HOW TO MANAGE INCREASING PRESCRIPTION DRUG COSTS

Prescription drugs are one of the most utilized elements of an employee health benefits plan. They are also one of the biggest cost drivers. If you’re like many employers, the cost for the prescription drug element of your employee benefits plan continues to rise; the big question is how to manage those increasing costs.

Prescription Drugs – The Basics

Prescription drugs are a vital part of a physician’s toolkit to treat health conditions. They can literally be life-changing for patients. There are several different categories of prescription drugs. This information is helpful when looking at ways to manage prescription drug spend.

Brand Name Drugs – Brand-name prescription drugs are protected under a patent by the drug manufacturer who developed the drug. During this time, the manufacturer tries to recoup its extensive research and development costs and make a profit. This is why brand-name drugs tend to be more expensive than other options. Companies other than the manufacturer cannot produce or sell drugs with the same active ingredient until the patent expires.

Generic Drugs – Generic drugs enter the market after the patent on a brand-name drug expires. They contain the same active ingredients as the brand-name drug, but colours and fillers may differ. Generic drugs tend to be less expensive than brand-name drugs. This is because the generic drug manufacturer does not have to recoup research and development costs associated with creating the drug.

Specialty Drugs – Specialty drugs were developed to treat complex health conditions and often require special handling, storage and administration. Some are created from living cells. They are very expensive to create, but they can have a life-changing impact on patients. In general, it’s not possible to create generic equivalents of specialty drugs.

Breaking Down the Costs of Prescription Drug Spend

The amount your employee benefits plan pays for prescription drug claims depends on a number of factors. Each claim is a combination of the cost of the drug (as charged by the manufacturer), the markup by the pharmacy, and the fee charged for dispensing the drug.

Your drug spend is influenced both by how many claims are made, and the value of the claims that are made. An increase in the number of claims made will drive up your drug spend, but an increase in claims for high cost drugs will also drive up your total drug spend. There are ways that you can target and influence both of these factors.

What to Do About Increasing Costs

With prescription drug spend on the rise, a comprehensive approach to managing costs is necessary. You’ll need to target the claim costs themselves; you should also focus on preventing claims from occurring in the first place. These two cost control strategies work best when employed together.

1. Manage Claim Costs
   Minimizing the cost of a prescription drug claim requires design changes to your plan. At GroupHEALTH, our Smart Rx Solutions help encourage employees to choose to take lower cost (but equally effective prescription drugs) and/or have their prescriptions filled at a central dispensing pharmacy.
   Choosing lower cost prescription drugs means a drug formulary is utilized. A drug formulary is a list of prescription drugs that will receive full coverage. The formulary was created (and is maintained) by pharmacy experts. It mostly includes generic drugs or lower-cost drug alternatives. These drugs are safe and effective. Keep in mind that there are many different ways to treat an illness – some ways cost more than others.
   Employees will need to try lower cost alternatives before moving on to more expensive treatments. This is especially true when it comes to high-cost specialty drugs. Employees will need to try other options before being covered for a high-cost specialty drug. They will be required to go through a special authorization process before receiving coverage for a high-cost specialty drug. For non-specialty drugs, employees must choose to take prescription drugs that are on the formulary in order to receive full coverage.
   The other element of Smart Rx Solutions involves using a central dispensing pharmacy. A central dispensing pharmacy dispenses and ships prescriptions from a single location directly to patients. By partnering with a central dispensing pharmacy, GroupHEALTH can help minimize markups and dispensing fees. This directly impacts claim costs. It can also be a convenient ‘perk’ for plan members to have their prescription delivered directly to their door.
2. Focus on Prevention
   The other big piece to managing increasing prescription drug costs is to employ strategies to prevent claims in the first place. One of the most powerful ways to do this is to focus on wellness. Support your employees in practicing healthy habits in pursuit of better physical and mental health. Healthier employees will need fewer prescription drugs.
   This can mean paying for gym memberships, providing personal training services (like LIFT), running workplace fitness challenges, organizing lunchtime walking clubs and providing healthy food in the workplace. There are many different ways to encourage employees to pursue a healthier lifestyle.
   From a mental health perspective, focusing on prevention may mean supporting employees with access to an Employee and Family Assistance Program (EFAP). An employee and family assistance program means 24/7 access to counselling and support. Free short-term counselling sessions, online articles and other resources can help those dealing with mental health challenges. Counselling can help with things like anxiety and depression which can potentially reduce or eliminate the need for prescription drug medications to manage those issues.

The End Result

Building cost control into the prescription drug portion of your employee benefits plan can be an important way to manage increasing prescription drug costs. Including a healthy dose of prevention (in the form of wellness) is also an important ingredient. The end result is more stable, controlled prescription drug costs. This will support you in providing long-term, sustainable employee health benefits.

Good Advice is Key

Are you floundering under the weight of increasing prescription drug costs? Have you looked at plan design changes and wellness as a means of targeting those costs? Explore your options with one of our licensed advisors on the phone, or contact us for a comparison quote.

Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefits packages that work as hard as you do.