Reducing PrescriptionDrug Costs Shouldn’tBe Hard to SwallowPeter VillanoStrategic Accounts ExecutiveAs prescription benefit program costshave escalated at a rate in excess of thenational inflationary trend for severalyears now, benefit managers need to lookat the options that are available to helpcontain the cost of the benefit. Many benefit managers andfinance officers are scratching their heads and looking forsolutions as to how they can manage the cost, yet maintainbenefits for their employees. There are many options that areavailable, however some options depend upon the level ofdisruption a plan sponsor may be able to endure.The reality is that dramatic cost reductions can be achievedthrough plan design modification. It is possible to implementchanges that can literally cut costs in half if your client iswilling, or perhaps desperate enough, to consider such dramaticchanges. Modifications can be incorporated in a varietyof ways, ranging from intrusive processes such as steptherapy and aggressive formulary programs to co-pay adjustments,or even more passive approaches. Programs such asstep therapy, or restrictive formulary programs, usually resultin service issues at the pharmacy counter. Often a prescriptionorder for a particular medication is rejected triggering achain of phone calls from pharmacist to physician and sometimeseven the pharmacy benefit manager, until a mutuallyacceptable, appropriately covered medication can be identified.During the hours or days that this authorization processmay take, the patient must sit anxiously awaiting a solution.All of us who have serviced these types of cost managementprograms are familiar with the fallout. The inherent flaw withsuch programs is that coverage issues are not addressed untilafter the prescription order is written and presented at thepharmacy counter. Although, presently very inconvenient toplan participants, there is a solution to this dilemma loomingon the horizon. Requirements being placed upon MedicarePart D benefit program providers are requiring movement towarddeveloping a process referred to as “e-prescribing.”continued on next page 13
E-prescribing is a mechanism by which physicians will submitprescriptions electronically from their offices, allowingfor immediate feedback regarding coverage, formulary, copay,etc., so that the prescription can be changed if necessaryto a covered drug, while the patient is still in the physician’soffice. Once this is universally available, many point-of-saledispensing delays at the pharmacy counter will disappear.For your clients who want to consider cost management optionswith fewer surprises, the following quick-referencelaundry list of options is available for consideration. Increasingco-pays is still the first line of consideration. It resultsin immediate savings and forces participants to share in theinflationary trend normally born disproportionately by theplan sponsor. We recommend serious consideration be givento a percentage “co-insurance” cost sharing structure in placeof fixed co-payment levels, because it automatically adjustswith inflation and heightens the cost awareness of plan participants.<strong>PAHU</strong>-PAC: ANOTHER ADVOCACY TOOLThe purpose of the Pennsylvania Association of Health UnderwritersPolitical Action Committee (<strong>PAHU</strong>-PAC) is to support Pennsylvaniastate legislators and legislative candidates who identify withand support the aims of our Association. Its purpose is not to “buy”votes. Rather, it is designed to cultivate a health insurance friendlylegislature by assisting worthy incumbents and candidates.<strong>PAHU</strong> members, families, employees and friends within the industryinvest in <strong>PAHU</strong>-PAC with their individual contributions. Theseindividual contributions add up and are disbursed by decision ofthe Board of Directors.<strong>PAHU</strong>-PAC disbursements are made when a majority of theBoard agrees that a legislator or candidate is worthy of support.The Board is elected yearly and must have representation fromeach local association. Criteria for support include a number ofthe following:• Insurance background or licensed insurance producer• Demonstrated vote or committee vote record• Support from local <strong>PAHU</strong> members• Leadership of House or Senate; member of a relevant committeesuch as the House Insurance Committee or Senate Banking& Insurance Committee• Dynamics of a particular race of district; Is it winnable?• Preference is given to having local members attend local legislativedistrict events versus higher-priced Harrisburg politicalfundraisers.• Disbursements are made to both Democrats and Republicans.Only individual investments in <strong>PAHU</strong>-PAC may be accepted. Itis against Pennsylvania state law for <strong>PAHU</strong>-PAC to receive corporatemoney. PAC contributions are not tax deductible. <strong>PAHU</strong>-PAC’s Operating Rules may be viewed at www.pahu.org.Generic equivalent drugs do cost one-third to one-fifth theprice of their brand-name counterparts; so any benefit designthat motivates use of generic equivalent drugs is effective.If you cannot mandate generic drug use, consider broadeningthe co-pay spread between brands and generics, even if itmeans lowering the generic co-pay level recognizing that theplan, at present rates, could save approximately $30 to $50for each generic conversion. When a preferred medicationlist is properly developed, three-tiered co-pay structures thatcharge the higher co-pay for “non-preferred” or “non-formulary”drugs can effectively reduce program costs, while keepingthe non-preferred items available to patients without thecumbersome prior authorization processes. As baby boomersage, “lifestyle” drugs such as Viagra, wrinkle creams, agingcounteringhormones, etc. are being developed and marketedheavily by manufacturers.Paying for these drugs is draining plan resources and ultimatelytaking dollars intended to pay for drugs associatedwith acute care and serious medical conditions. Many plansponsors now exclude or restrict coverage of these drugs, orhave in place a higher co-pay tier that can be added just for“lifestyle” drugs.Other simple ways to help share in prescription drug costs areto set mail order co-pay levels to at least 2 to 2½ times thelevel of retail co-pays assuming that the days’ supply availablethrough mail order is 3 times retail. Limit the quantitydispensed through a retail pharmacy to 30 days supply or less,instead of “34 days,” or “the greater of 34 days or 100 units.”This reduces waste and enables collection of additional copays.Another option is to enforce a coordination-of-benefitstructure, especially if spousal employment levels are high.Of course, the value of each option varies in terms of savingsgenerated depending on your client’s participant utilizationpatterns and present benefit and co-pay structures. Alternativesshould be evaluated in conjunction with projected costsavings under various scenarios in order to construct a mosteffective benefit change. This review may also be helpful duringa negotiation process.One last and important point, voluntary mechanisms such asthe distribution of informative literature rarely accomplishesmuch. The dollar still rules; so to be effective, you willneed to institute plan changes that cause program participantsto participate financially in their drug utilization decisions.A few years back, one of our clients who had the ability toinstitute dramatic plan changes moved from a fixed co-paystructure to a high percentage co-insurance structure with anannual spending cap on the benefit for brand medications.Nothing was mandated, step therapy was not implementedand no formulary was in place.14
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