Lately, the best thing that can be said about prescription drug benefit costs is that they haven't been increasing as fast as they were a few years ago. But that is likely to change over the next few years. Indeed, when it comes to prescription drug costs, companies face a classic good news/bad news scenario. The good news is that thepatents on several major blockbuster drugs, like Zoloft and Zocor, have expired or will expire soon, which means that lower-cost generic versions are now or soon will be available. Considering that these drugs accounted for tens of billions of dollars in prescription drug spending, the savings for companies' prescription drug benefit plans promises to be considerable.
Now for the bad news from a cost perspective. The biotechnology revolution promises to bear significant fruit in the coming years as a host of new and extremely expensive biotech drugs come onto the market. Estimates of the size of the market for specialty and biotech drugs range from $70 billion to $80 billion or more in 2008, compared with $30 billion to $40 billion in 2004.
And when you look at the potential cost of biotech drug usage per patient, the sums seem even more staggering. "The costs of these drugs can range from $5,000 to $50,000 per month per patient," says Michael Jacobs, Atlanta-based national clinical practice leader with benefit consulting firm Buck Consultants. "They have the potential to change the way health care is delivered and certain diseases, like cancer, are treated. But what happens if five or six percent of your employee population needs these drugs?" Moreover, these drugs require long-term usage, which can further affect costs.
What's more, these costs could be just the tip of the iceberg. "Once a drug is approved for use for one condition, it is easier for it gain approval for use for other conditions," notes Helen Darling, president of the National Business Group on Health, a nonprofit association of 250 large employers in Washington, D.C.
Managing Utilization
What can companies do to manage prescription drug spending while providing their employees with the most effective drug therapy? In many ways, the steps companies are taking to maintain a handle on prescription drug spending are simply an extension of the overall trend toward encouraging greater health-care consumerism, individual responsibility for health and well-being, and involvement in health-care decision-making.
As drugs become more expensive, companies are shifting their cost-management strategies to focus on ensuring drug therapy compliance (i.e., making sure that individuals are taking the drugs as directed) and utilization management. "With utilization management, companies encourage the use of less costly and less invasive treatments and only move on to the next level of treatment if the first level doesn't work," explains Darling.
"Now is the time to prepare the employee population for how things will be managed and [emphasize] individuals' responsibility for their own care," says Jacobs. For example, a company could eliminate co-pays for drugs that are used to treat certain chronic conditions but impose financial penalties, such as greater cost sharing, if the individual has a medical emergency as a result of non-compliance with drug therapy. On the flip side, the company could reduce cost sharing for employees who demonstrate that they are taking steps to manage their condition and improve their health.
Given the number of brand-name drugs that are coming off patent, a company can offer incentives for individuals to switch some brand-name usage to generic forms even if they are taking a drug that is still under patent protection. For example, the cholesterol-lowering statin, Zocor, is now available in a generic form, so individuals taking another brand-name statin that is still under patent -- Lipitor, for example -- might be able to switch to the generic form of Zocor with no adverse effects.
Dollar Thrifty Automotive Group Inc., a company that specializes in car rental services, is attempting to manage costs in its self-insured prescription drug plan by developing a specific strategy to structure the therapy for the person taking the medications, says Angel Stacy, the Tulsa, Okla.-based company's director of employee benefits and HRIS. Because there are several drug options of varying strength and cost available for various conditions, the company's program focuses on working with the patient's doctor to identify the right drug therapy and monitor its effectiveness. If a drug is not working as expected, the patient can switch to more powerful and more costly options. "This way, the individual doesn't go with the most expensive drugs unless they need it," says Stacy.
This close monitoring of drug therapies is also important for other reasons. For example, drugs can lose their effectiveness over time, so a drug therapy that was successful in the past may stop working at some point. Moreover, drug effectiveness can change significantly if the patient's weight fluctuates; close monitoring enables the prescription to be modified quickly, before the condition can worsen or complications can develop. "Our ultimate goal is to have healthy employees," says Stacy. "We are focusing on doing what it takes to help them maintain their health."
Encouraging Compliance
Enforcing compliance with prescription drug therapy is another valuable cost management strategy. The rationale behind this approach is that ensuring compliance with required drug therapies helps prevent the patient's condition from deteriorating and requiring additional treatment and hospitalization.
Many new and existing specialty drugs for treating certain chronic conditions -- for example, Hepatitis C -- often have serious side effects that can affect the patient's willingness to continue the therapy. For example, if side effects occur, the patient could stop taking the drug, and his or her condition could worsen unless an alternative therapy is introduced or the patient receives care to lessen the side effects. Without an intervention to deal with the side effects or find another treatment option, the patient's condition will go untreated and might deteriorate. To prevent these types of situations, some companies provide disease or case management services that provide follow-up care and counseling to help ensure drug compliance.
Disease management programs can also be used to help individuals manage common conditions where noncompliance can lead to debilitating and costly complications.
Pitney Bowes Inc., a company that provides mailstream software, hardware, services and solutions, has structured its prescription drug program to focus on increasing drug therapy compliance for the most prevalent conditions among its employee population: diabetes and asthma.
"These are high cost conditions, made more so by employees not being on the proper drug therapy or not being compliant," says Dr. Brent Pawlecki, the company's associate medical director in Stamford, Conn. "We needed to find ways to make people more compliant on taking their medications, and we wanted to get rid of barriers to them getting proper care."
Pitney Bowes modified its tiered payment structure for drugs that treat these conditions. The existing tiered structure requires progressively higher co-pays for generic drugs (10 percent co-pay), preferred brand-name drugs (30 percent co-pay), and brand name drugs (50 percent co-pay). To make asthma and diabetes drugs more affordable, the company placed all of those drugs in the first tier with a 10 percent co-pay regardless of whether the drug is generic or brand-name.
As a result of this change, Pawlecki found that the compliance rate for these populations improved, and the rate of emergency room visits and hospitalization declined. Moreover, the overall cost of care for diabetes declined by 6 percent and for asthma by 15 percent, while average annual prescription drug costs for those conditions declined 7 percent and 19 percent respectively. Disability rates also fell among those populations. "Once we got people on the right therapies and increased compliance, they had fewer health problems and complications and didn't need hospital care or additional medications to deal with those problems," Pawlecki reports.
More Cost Savings
There are other opportunities to reduce prescription drug benefit costs in the actual administration of the program. John Malley, eastern region pharmaceutical practice leader for Watson Wyatt Worldwide in New York City, suggests that companies carefully evaluate how various drugs are categorized as specialty or non-specialty. These categorizations can have significant cost implications because available discounts can vary based on whether a drug is considered a specialty or non-specialty item.
A drug might be classified as a specialty item by a particular pharmacy benefit manager (PBM) but not by others. The form a drug takes can also affect its specialty status. While a self-injected drug might be considered a specialty item, its tablet or capsule form might not be.
Companies that use a PBM tend to have lower costs than companies that rely on health insurers to manage their prescription drug benefits, according to Buck Consultants' national health-care trend survey for the second half of 2006. In that period, companies using a PBM saw costs increase by an average annual trend of 6.9 percent, compared to 11.4 percent for companies that use health insurers. (See Using a Pharmacy Benefit Manager below).
Stacy suggests that companies look for PBMs that are willing and able to be flexible when managing the prescription drug program. "Some PBMs are better than others," she says. "And some PBMs are strict in what they can and cannot do within their structure -- and that limits your ability to manage your prescription drug program."
Rethinking Rx BenefitsCompanies have long been using their prescription drug benefits structure to encourage more cost-conscious purchasing. Here is a summary of some of the options: A basic tiered structure. This option uses progressively higher co-pays based on the type of drug involved. For example, generic drugs have the lowest co-pays, and higher co-pays apply to brand-name drugs for which no generic substitute is available. The highest co-pay would be for brand-name drugs for which a generic substitute is available. Cost-efficient tiers. The basic tiered benefit structure can be modified to tie co-pay levels to a drug's cost efficiency as measured by effectiveness and price; the drugs that are most effective and have the lowest price would have the lowest co-pays. Pharmacy benefit managers can provide information on a drug's cost efficiency. Added tiers. With more specialty drugs coming on the market, some companies are considering adding more co-pay tiers to deal with the high cost of those products. The danger of this approach is that the drug could become so expensive that the patients fail to take it, and their worsening condition could lead to even more expensive hospitalizations. Generic-only co-pays. Companies can also limit prescription drug reimbursement to the cost of the available generic version. This way, if an individual wants to use a brand-name drug, he or she must pay the full difference between the price of the brand-name drug and the generic version. Condition-related co-pays. If a company has a large employee segment with a specific condition, it can structure a special tier for the drugs necessary to treat that condition. For example, if many employees suffer from diabetes or asthma, the company can develop lower co-pays just for specific drugs. In general, companies would keep the co-pays on these drugs lower than those on other conditions to ensure the drugs remain affordable and to encourage greater compliance with drug therapy. The thinking here is that the medical care for complications that occur when these conditions go untreated will be much higher than the cost of the drugs. |