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The secret weapons every payer should use to fight rising drug costs

Commentary: All across the news, headlines confirm what benefit managers, advisers and HR executives already know: prescription drug prices are skyrocketing. Truveris’ monthly National Drug Index shows that prices paid by everyone – private insurers, self-insured organizations, government entities and  patients – are escalating at a rate that outpaces inflation by a wide margin. And just recently, Express Scripts published figures citing the impact of specialty drugs on rising prices. These drugs are not only increasing in price, but also in utilization, a very dangerous combination.

In light of this news, it is not surprising that PBMs are taking their own steps to control costs, implementing changes that affect both members and your bottom line.  For example, the percentage of benefit plans with four or more drug pricing tiers has grown nearly 50% in the past two years, and the percentage of claims with prior authorizations is now reaching double digits.

Fortunately, companies can also take steps to combat this trend, controlling costs while best protecting the benefits and budgets of their employees. And the sooner they act, the better chance they have to realize savings and more generous benefits in advance of prices rising again.

Also see: Plan design changes required to curb rising Rx drug prices

The first and best course of action for a company is to evaluate when their PBM contract comes due. If that deadline is approaching, benefit managers and HR executives should seriously consider bidding their pharmacy benefits in the open marketplace.  There is tremendous value now available from various parts of the pharmacy supply chain that can rarely be accessed unless an RFP is conducted. Once a daunting task for companies, open bids have becoming easier to execute with newly available, sophisticated RFP technology that reduces the time and money spent on determining and securing the best prices and contractual terms.

Today’s technology allows companies to employ cutting-edge “reverse auction” tools, which create a hyper competitive environment, driving best value for payers. The process often yields savings of more than 10% and allows the payer to probe deeper into the PBM’s formulary structure and their inclusion of high-cost specialty drugs that often require special handling and administrative complexities. PBMs traditionally apply lesser discounts to specialty drugs when compared to small molecular pills and capsules – a growing problem given these medicines’ rising costs and growing utilization rates.  Companies must discuss this issue with PBMs and negotiate best possible specialty drug prices before renewing their contracts.  

Another potential avenue to achieve savings on drug prices is to better understand and optimize plan design. Advanced analytics and technology today offer scalable toolsets that can determine how a company’s rising costs can be stemmed. For example, assessment of the member and bottom line impact of more aggressive rule sets for prescription drugs, including prior authorization, step therapy or even exclusion can be done in minutes, not weeks. Plan design optimization only takes minutes with the right tool set and can save 2% to 20% depending on the rules chosen.

Also see: Pharmacy benefits eating up bigger portion of health care budgets

Regardless of contract status, plan payers should also employ appropriate “bill review” of invoices. This practice ensures that after a contract is finalized, details are adhered to with regard to claims adjudication or drug classification. This is increasingly critical as opportunities for errors have grown directly in proportion with the increasing complexity of plan designs. Bill review, combined with the reverse auction RFP process, is quickly becoming a best practice for payers offering pharmacy benefits.

In short, affordability and access is a payer’s primary concern. The escalating cost of drugs is not going away any time soon. Contact your adviser or broker to stay in the know and use tools to maximize every dollar spent on this all-important benefit for employees and members.

Bryan Birch is chairman, president and CEO of Truveris, a provider of pharmacy pricing and benefits analysis.

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Healthcare benefits Healthcare plans Pharmacy benefits
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