Prescription medication costs have risen into double-digit increases for 2016 and these expenses are going to continue to rise into next year, according to Segal’s 2017 health plan cost trend study.
The prescription drug cost trend for active employees and early retirees is projected to be 11.6% in 2017, up from 11.3% in 2016.
The projected specialty drug, or biotech, trend rate for 2017 is exceptionally high at 18.7%, and while less than 1% of all medications are specialty drugs, respondents to Segal’s survey indicated those drugs now account for 35% of total projected prescription drug cost trends for 2017.
“Given the increasing number of pharmaceutical products now available for conditions that require the use of specialty medications, plan sponsors should consider implementing strategies that manage patients who use these drugs and target their costs,” says Edward Kaplan, national health practice leader at Segal. “This can include utilization-management controls, formulary or preferred step-therapy; tiered copayment structure and aggressive specialty drug contracting terms that maximize client and patient value.”
While Kaplan advises these options to maximize patient value, Susan Hayes, AHFI principal for Pharmacy Outcomes Specialists, says many clients are running into road blocks with traditional pharmacy benefit managers, or PBMs.
“PBMs are now requiring mandated exclusionary formularies that exclude lower cost brand drugs and generics in favor of high cost brand drugs that generate rebates for PBMs, which in turn are only shared with the largest and most savvy employers,” Hayes says. “Prior authorization programs, which were put into place to question the need for high-cost specialty drugs, are nothing more than a rubber stamp process for many PBMs.”
Hayes added, a recent audit of prior authorizations for large clients of Pharmacy Outcomes Specialists found that about 40% lacked any documentation and an additional 20% lacked sufficient evidence to have approved the claim.
“The only way to manage costs today is to carve out rebates, or formulary development and the prior authorization process, as well as fraud detection to outside academic organizations like the University of Massachusetts who do not have ‘skin in the game’ for processing high cost claims,” she says.
Outpacing inflation and wage increases
In its study, Segal also found that health plan cost trend continues to significantly outpace inflation and average wage increases more than threefold. While prescription drug cost trend is projected to rise 11.3% in 2017 and the popular open access PPO/POS plan cost trend is expected to rise 7.8%, wages are projected to increase by just 2.5%.
“Plan sponsors will need to apply cost-management strategies to bring trends down to more sustainable levels,” Kaplan says. “Each plan sponsor has a unique set of goals and cost drivers, so strategies will vary.”
Kaplan added that the best strategies will directly address plan design, aggressive vendor contracting and measurable population health improvement.
Tim Thomas, president and founder of Crystal Clear Rx, says while specialty medications are expected to account for more than half of all prescription expenses by 2018, it is important that plan sponsors not forget that 50% of the drug spend will remain with traditional pharmacy.
“There are tactics and strategies that can be employed against both specialty pharmacy and traditional pharmacy at lower cost,” Thomas says.
Jennifer Wilson, CEO of ARMSRx, agrees that creative strategies for cost savings are a must moving forward and discounts, contract language and rebates are paramount, but much more needs to be done.
“The plan sponsor could be spending insurmountable amounts to increased specialty pharmacy administrative costs associated with patients getting infused at an outpatient hospital setting or in the physician’s offices,” Wilson says. “Genetic testing strategies is another way to reduce the unnecessary costs associated with the trial and error associated with step therapy programs and the wrong medications being dispensed, causing drug interactions and unnecessary hospitalizations, to mention a few.”
Segal’s survey included nearly 100 managed care organizations, health insurers, pharmacy benefit managers and third-party administrators.
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