Pharmacy Benefits Uncut

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At some point in the last little while, like many employers, you’ve probably realized your pharmacy spend is consistently increasing at a pace that is unsustainable, and worse yet, you’re seeing no improvement in your plan members’ health in return for these additional dollars. Essentially you’re throwing good money after bad.

I don't say that to be a Debbie-downer. I say it because getting value for pharmacy spend is every employer’s goal, but few employers are able to implement and execute a strategy that actually helps them achieve it.

One of the most important things you can do is eliminate what’s not working. Complexity is a feature, not a bug, of the employer-sponsored pharmacy benefits world which operates on information asymmetry and PBM structures designed to profit at your expense. But the good news is that you can take steps to restructure your pharmacy benefits plan so that it’s working for you and your members. And this restructuring effort should begin with getting rid what’s not working.

Here are four areas you can look at as you embark on your pharmacy benefits elimination diet.

#1 Intermediaries

It may surprise you to learn that 50% of your pharmacy dollars may be going to intermediaries, the largest culprit being PBMs. This is particularly true if you’re using one of the Big 3 PBMs (Express Scripts, OptumRx, Caremark) since they control 80% of the prescription drug market and are owned by the same large healthcare corporations that also own insurers, pharmacies, and physician practices. They wield enormous power and use opaque structures to obscure the price of drugs. They likely offer you a huge rebate check but mark up prescription drugs prices exponentially so you and your plan members are paying many times more than the lowest net cost for which these drugs are available. They keep promising bigger and bigger rebates, but your drug spend keeps increasing and you have no idea how the money’s flowing.

When fixing your pharmacy benefits, make it your priority to eliminate the money leaking to your PBM. Work with an independent PBM that’s willing to offer you the lowest net drug cost. Here’s the rule you need to keep in mind: Any PBM promising to reduce your drug spend through additional discounts, rebates, or shared savings without telling you the actual cost of the drugs you’re purchasing is using you to pad their bottom line rather than providing fairly priced drugs to your plan members.

#2 Drug Formulary

Those rebates I just mentioned aren’t just driving up your drug costs, they’re also influencing the drugs your plan members get access to. Because these rebates are tied to the price of drugs, your PBM is incentivized to list high price-high rebate drugs on your formulary in favour of lower cost alternatives that are equally effective. This means your plan members are likely being steered to higher priced drugs, not because they’re better but again to pad your PBM’s bottom line at your expense.

Work on offering the right drug mix to your plan members by making it your goal to provide access to the most effective medications at the lowest possible cost. Do this by holding your PBM accountable: ask them how they make their formulary listing decisions (i.e. is it a rebate-driven formulary), whether they have a biosimilars first strategy, and for access to minutes of their Pharmacy and Therapeutics Committee meetings. Make a concerted effort to eliminate expensive drugs from your formulary that provide no benefits over cheaper alternatives. You may have to work with an independent clinical expert to achieve this goal, but the savings you realize will make it well worth it.

#3 Clinical Programs and Point Solutions

Your PBM probably offers clinical programs for management of chronic conditions such as diabetes or obesity for additional fees. Or you might be offering point solutions (e.g. digital apps) from other vendors to help your members manage their medications. While these targeted services may be designed to improve health outcomes and control spending, the data tell another story. Only about 10% of plan members use these services and it’s often difficult to know whether they’re actually effective. All of this amounts to a questionable return on your investment.

Take control of your plan by determining whether these types of solutions are meeting the needs and priorities of your members and whether they’re achieving adequate uptake to justify their cost. If not, don’t hesitate to eliminate them. Anecdotally, I’ve heard from many employers that plan members receive superior clinical services from independent pharmacies filling their prescriptions rather than chain pharmacies owned by PBMs or digital tools. Perhaps the best approach is to ensure your plan members have an ongoing, trusted relationship with a pharmacist who can provide clinical services to optimize their medication use and help manage their chronic diseases.

#4 Out-of-Pocket Costs

This may be an odd thing for you to think about eliminating if you’re trying to save money but hear me out. Typically cost-shifting to members is a move employers use to reduce their costs, but increasing out-of-pocket costs has health equity implications and potentially increased downstream costs related to health issues arising from medication non-adherence.

And those PBM rebates I mentioned that keep driving the list prices of drugs higher – they’re also driving up out-of-pocket costs for your members since prescriptions copays are based on the list price rather than the net price of drugs.

Here’s where a two-pronged approach can be helpful: focus on obtaining the lowest net cost for drugs so that your drugs prices aren’t being driven by rebates; and once you’ve been able to achieve this objective, you’ll be in a much better position financially to waive out-of-pocket costs for your members since your prescription drug spend will be reduced considerably.

The Bottom Line

Contrary to what many players in this industry would have you believe, ever-increasing pharmacy spend in the employer-sponsored benefits world is not inevitable. In fact, implementing smart strategies could help you reduce your pharmacy spend by 20% of more and reduce your fiduciary risk. These strategies should begin with identifying and eliminating the services and structures designed to keep your prescription drugs prices skyrocketing year after year.

That's all for today.

See you in two weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com