exclude cost-effective programs from external vendors, further exacerbating rising costs that could be controlled.
To assist employers in navigating this costly and complex landscape, Alera Group will host a one-hour webinar on Thursday, April 20: Reining in Runaway Pharmacy Spending. During the session, we’ll share insight into what's driving prescription drug pricing and discuss strategies to help you navigate rising costs and control pharmacy spend. You’ll hear and see case studies of cost-saving solutions, including those that have been so effective for our food-manufacturing client.
Ultimately, you’ll come away with a deeper understanding of what we mean when we say that the key to a cost-effective pharmacy plan is enabling the plan’s members to obtain the right drug at the right cost at the right time and in the right place.
Specialty Drugs and Soaring Costs
The importance of managing pharmacy benefits continues to increase — and the problem of rising costs, particularly for specialty drugs, isn’t about to lessen. As the Brookings Institute and the USC Schaeffer Center for Health Policy & Economics noted in their 2022 report Auditing the prescription drug Consumer Price Index in a changing marketplace:
“Specialty drugs, such as those that treat cancers and immune system disorders, carry high prices, have experienced high rates of price and spending growth, and have claimed a rapidly growing share of drug spending, reaching 55% of U.S. drug spending in 2021, nearly double the share from ten years prior.”
What’s behind the upward trend in the use of specialty drugs? Citing reports by the American Hospital Association and the Centers for Disease Control (CDC), Pharmacy Times attributes it to the growing number of Americans with chronic medical conditions. And, the publication adds, “Specifically, the CDC predicts the total number of incident cancer cases to increase by approximately 50% between 2015 and 2050. The number of Americans with diabetes is projected to more than double between 2010 and 2050. Additionally, the U.S. population is aging.”
Depending on one’s point of view, pharmacy benefit managers have attempted to either mitigate or capitalize on the problem. Earlier this year, the U.S. House Committee on Oversight and Accountability opened an investigation into pharmacy benefit managers and their role in rising prescription drug costs.
In an interview with Bloomberg Law, Stacie Dusetzina, an associate professor in the Department of Health Policy at the Vanderbilt University Medical Center, said the committee should find there’s plenty of blame to go around.
“Many members of Congress are frustrated by the lack of transparency in the drug supply chain and PBMs are a pretty easy target,” Dusetzina said. “It is important to realize that drug manufacturers set the list prices; PBMs the terms for coverage. PBMs, plans and drug manufacturers share the blame for the increase in list prices.”
Making PBMs Accountable
When is a 20% savings on the cost of a prescription medication really not a 20% reduction on the cost of the drug? That’s a question pharmacy benefit managers would rather you didn’t ask — and one a savvy, diligent pharmacy benefits consultant is prepared to answer.
The PBM world is extremely complex and constantly evolving, with everyone from Amazon to Mark Cuban getting in on the act – or at least attempting to disrupt it. PBMs perform valuable basic functions, but maximizing the value of their services requires expertise and diligence, including:
- Requests for proposals (RFPs) to gain the best of current market pricing improvements;
- PBM contract review and negotiation to eliminate underlying terms, conditions and definitions that dilute the pricing and rebate guarantees; and
- Audits to ensure that the PBM is living up to their contractual obligations.
In addition, there are numerous programs available to manage risk that require experience and expertise to vet and determine the financial or clinical value, as well as the member experience.
Underneath PBMs’ discounts, rebates and guarantees may be misleading or shifted costs, lower-priced alternatives unavailable through that PBM or reasons why a particular medication that is available may not be the best drug for you. Remember: right drug, right cost, right time, right place (i.e., where and how the medication is purchased, received and administered).
Examining the Corporate Culture
What employers sponsoring a group health plan can do about pharmacy spending depends on the employer, its employees and the plan. Arriving at the optimum solution begins with four questions.
- What are the potential savings?
- What is the plan members’ experience with the current program?
- What are the plan sponsor’s responsibilities?
- What entities — including care providers, vendors and PBMs – are involved?
Answering those questions, and designing a solution, is like refining the process of building a car on a production line: You remove cost inefficiencies wherever you can.
Join us on April 20 for a closer look under the engine of vehicles built for Reigning in Runaway Pharmacy Spending. To register, click on the link below.
REGISTER FOR THE WEBINAR
About the Authors
Alera Group Pharmacy Solutions (AEC Rx)
John Adler has more than 30 years’ experience in pharmacy benefits consulting, including service as the lead PBM consultant for the world’s largest labor coalition. A nationally recognized PBM contract and RFP expert, he has appeared served as a featured speaker at conferences hosted by the International Foundation of Employee Benefit Plans (IFEBP), Self-Insurance Institute of America (SIIA) and the Society of Professional Benefit Administrators (SPBA).
Connect with John on LinkedIn
Alera Group Pharmacy Solutions (AEC Rx)
With more than 25 years of PBM and RFP consulting experience, Bob Eisendrath is nationally known for his contract analysis skills. Prior to joining Alera Pharmacy Solutions, he held a senior leadership position at CVS/Caremark, with responsibility for large employer and labor coalitions and high-profile large national clients, and served as national PBM practice leader for EPIC Brokers & Consultants.
Connect with Bob on LinkedIn