empty bottles of prescription drugs on cash

More than 60% of employers in the US say that medication costs and medical spending are increasing at an unsustainable rate.

For self-funded employers, finding ways to reduce prescription drug expenses is critical. And as a benefits advisor, it’s your responsibility to come to them with innovative, cost-efficient ways to do so.

Here are key strategies you can use to help your self-insured clients control rising prescription medication costs.

1. Develop a Deep Understanding of Current Medication Costs & Needs

Plan sponsors have the power to control their medication costs. But you’ll need a good understanding of their enrollees’ health and prescription drug needs to figure out how to help them.

This will help you develop strategies to reduce expenses while still ensuring they’re providing their enrollees quality care. It can also help you figure out where they have costs that are higher or lower than expected.

Start by identifying enrollees who used one or more drugs last year. Then, for each drug, calculate the average cost per enrollee. This will give you a good idea of where the money is being spent, and on whom.

You should also identify the most common drugs by total costs. These are the ones that consume the most resources and are likely to be the largest drivers of your medication costs year to year.

Dig into what each client’s population is like. Is more than 40% of their population on Medicare? Do they have many high-risk enrollees with chronic conditions? These can affect medication costs.

Use data from the top users of their plans to see if you can pinpoint specific high-cost conditions or drugs. For example, you may notice that a high percentage of claims apply to an enrollee on maintenance therapy for an ongoing condition. This person may be on a low-value medication but could do the same or better on a less expensive, higher-value drug.

Finally, it’s good practice to keep an eye on the cost of prescription medications, as well as any regulations, laws, or news about them.

2. Improve Negotiating Power & Identify Cost-Saving Opportunities with PBMs

There’s a lot of news right now about the role of Pharmacy Benefit Managers (PBM) in increasing prescription drug prices. The FTC announced on June 7, 2022 that it was launching an investigation into the six largest PBMs. They include CVS Caremark, Express Scripts, OptumRX, Humana, Prime Therapeutics, and MedImpact Healthcare Systems. They’ve been asked to turn over information regarding their practices for the previous five years.

So, it’s safe to say that many self-funded groups might be re-considering their PBM options.

As you know, plan sponsors have the power to choose their PBM. This is a crucial decision because the PBM they choose can have a big impact on their medication costs.

Negotiations between the PBM and drug manufacturers influence more than 90% of all medication costs. You can save money by utilizing a PBM with a strong history of negotiating better prices on behalf of their clients.

Shop around for the best PBM for each client. You’ll want to look for those that have processes in place to wisely manage prescription drug spending. Ask them to provide denial rates and average costs per drug dispensed for your clients’ most common drugs, and then compare them to other PBMs.

Consider telling your PBMs that if they can’t provide you with a viable discount, you’ll be forced to search for another partner. This threat of competition will likely encourage your existing partners to work with you.

3. Apply a Reference-Based or Outcome-Based Prescription Drug Pricing Strategy

Another way to reduce rising prescription medication costs is to implement reference-based pricing. In this model, the plan sponsor determines a maximum amount that it will cover on the cost of a prescription if therapeutically similar drugs are available. Any dollar amount above the maximum is the enrollee’s responsibility.

In outcome-based pricing, a plan sponsor agrees to set prices. However, if the drug doesn’t perform to the patient’s and physician’s expectations, some, if not all, of the cost is refunded.

Here’s an example of outcome-based pricing in action. Let’s say there’s a high-cost medication that is supposed to reduce heart attacks. In an outcome-based pricing model, the plan sponsor agrees to cover the drug as long as the enrollee doesn’t have a heart attack. If the enrollee has a heart attack while taking the medication, the plan sponsor gets a full refund.

4. Drive Smarter Drug Formulary Management

A 2019 study by the Pacific Business Group on Health, The Commonwealth Fund, and Integrity Pharmaceutical Advisors found that wasteful prescriptions represented 3 – 12% of total claims per plan sponsor evaluated, with an average savings of $413 per drug.

A formulary is a list of drugs that the plan covers. It can be tiered to group drugs by cost, and then coverage is determined within each tier.

PBMs often develop formularies that contain drugs with little to no clinical value. These include drugs that have an over-the-counter alternative, brand name drugs with equivalent generic drugs, and drugs that have been modified slightly so they can be listed as “new,” which means they’re more expensive.

PBM practices can be questionable at best when it comes to formulary design:

  • There can be instances where a brand name drug is placed in a “more favorable” formulary tier than a generic drug.
  • Formularies can also have brand name drugs that are excluded in favor of other brand names that may not contain the same active ingredient.
  • Some formularies could exclude medications where there is no alternative medication.
  • Excluded medications for cardiovascular problems have increased more than six times in the past eight years.

What can benefits advisors do to ensure better formulary drug management?

Advise your clients to work with a PBM that allows formulary customization. This lets them decide which medications they want to cover or exclude and at what level, all based on their enrollees’ needs.

You should also consider drug caps, step therapy, generic drug requirements, and other strategies to ensure formulary optimization.

5. Implement a Prescription Drug Savings Program

We all know that because PBMs negotiate the price of drugs with each pharmacy, there can be big differences in costs to the enrollee and the plan sponsor. Prescription savings programs align with PBMs, networks, and plan sponsors to reduce medication costs by helping enrollees identify the best, most affordable drugs for them.

This type of program enlists clinicians to review medications for duplicate therapies or generic alternatives, and to seek out financial assistance resources when available. For example, prescription drug advocates at SentryHealth:

  • Discuss enrollees’ medical conditions and their prescribed medications
  • Analyze current medications and clinical history
  • Evaluate alternative medications including the availability of generic drugs at a lower cost
  • Determine if there are patient assistance programs or other available resources to help reduce financial responsibility
  • Connect employees to low-cost prescriptions, delivered right to their doors

So not only do they help source the cheapest medications, but they also ensure enrollees get the most therapeutically appropriate drug at the best price.

To encourage the use of this type of program, some plan sponsors require that an enrollee consults with a prescription drug savings program expert before getting their medication filled or refilled.

Forward-thinking benefits advisors bring their clients innovative ideas that lower costs and mitigate risk. As medication costs continue to rise, now is the time to consider strategies that will work now and into the future.

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SentryHealth is leading the charge in employee health and wellbeing. Integrating smart technology with personalized guidance from Registered Nurse Advocates, we empower employees to make more informed decisions while guiding them to quality, affordable care. The result is greater engagement, higher satisfaction, better outcomes, and lower costs.