Employers Aggressively Evaluate Net Effects to Pharmacy Plans

Posted by Charles Middleton on 04/26/2016

Q: What are some of the top financial concerns for employer-sponsored health plans as they face the next year to 18 months?

A: A main concern is the alarming rate of increase in pharmacy spending. The prescription price index published by Express Scripts indicates that brand price inflation nearly doubled between 2011 and 2015. Brand prices on the whole were nearly 16 percent higher in 2015 over 2014. While many plans have implemented aggressive cost-containment strategies to address their health plan spending, pharmacy is sneaking up the ranks as a percentage of total health plan spending at an average of 16 percent of the total cost of employer-sponsored health care. In recent years, employers have been so focused on implementing the Affordable Care Act (ACA), that pharmacy has taken a back burner. Employers have relied almost blindly on insurance companies and third-party payers to manage their risk for them. Add to this the ACA's 2015 combined out-of-pocket maximum requirement that shifts a portion of member pharmacy costs back to the health plan, rapid increases in the FDA approval pipeline for specialty drugs, and a continued rise in profit-taking strategies among pharmaceutical companies, and you have the perfect storm for this rapid rise in overall pharmacy costs for employer-sponsored health plans.

 

Q: How has the ACA changed out-of-pocket maximums and how are these changes affecting employer-sponsored health plans?

A: The ACA now limits the amount of combined (medical and pharmacy) out-of-pocket expenses — such as copays, coinsurance and deductibles, that a plan member can incur in a given year. Previously there were no requirements to implement pharmacy out-of-pocket expenses and copays did not accumulate toward the out of pocket maximum, in many cases. These combined out-of-pocket maximum changes were delayed in 2014 and implemented in 2015. In 2016, for example, a group health plan must now pay 100 percent of the health plan expenses for plan members once the member expends $6,850 in combined medical and pharmacy out-of-pocket expenses for an individual plan, and $13,700 for a family plan. With the rapidly rising cost of specialty drugs, these combined out-of-pocket maximums can easily be attained by members requiring routine maintenance medications, or some of the more advanced specialty medications on the market today. It is not uncommon to see a health plan where fewer than 2 percent of the total drugs utilized were specialty drugs, generating more than 60 percent of the total drug spend. Provenge, as one example, a common drug used for prostate cancer, averages $105,000 per month. Newly introduced hepatitis C drugs can cost up to $30,000 per script with average dosage requirements of three scripts. 

 

Q: How are employers addressing the increasing concern of pharmacy spending?

A: Clinical management programs such as prior authorization and step therapy are basic components, but no longer enough. We are seeing more employers carve out their pharmacy benefit management contracts from the insurance companies to gain greater customization, control and behind-the-scenes revenue transparency. This also allows an employer to negotiate aggressive contract terms that require the passing of all manufacturer incentives fully through to the employer. Savvy employers are becoming more aggressive about evaluating the net drug impact after rebates. Other trends include narrowing the allowed pharmacy network to create greater negotiating leverage with a select chain of pharmacies, or independent pharmacies. More employers also are adding pharmacy price transparency tools to allow plan members to go online and shop for the lowest-cost pharmacies for a given drug. We further see a greater effort to monitor and negotiate drugs that are being bought through the health plan side and run through the plan as a health claim. This is where the physician buys through his/her own wholesaler, marks up the drug and passes it through as a health plan claim.

 

Q: What can be done about the drugs running through the medical plan side?

A: Employers don't always realize that they or their consultants can implement strategies to either negotiate these drugs directly with the physician or health care provider, or they can amend the plan to force certain drugs to be bought only through the pharmacy plan and not allow the drugs to be bought at the provider level. The important thing is to be aware of these pharmacy trends and recognize the increasing role that pharmacy may be playing in their overall cost equation. 

PAULA BURKES, BUSINESS WRITER

Published The Oklahoman, April 26, 2016