Prescription drugs are the single largest expense of a consumer’s healthcare care premium dollar, according to America’s Health Insurance Plans. At more than 22%, AHIP notes that they outpace the cost of physician, inpatient and outpatient hospital services and “would have been even higher if medications administered during inpatient hospital stays were included.”

AHIP’s research may be seen as the latest salvo in an ongoing finger-pointing campaign that pits health insurance carriers against big pharma, independent pharmacists and pharmacy benefit managers as all three anticipate the next steps in healthcare reform.

With more than 97 cents of every premium dollar for a commercial health plan invested in direct medical costs that include prescription drugs, AHIP President and CEO Marilyn Tavenner noted in a statement a need for “real solutions that answer the president’s call to ‘bring down the artificially high price of drugs’ so that consumers can affordably get the care they need.”

“The cost of prescription drugs continues to rise, hitting consumers hardest both in the form of premiums and out-of-pocket costs,” says Kristine Grow, a spokeswoman for AHIP who urges brokers and advisers not to lose sight of the continuing goal to make healthcare more affordable.

By focusing on what’s driving these expenses, she says it will be possible to bring down those costs, “whether through greater transparency into pharmaceutical pricing or innovative new programs designed to help people stay healthier and enjoy a better quality of life.”

The AHIP percentage of healthcare costs attributed to prescription drugs is more than twice the Centers for Medicare & Medicaid Services’ estimate of just 9% of national expenditures, notes Mark Merritt, president of the Pharmaceutical Care Management Association, which represents PBMs.

The search for savings

While drug spending is “actually only growing at about a 3% or 4% rate,” he says the focus is on taming costly specialty drugs. “PBMs can deliver savings from rebates and discounts on specialty products and other products, but plans don’t have unlimited funds,” Merritt explains, “and they have to make a tough choice about whether to apply those savings to reduce premiums for all employees or cap co-pays or reduce cost sharing on really expensive products.”

Also see:21 innovators who are transforming benefits technology.”

If the Food and Drug Administration approved generics and competing brands at a much faster pace, he says the U.S. could save “literally billions of dollars.” But in the meantime, he believes benefit brokers and advisers can help employer leverage the cost saving tools PBMs through more selective pharmacy networks. The aim is to determine which drugstores are most convenient for employees and then negotiate substantial discounts where there are competing drugstores in those areas.

“That is the wave of the future and has been really popular in Medicare Part D,” Merritt notes. “In fact, most seniors are choosing these preferred pharmacy network or discount pharmacy network plans because the savings are great, and they still get to the drugstore they want to go to, anyway.” He says formularies also offer “tremendous savings and no clinical downsides to patients, and it’s something that I think is being more aggressively used.”

HR professionals increasingly are under pressure not just to provide the most generous benefits possible, but also to deliver the biggest possible savings. “That’s where PBMs can come in and offer some options to help accomplish that goal,” he adds, noting that his group’s members deliver savings of about 30% on average.

Register or login for access to this item and much more

All Employee Benefit News content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access