Prescription drug coverage continues to play a major role in employer-provided group health benefit plans as new and specialty drugs with extreme costs and above-average price inflations continue to challenge employer budgets.

As pharmacy continues to evolve and become more of a driver on overall health care costs, it is important for a plan sponsor to protect their plan by reviewing pharmacy spend and contracts. Once a plan sponsor has a deep understanding of their pharmacy program and PBM contract and has gone through industry benchmarking, they can begin to set and address goals to manage costs while still providing a reasonable and sustainable pharmacy benefit to their employees.

Learn about understanding your pharmacy benefits manager (PBM) in this State of Health Care Guide.

While the following strategies exist in the market, they may not be a good fit for all employers and further consulting with your benefits advisor is highly encouraged.

International Pharmacy (Get cheaper drugs.)

The truth is, prescription drugs often cost substantially less in other countries. A perfect example is Sovaldi, a medication used to treat hepatitis C. When it came out, it was approximately $90,000 for a course of treatment in the United States; in Egypt the cost was approximately $1,000. Yes, the cost differences can be that extreme!

There are two avenues to take advantage of international pharmacy – ship the medicine here to the plan member or send the member to another country to procure the medicine.

Medical tourism is also gaining traction. Read about it in this guide.

Upside

Savings! Plan savings are typically upward of 20% of drug spend. The greatest savings are generally seen on brand name and specialty drugs.

This is a voluntary option for members. In many cases, plan sponsors subsidize the member’s cost entirely; essentially, the member gets it for “free.” Additionally, if the member travels to procure the drug, their travel expenses are often covered by the employer.

Considerations

When speaking with vendors, consultants, peers and others, take caution with those who have extreme opinions about this – either all for it or totally against it. The reality, as with most things in life, likely lies somewhere in the middle.

There is questionable legality around importing. Importing drugs from other countries is generally not legal, with some exceptions. However, there are a number of bills pending in Congress that would change that incrementally. Regarding the member travelling to procure the medicine, if that medicine is legal in the U.S., it is legal for them to obtain in another country and typically will be covered by the plan and therefore be tax favored, as well.

Other considerations include:

• Drug pedigree
• Shipping/handling/cold chain
• Customs
• Travel risk
• Plan sponsor risk for promoting program
• PBM exclusivity agreements
• Loss of rebates
• Fees

Patient Advocacy (Get someone else to pay for the drugs.)

There are foundations and charitable organizations that are willing to subsidize patient costs. These programs are primarily focused on specialty; however, some programs target high-cost traditional brands. Basically, the program forces 100% of cost share to the member to maximize subsidies and then the member is covered by the foundation/charity.

Upside

Typically, there is upward of a 90% reduction of the drug costs, resulting in the member obtaining the medicine free or at a very low cost. Even if funding cannot be obtained, the member will always get their drug so long as they meet the clinical guidelines.

Considerations

The employee (or potential employee) will likely view this, at first, as a low-benefit offering. As they are reviewing your benefit plan, they will initially see that specialty is not covered, unaware of the next step of the program.

Other considerations:

• Long-term viability of the solution
• Questionable use compared to the intents of these funds
• Discrimination concerns (ADA, HIPPA, etc.)
• PBM exclusivity agreements
• Loss of rebates
• Fees

Specialty Prior Authorization Carve Out (Savings as a byproduct of focus on patient health)

This strategy is fairly prevalent in the industry. While the first two approaches we covered address drug costs directly, the savings that result from a specialty PA carve out are a byproduct of a focus on the plan member’s health and safety.

The question a plan sponsor asks is “If for every $1 I’m spending on pharmacy 50% is on specialty, would it be beneficial to have that specialty piece carved out?”

The approach removes the clinical authorization component and fulfillment from the PBM and questions utilization. It is likely that some medications were never needed in the first place, the patient did not receive the benefits of the drug or the condition no longer requires the medicine.

Upside

This results in a reduction in over-utilization patterns as a result of more appropriate, outcomes-based prescribing. This in turn enhances patient health and safety. And, ultimately, there is typically a 10 to 15% plan spend reduction.

Considerations

Some members may not understand why a medication is no longer being approved and therefore perceive a low-benefit offering by their employer. Further, an employer must ensure their plan is written very clearly to state that the plan is making a payment determination, NOT a treatment determination.

Other considerations:

• PBM exclusivity agreements
• Loss of rebates
• Fees

All Things Considered

The first two strategies covered are more avant-garde. It will take the right type of organization with the right amount of risk tolerance to have success with them; however, the savings can be immense if properly implemented. The last strategy is a more tried-and-true solution; however, the savings potential is not as grand.

Unfortunately, there is no clearly defined, one-size-fits-all solution to controlling employer pharmacy spends. Partnering with an experienced benefits advisor with specific expertise in pharmacy consulting is your best plan of action. They will be able to help your organization develop a strategy to curb prescription drug benefit costs and control health plan expenses.