Of all the news headlines, announcements, and unforeseen challenges impacting employers and their members this year, it’s important to know what will carry over into the new year. Our team of experts answers your questions about how current events will impact your clients’ prescription drug plans and shares key insights to optimize their pharmacy benefits in 2021.
How Will the COVID-19 Vaccine Affect Pharmacy Benefits Plan Spending?
The goal in the U.S. was to have a COVID-19 vaccine ready for use in some fashion by the end of the year. Over the last several weeks, pharmaceutical companies submitted COVID-19 vaccines to the U.S. Food and Drug Administration (FDA) for distribution under the Emergency Use Authorization (EUA). Novavax was among the first companies to begin working on a COVID-19 vaccine back in April and May. Since then Pfizer, AstraZeneca, and Moderna also announced promising results from their vaccine trials. Further results from tests of other experimental shots are expected soon.
According to recent guidance, distribution will occur in phases to prioritize populations, including health care workers, front-line and other essential workers, as well as people with increased risk of severe illness from COVID-19. However, the Centers for Medicare & Medicaid Services (CMS) expects there will be sufficient vaccine supply to distribute to all beneficiaries. During the initial phase of limited vaccine supply, the federal government is planning to purchase all the initial supply of the vaccine and allocate vaccines to the states for prioritized distribution. During this time, the federal government will cover the ingredient cost of the COVID-19 vaccine. However, plan sponsors will be required to cover the administration cost through their medical and/or PBM pharmacy benefit, with most plans requiring zero cost share to their plan members.
Which New Strategies Were Effective in Managing Specialty Rx Costs?
The reality for most employers is that just 2% of their members are already driving 60% or more of their plan costs. Some analysts point to the cost of single-source generics and brand-name medications (i.e. limited competition) as a reason for the increased spending. Others believe that the number of prescriptions per person may play a role. Those factors are concerning, but the major influence tilting the market is the increasing use of specialty medications and high prices – more specifically, the costs of limited distribution drugs.
The challenges of finding a viable solution to make specialty drugs more affordable was evident in the handful of effective and ineffective solutions that we saw emerge this year. Among one of the most popular and controversial specialty strategies involved carving out or excluding specialty drugs from the pharmacy benefit. Understanding the pros and cons of this strategy will impact how you advise your clients in 2021. An objective, independent review of the group’s specialty expenses can help evaluate how the program will impact the pharmacy plan and members. The analysis also could point to alternative strategies to help mitigate specialty Rx costs, such as leveraging Manufacturer Assistance Program funds.
Looking back on 2020, there were clear market forces that drove prescription drug trends and the strategies that emerged to combat them. Plan for 2021 with these expert insights on what matters most for your pharmacy plan.
How Will the New PBM Players Change the Prescription Drug Market?
The Pharmacy Benefits Management industry is no stranger to twists and turns, and 2020 was no exception. On August 18, RxBenefits announced the launch of a new category of pharmacy benefits management: pharmacy benefits optimization (PBO). As the company entered its 25th year, it formally brought the PBO model to the market as a direct response to the contract, clinical, and service management gaps that result from employers going direct with traditional PBM providers. RxBenefits is officially the industry’s first and only technology-enabled pharmacy benefits optimizer, acting independently of Big Pharma, using advanced data science to advocate in the best interest of self-funded employers and their members. Expect to see more of the PBO speak in the marketplace next year as middle-market employers continue to persevere through the economic challenges that emerged this year.
Then on November 17, Amazon announced a new retail pharmacy offering for its U.S. customers aged 18 or older. Acting as a remote retail pharmacy, Amazon Pharmacy accepts most forms of insurance and allows customers in 45 states to order up to a 30-day supply of their medication. Prior to purchasing their medications, customers will see the cost of their prescription copay alongside the cash price for the drug, as if they did not have insurance. For employer-sponsored benefit plans, Amazon Pharmacy is another option employees and members have for filling their brand and generic drug prescriptions. However, it’s important to note that Amazon Pharmacy’s limitations are different from what members experience using their prescription drug benefits at other pharmacies.
Which Drug Pricing Regulations Will Impact Self-Funded Employers?
This year we saw a lot of activity and very little progress. The elephant in the room is the election and what impact a new administration will have on the drug pricing policies on the table:
- Senate Bill 2543 set an out-of-pocket spending cap for Medicare recipients, set some limitations on manufacturers, such as requiring them to exclude the value of patient assistance co-pay coupons from their average sales price calculation. But overall the bill’s current language would have no direct impact on drug pricing. This has been awaiting Senate decision since it was submitted in Sept. 2019.
- House Bill HR3 also has been stuck awaiting decision in the Senate all year since it was submitted Dec. of last year. This bill gives the government the power to negotiate drug prices with drug manufacturers and limits the maximum price of negotiated drugs to the average international price index. Drug manufacturers argue that this bill would lower their revenues and stifle drug innovation for rare conditions.
- Executive Orders and subsequent rulings led to the most action on the national level. These mandates from the Trump Administration tackled multiple areas in drug pricing transparency: drug rebate reform, drug importation from Canada, “Most Favored Nations” pricing, and a change in how 340B drug discounts are applied to help low-income patients.
With the transition to a Joe Biden presidency underway, health insurance and the coronavirus pandemic seem like obvious priorities. There would be a focus on drug prices as well, but the consensus is that we won’t see major drug pricing initiatives until COVID-19 is behind us. Biden further discussed forming a panel to independently review drug benefits and determine fair prices, plus capping drug price increases to the rate of inflation. We could see some of the core pillars of the House bill remaining intact—controlling out-of-pocket costs, discouraging price hikes, and negotiating prices.