What HR Leaders Have Wrong About the Pharmacy Benefits Value Equation

Top 3 Things You’ll Learn

  1. How pharmacy benefit costs have evolved since the PBM industry began in the 1970s
  2. Common misconceptions among HR leaders about lowering Rx costs and creating member disruption
  3. How forward-thinking employers are looking to adapt their risk management strategies to current market pressures

The pharmacy benefit management (PBM) industry began in the 1970s, with PBMs adjudicating prescription drug claims manually by paper. It’s also when commercial publishing of average wholesale price (AWP) drug pricing data became commonplace. In those early days, health care spending averaged around $350 per capita in the U.S. Even then, it was common for a doctor to prescribe a medication, indifferent to its price, and to have it paid for by consumers or third-party payors that had little influence over the drug chosen or the price paid.

Forty years later, large molecule biologic drugs had become a staple in the marketplace, and U.S. health care spending jumped to about $8,400 per capita. A doctor could write a prescription for a new medication that could have cost an employer-sponsored pharmacy plan $5,000 a year, which was a considerable amount when you multiply it by the number of employees. Fast forward to now, per capita health care expenditure hovers over $12,000. For most employers, just 1% of their members are driving 40-50% of the pharmacy plan’s cost. We’re literally in a position now where with the stroke of a pen, a doctor can write a script that could impact a plan by a million dollars a year.

Misconceptions About Benefits Value & Member Disruption

HR managers nowadays are balancing competing directives. Their CEO or CFO is saying they need to lower the cost of the benefits. They also want to do the right thing by their employees. Unfortunately, there’s a false perception among HR leaders that lowering pharmacy benefits costs means lowering coverage, and in effect reducing the benefit and creating member disruption. They think they have to stop covering medications or raise the out-of-pocket costs so that members pay a larger portion of the cost-share – and that’s really a false perception.

The reality is that there is a lot of waste inside of the pharmacy system. It’s very opaque and mysterious to most people. If HR leaders are operating under that false premise, that a reduction in cost is a reduction in benefit, that’s an immediate barrier to moving forward.

As trusted advisors to HR leaders, we never want the organization to be in a situation where the cost of the benefit has exceeded the value. There are several ways they can lower pharmacy costs and improve the value of the benefit for employees, and in some cases, expand the coverage. But they need help in understanding what levers exist that they could pull with the right partner, to balance the benefits value equation.

There’s a false perception that lowering pharmacy benefits costs means lowering coverage and creating member disruption. The reality is that just 1% of members are driving 40-50% of plan costs, and there is a lot of wasteful spending inside the pharmacy system.

Pharmacy Benefits Cost-Savings for Modern Times

Because of the COVID-19 pandemic, everyone’s benefits budget, including their healthcare spend, is under a tremendous amount of pressure. Employers are depending on their consultants and pharmacy benefits providers more heavily than they ever have in the past. Having the ability to tailor a prescription drug savings strategy based on the organization’s tolerance for member disruption will be key to their success going forward.

Now more than ever, employers need to put cost-saving controls in place, such as saying no to employees who are on a high-priced, low clinical value medication. We’ve already seen employers moving the needle on that spectrum a little bit in order to find more dollars to save jobs. With independent clinical oversight programs in place, they are positioned to really scrutinize certain prescriptions that are suspect for wasteful spending or being a low value type of prescription. Imagine, if you could deliver tens to hundreds of thousands of dollars, or in some cases millions of dollars, in pharmacy savings to your clients each year, that would save a lot of jobs.

Check out the free webinar, What’s Hot, What’s Not in 2021, to learn more about current pharmacy benefits trends impacting employers and what you can do to better manage high-cost drugs.

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