Americans spent $335 billion on prescriptions in 2018, and are projected to spend more than $511 billion by 2025 — an increase of over 52%, according to Express Scripts. In an analysis of internal data, the pharmacy benefit manager found Americans had on average more than 18 prescriptions in 2019, and 80% of those were necessary to manage chronic conditions.
It’s clear that something needs to change for consumers. Managing Rx costs is a burden many Americans can’t bear, pushing them to take chances with their health that hurt them more in the long run. Almost a quarter of consumers who suffered a price increase on medications simply declined to fill the prescription, while roughly one in 10 took an expired medication or skipped a dose to make it last longer, Consumer Reports found.
Even after the Affordable Care Act passed, more than half of Americans still get their health insurance through employer-sponsored plans, according to the Commonwealth Fund. Prescription spending represents an increasing share of health costs, but employers can help keep costs low by taking steps to control medication costs for their employees. Here are three areas where employers can begin helping workers reduce pharmacy spend right away.
Transparency
Pharmacy benefit managers buy prescriptions for health plans at lower prices than what the plans pay for them — a simple economic concept, but one that puts plans at a serious disadvantage and can put millions of dollars on PBMs’ balance sheets.
Some PBMs say they offer their services for free. Of course, you never really get anything for free. Instead of charging an administrative fee, these PBMs keep the difference between what they charge health plans and what they reimburse pharmacies.
Employers can start demanding transparency by working with PBMs that use pass-through pricing and set out their administrative fees clearly, so they know exactly what they’re paying for in their health plan.
Rebates
The pharmacy benefit manager model creates an inherent conflict of interest. PBMs negotiate rebates from manufacturers for making their products preferred drugs in health plan formularies, according to a paper in the Yale Law & Policy Review. If PBMs pass those savings on to clients, great — but they’re under no obligation to do so.
Courts that have considered the question of PBMs’ fiduciary obligations to plan participants tend to take them on a case-by-case basis, Bloomberg Law reported. In the meantime, PBMs are bringing in billions of dollars through rebates. A 2019 survey by Pew Charitable Trusts found manufacturer rebates more than doubled between 2012 and 2016, growing from $39.7 billion to $89.5 billion.
Make sure your employees are getting the most savings by asking your benefits advisor these four questions:
- Are Rx rebates shared with clients?
- Can clients get rebates as cash?
- Can clients audit the rebates that have been applied?
- Do clients have any control over the prescriptions in the formulary?
Specialty Rx Management
Specialty drugs account for about 2% of prescriptions, but almost half of Rx spending goes toward these expensive medications. Fortunately, there are steps that employers can take today to address specialty Rx costs.
Copay cards split the Rx costs between drug manufacturers and health plans. Similarly, medication assistance programs are offered by manufacturers to help reduce patients’ Rx costs.
Although the Food and Drug Administration prohibits importing medications to the United States, lawmakers’ attitudes around that are changing. President Donald Trump signed an executive order in September declaring that Medicare should not pay more for medications than the lowest prices charged in countries with similar GDPs.
Employers benefit with the right partner
Employers are under a lot of pressure to offer benefits that will help recruit and retain the best talent without breaking the bank on health plans. Even those who work with consultants say they are overwhelmed by the complexity of their plans, according to Guardian Life’s 4th annual Workplace Benefits Study.
It’s not unreasonable to demand the same transparency from your benefits advisor that you want from your PBM. Ask your advisor about their compensation structure. Are their commissions paid by the insurance companies they recommend? Would it make more sense to join a consortium program than to try to self-fund an insurance plan for employees?
Employers need creative experts who understand how to control healthcare costs. Knowledgeable advisors who find innovative solutions like self-funding for their clients can help them save 10% compared to commercial insurance, according to Government Finance Review. Rx management is a key factor impacting employer-sponsored health plans, and one that with the right help, employers can begin controlling today.
