Editor's note: The following is a contributed piece by John Crable, senior vice president at Corporate Synergies, a national employee benefits and business insurance brokerage and consulting firm.
There’s a strong focus on containing pharmacy benefit costs in 2018. Prescription drug plans today can comprise anywhere from 18-25% of the total healthcare spend. It is not uncommon for prescription plan costs to approach 30% of the overall benefit spend for some employers.
Historically, brokers and consultants have helped employers manage the cost of pharmacy benefits by focusing on negotiating pricing arrangements for drugs through discounts and rebates. As long as pharmacy benefit managers (PBMs) pass through most or all of the rebates and discounts to employers — especially for specialty drugs, which can cost thousands of dollars per script — employers should save a significant amount from retail pricing.
While this strategy helps save money and should continue to be used, there’s another tremendous opportunity that many employers are leaving on the table: reviewing drug formularies and claims from a clinical perspective. This practice can help plan sponsors determine the lowest net cost for a treatment.
PBMs and employers typically see rebates on brand-name drugs, rather than generics. A brief glance at the pharmacy plan performance may show high-cost drugs prescribed to your members, as well as high-dollar rebates you receive in return which at times can create a misguided incentive of larger rebates when the focus should be on total lowest net cost. Some of these brand-name drugs must be prescribed because there’s no alternative. However, many drugs do have equivalent alternatives that cost much less. Reviewing your pharmacy benefit with a clinical eye can help you determine which drugs are costing more than they should.
Here’s how it works: Clinician-consultants will review overall claims file and utilization to see which drugs are being filled — and, importantly, what is being filled unnecessarily. Clinicians will look for certain high-cost specialty drugs or brand-name drugs prescribed when there is a much lower-cost alternative and flag them. Then, they’ll present the drug list to the employer and discuss the pros and cons of changing the Rx formulary to save money. If the employer elects to move forward with the change, the plan notifies both the prescribing physician and the patient to alert them that a formulary update is coming and let them know of the alternative, lower-cost and usually equally effective prescription.
Just how much can employers save with a clinical review? One drug, Duexis, is a brand-name with an alternative equivalent of two over-the-counter medicines — Pepcid AC and ibuprofen. Duexis costs $1,954 per month, versus $30/month for two over-the-counter medicines. The reason Duexis is often overlooked is it produces a large rebate. However, even with the rebate employers are paying nearly $900 per month for the drug. This is a prime example of rebates that fail to produce the best possible cost control.
A clinical review strategy can cause some disruption, but it may not be as much as you think. Take this real world example: Out of a plan with 5,000 members, 20 claims affecting seven members are flagged after a clinical review. Excluding a total of eight drugs, each with a comparable alternative, will save the plan $80,000 over six months.
Conducting clinical reviews of pharmacy benefit plans doesn’t solve the problem of skyrocketing drug prices altogether. But when combined with rebate and discount negotiation, it can help an employer manage pharmacy benefit costs, achieve the lowest net cost of prescription medications with the least amount of disruption to plan members, and continue to provide an excellent benefit.
And that’s good medicine.