How employers can reduce prescription drug spending

January 14, 2020 1:47 PM

The rising cost of prescription drugs is a growing burden on employer-sponsored healthcare plans. More than 60% of employers say drug and medical spending is unsustainable for their business, the National Alliance of Healthcare Purchaser Coalitions says in a new survey.

The report, “Employer Roundtables on Drug Management,” surveyed 80 employers for how they are managing these rising costs. Fifty-five percent said they were considering the utilization of a pharmacy benefit manager and 44% said they want to implement reference-based pricing.

“Employers are working to change the conversation with their PBMs, health plans and other vendors to reduce waste and fraud and implement more effective strategies that improve health while mitigating these costs,” says Michael Thompson, National Alliance president and CEO.

The cost of pharmaceuticals has already increased 5% since the beginning of 2020 and 52% of Americans say passing legislation that would lower the cost of prescription drugs should be a top priority for Congress. Recently, California introduced legislation that would work with generic drug companies to offer medications directly to consumers. This would increase competition and lower drug prices.

However, just 20% of employers surveyed by the National Alliance said they were confident legislative efforts would effect changes to price in the short term. The survey introduced these recommendations for how employers could address and manage these costs:

Demand price transparency

The National Alliance recommends that employers restrict the use of rebates and instead demand transparent pricing. Additionally, the majority of employers surveyed believe direct-to-consumer advertising encourages employees to want more expensive brands. In 2016, the pharmaceutical industry spent $29.9 billion in marketing and advertising, according to analysis by the Journal of the American Medical Association.

Invest in employee preventive care and chronic condition management programs

According to the CDC, 75% of healthcare spending is due to chronic diseases that could be avoided by preventative care services. Currently, three-quarters of employers offer a wellness benefit program, which can lower healthcare costs by $3.27 per employee, according to a Harvard University study. The National Alliance says these programs can also better monitor pharmacy and medical claims, while potentially reducing medication waste.

Factor in indirect costs and their impact

The survey recommends looking at a variety of factors when it comes to the increasing costs of pharmaceuticals. In addition to assessing the cost of the drug, employers should factor in how stress, anxiety and medical debt impact an employee’s overall health. Stress and financial anxiety account for $190 billion in healthcare spend, which could add to a company’s bottom line.

Implement personalization where possible

Employers should negotiate prices for specialty drugs, which often carry the most exorbitant price tags. High-cost “orphan drugs,” used to treat rare diseases, can be 25 times more expensive than traditional drugs, according to a study by America’s Health Insurance Plans. Additionally, the survey recommends avoiding a one-size-fits-all approach and taking advantage of PMB specialty pharmacies for employees who need these high-cost drugs.