Workers Are Bearing A Greater Share Of Prescription Drug Costs
In response to the rapid growth in prescription drug expenditures, many employers are redesigning their pharmacy benefits to shift a greater part of the cost to employees, according to a survey by Mercer Health & Benefits. The survey also revealed, however, that most employers are exploring other ways of cutting costs, while still providing workers with essential prescription medications at affordable prices.
One-fifth of the 529 large employers surveyed indicated their health plan participants were responsible for 30% or more of the cost of prescription drugs in their health plans in 2004.
"A 30% member cost-share is about as high as most employers are willing to go," said Debbie Martin, a member of Mercer’s pharmacy benefit specialist team. "If you’re there already, as many employers now are, you’re probably looking for alternative ways to manage pharmacy costs. Fortunately, employers have a number of options."
Results indicated that nearly two-thirds of respondents currently have three-tier member copayments, generally with the lowest amount for generic drugs and higher amounts for preferred and non-preferred brand-name medications.
The survey also showed that some employers have additional payment tiers in place for discretionary or high-cost specialty drugs. Approximately 46% of respondents reported using a DAW2 program, which requires members to pay the difference between the cost of a generic and brand-name drug should the patient choose the more expensive option, while 26% of the employers surveyed said they use the even stricter DAW1 program, which forces the patient to pay the difference between the cost of the generic and brand-name forms of a drug even if a physician was responsible for requesting the brand-name medication.
A smaller number of employers offer health plan participants incentives for using generics, according to the survey. While only 2% of respondents said they currently offer copayment waivers for generic drugs, at least for an initial period, another 8% said they are considering implementing a generic waiver within the next two years. Moreover, 48% of surveyed employers reported producing targeted communications designed to educate participants and/or physicians about generic options.
Another commonly used cost-reduction measure, according to the survey, is step therapy, a requirement that more expensive drugs be used only after preferred first-line drugs have been administered and found to be ineffective in treating a member’s illness. Around one-quarter of respondents reported requiring the step therapy approach in treating asthma and arthritis, and almost one-fifth said they apply it to anti-depressants and cholesterol medications.
More than one-fifth of respondents said they use another cost-cutting tactic, uptiering, which involves removing all brand-name drugs from the formulary for a certain therapeutic class. Uptiering, researchers said, is most commonly used for antihistamines.
More than 80% of respondents using the services of a pharmacy benefit manager (PBM) indicated they are satisfied or highly satisfied with the account and member services provided by their PBM. At the same time, however, approximately one-fourth of respondents with a PBM said they are likely to change approaches over the next two years.
Most of the surveyed employers who rely on their health plans for pharmacy benefits also claimed to be satisfied or very satisfied with the account and member services rendered, but they expressed lower levels of satisfaction with the cost management performance of these providers. However, compared with those using PBMs, this group of employers was less likely to report plans to switch pharmacy benefit providers over the next two years.
While more than one-third of respondents currently using a PBM are participating in—or are considering participating in—collective purchasing of pharmacy benefits, those using a health plan are considerably less likely to show an interest in collective buying.
Only 6% of respondents reported using pharmacy benefit administrators (PBAs), a new type of PBM offering transparent pricing arrangements, which involve the pass-through and disclosure of arrangements with pharmacies and drug manufacturers. Moreover, just 2% of the employers surveyed expressed interest in moving to a PBA in the next two years.
"Employers interested in transparent pricing have been able, for the most part, to secure this arrangement through their current PBM or health plan," Martin explained. "Many of the new PBAs or transparent PBMs are small, and employers may fear they lack the critical mass to provide a consistently high level of service."
When asked which objectives for their prescription drug benefit they would categorize as important or very important over the next two years, 78% of the employers surveyed said they hoped to implement incentives for cost-effective drug use, and 73% said they wanted to better manage costly specialty or biotech drugs, such as those used to treat rheumatoid arthritis or multiple sclerosis.
Researchers noted that specialty and biotech drugs are often covered through health plans, rather than pharmaceutical plans. Fewer than half of the employers surveyed said they believe they are using the most cost-efficient channels for buying specialty drugs, and just two-fifths rated their clinical case management for these drugs as effective.
Some employers are cutting costs by scaling back coverage for discretionary drugs, according to the survey. Results showed the drugs most likely to be excluded from coverage were those related to weight-loss, fertility, and smoking cessation.
To ease the financial impact of cost-shifting and encourage compliance with treatment programs, a small minority of the companies surveyed said they were reducing or eliminating copayments for patients with certain chronic medical conditions, such as diabetes and asthma. Just 3% of respondents reported providing waivers for the chronically ill, but 11% said they are considering doing so within the next two years.
