Whether it's a carrier-based or stand-alone pharmacy benefit manager, employers continue to turn to PBMs to save additional dollars on pharmacy benefits.
During the last two years, employers have become better negotiators in dealing with PBM vendors, explains Ed Kaplan, Segal's national health practice leader. The recession and a slow economic recovery, coupled with rising health care costs, means employers are pushing harder to get maximum rebates and discounts on generics and brand- name drugs.
"They are scrutinizing every aspect of the PBM contract," Kaplan notes. Some are re-evaluating certain clinical services, such as case management and step therapy, questioning the programs' return on investment and costs. "The good news, however, is that the PBMs are willing to be flexible to improve deals, so that they can keep their members," Kaplan says. "It's a competitive market, and the PBMs are doing a good job in fighting for the business."
Controlling costs
According to a recent Medco study, which polled 300 plan sponsors in the public and private sectors with between 500 and 50,000- plus employees in the first quarter of 2009, 80% of employers hope to address chronic diseases within their workforce by integrating drug and medical data, and adding clinical management programs to their pharmacy benefit to help increase patient safety and control plan costs.
"A large percentage of our health care dollars are being spent on treatments for diabetes, cholesterol and hypertension - conditions that in many cases could be better controlled, and even prevented, by changing behaviors," says Tim Wentworth, group president of Medco's employer accounts.
"Plan designs that were off the table about a year ago because of employee pushback are now back on the table. The move is toward more utilization-management tools," says David Dross, national leader of Mercer's managed pharmacy consulting group.
For example, more employers are turning to prior authorization for certain drugs, such as anti-inflammatories and growth hormones, which means the member, pharmacist or provider will have to contact the PBM before the member can fill the prescriptions.
Employers also want members to try a generic first or purchase an over-the-counter drug before moving on to more expensive drugs, Dross adds. "Up-tiering" - the act of taking a certain class of drugs and moving them to the third tier, thus making them more expensive - also is catching on with more employers. Both designs are intend to drive behavior toward purchasing inexpensive drugs, Dross explains.
Buck Consultants completed a survey in July 2009, questioning more than 140 U.S.-based employers representing a broad range of industries and employer sizes. About 76% of respondents use employee cost-sharing as a utilization management tool, up from 51% in 2008, Buck's analysts found.
The most common target cost-sharing range is 11% to 20% of claim costs, which was used by 39% of employers. Overall, employers viewed their prescription drug benefits as a way to keep their workers healthy and to stay competitive in the marketplace. The report notes that 30% of respondents reported that pharmacy benefits represent between 11% and 15% of total health care costs.
"This is down from last year's survey, when the largest group indicated their drug benefits made up between 16 % and 20% of total health care costs," says Michael Jacobs, a principal and national clinical practice leader at Buck Consultants. The decrease may stem from more expensive brand medications moving off-patent and being replaced by lower-cost generics.
"The majority of our employer-clients tell us they are actively looking for opportunities to improve savings while preserving the focus on improving the member experience," explains David Joyner, executive vice president of sales and account services at CVS Caremark. "This is their primary concern as they review and evaluate their PBM programs and services. Overall, their top six priorities for identifying the right PBM for them are: competitive price; customer service; trust; reliability; flexibility ;and consumer engagement capabilities," Joyner adds.
The economy and health care reform
The PBMs realize that employers are operating in a tough economy. Consequently, PBMs have created more touch points within their programs to help members adhere to and understand their medications, explains Andrew Mechavich, senior manager of compensation and benefits practice at SMART Business Advisory and Consulting.
For example, to eliminate a one-size-fits-all approach to how patients interact with their personal pharmacist, some PBMs offer a service in which a nurse or pharmacist makes a cold call to a member to discuss their medication, the disease and the medication's side effects, Mechavich says. The PBMs believe this model works because some members might feel uncomfortable in discussing certain health-related issues with their local retail pharmacist.
Conducting genetic tests on patients to see if a drug will work on the individual is also gaining some traction among PBMs. "You can pay a fee for a genetic test to see if a certain drug will work for you," thus eliminating, in part, higher claims down the road for a drug that failed to produce results, explains Mechavich. In the Medco study, more than 60% of plan sponsors believe that genetic testing should become a routine part of health care.
As employers try to negotiate favorable deals with their PBM vendors, some health care economists have argued that pharmaceutical companies are inflating the prices of popular brand-name drugs in anticipation of the health care reform. The experts contended that despite a drop in the consumer price index and a decline in generic drugs, the prices for brand-name drugs continue to increase by more than 8%.
Drug manufacturers denied the charge, explaining that they are committed to lowering prices for brand-name drugs as a part of health care reform. They also explained that compliance, research and development costs for new and improved drugs contribute to their expensive prices.
If Congress passes final health care legislation and the law calls for pharmacy-cost trends to remain at a certain level for the next five years, then the cost of some drugs will be starting from a higher baseline, explains Mercer's Dross, who adds that the PBMs have little control over how the pharmaceutical industry sets prices on brand- name drugs.
Segal's Kaplan believes that the PBMs haven't been too vocal about the health care debate, given that reform will entail providing decent coverage to more individuals. "When you have good health care coverage, there is more utilization of prescription drugs," Kaplan adds. The business model for the PBMs is built on traffic within the system. That is, as long as there are prescription drug transactions flowing through the system, the PBM will turn a profit.
90-day program for retail
One way PBMs have turned a profit is by offering 90-day mail-order refills, but mail order is not the only channel for a 90-day supply of medications, says Stan Blaylock, president of Walgreens Health Services. "The reality is that you can have a cost-effective offering that allows for a 90-day mail-order program in conjunction with a 90-day refill at a retail pharmacy," explains Blaylock.
Walgreens recently rolled out an initiative that will have its pharmacists working with doctors, insurers, employers and managed care organizations to allow for a 90-day supply of prescription drugs, instead of 30 days, for chronic conditions. According to the company, there's about a 15% increase in adherence to medications for patients receiving a 90-day retail prescription versus those receiving a 30-day supply.
In addition, each 90-day prescription fill equals three times the volume of a 30-day fill, more than 24% of Walgreen's Medicare Part D beneficiaries' prescription volume, and 47% of its prescription savings club members' medication volume are filled as 90-day supplies at the pharmacies. Blaylock supports an open-network approach that would allow all retail pharmacies to offer a 90-day program.
"Our employees prefer going to their local retail pharmacy rather than their mail box for prescription drugs," says Mark Weinstein, president & CEO of Independent Colleges & Universities Benefits Association.
The Florida-based group, which operates as a Voluntary Employees' Beneficiary Association, represents 12 private educational employers. In 2008, it carved out its prescription drug benefit and adopted the 90-day retail program in conjunction with a 90-day mail-order service.
Weinstein believes that a 90-day retail program creates additional opportunities to improve medication adherence, and wellness and disease management efforts, given that a pharmacist is right there to distribute the drugs to the employee. "Pharmacists are an untapped resource when it comes to delivering quality care," he says.
Four strategic tools to improve prescription drug efficiency
1. Diagnostic checkups that provide an incisive review of how a plan sponsor's drug benefit is performing from clinical, financial and plan design perspectives.
2. Streamlined financial audits that provide snapshot views of PBM performance against major financial terms (drug discounts, dispensing fees, rebates), assuring delivery at contracted levels. Snapshot reports also provide valuable market benchmark data and identify areas where additional savings can be realized.
3. Enhanced prescription drug program analyses fill gaps in information provided by medical vendors and PBMs, and provide data for fraud and Rx-abuse detection and specialty drug utilization. 4. Value-based prescription drug plan design strategies encourage appropriate Rx utilization and help align copays and other out-of-pocket costs with effective chronic disease management and prevention. An example: Free medications for diabetics to help them better manage their condition.
Source: The Segal Company
Rx realities: Highlights from the Medco survey
>> For the second year in a row, plan sponsors perceive specialty medications as the leading driver of prescription drug costs. Three-fourths of those polled have found some relief through reduced prices by billing these drugs under the pharmacy benefit instead of the medical benefit.
>> Mail-order pharmacies improves adherence to essential drug therapies, noted 70% of respondents and nearly half believed that mail-order pharmacists do a better job at identifying adherence problems.
>> Despite unanimous agreement that generic programs constitute significant cost savings, 62% of respondents consider $4 generics programs at retail pharmacies as solely designed to increase foot traffic, and represent only a limited number of available generic drugs.
