Avoid Drug Cost Containment Mistakes

Posted on Wednesday, April 03, 2019

With prescription drug costs continuing to rise, employers and health plans are always searching for ways to control drug spending. Yet, in the quest to control these expenses, it's important that cost-control measures do not backfire and, somehow, negatively impact plan members' health. The appropriate use of necessary prescription drugs can be a very cost-effective way of treating illnesses, managing chronic conditions, and avoiding more expensive and intrusive interventions, like surgeries and emergency room visits. On the other 

Employee Education May be a Key Factor in Cost Control

     If your company has a health insurance plan, chances are you can get employee education resources from your insurer at no  charge. Pharmacy education, in particular, is most often integrated within medical plans. For example, some insurance companies provide members with cost comparison information of generic versus brand name drugs.  Insurers have also introduced tiered pharmacy plans, which have lower co-pays to encourage members to use generic drugs when possible. 

     As the proportion of health care dollars spent on pharmaceuticals grows and the tendency of drug companies to market directly to the consumer increases, employee education becomes even more important. 

     Insurance carrier representatives are generally available to host health seminars and workshops for companies and employees. As an employer, you can show your commitment to these programs by making meetings mandatory.

hand, some cost-control measures may cause unintended negative consequences that will require much more expensive treatment later. An example would be if an individual with hypertension does not effectively manage his or her blood pressure levels over time, the hypertension could escalate, causing heart attack or stroke.

Statistics explain why employers and health plans have taken various measures to control prescription drug spending. This is an area of expense that has increased greatly. The latest study by the Kaiser Family Foundation shows prescription drug spending of $300.3 billion in 2009,  up about 39 percent from the 2006 level of  $216.7 billion.  By some estimates, this spending will reach $360 billion to $390 billion by 2014.

The Kaiser report shows  prescription drugs accounted for 10 percent of total health care spending -- typically one of the fastest growing components of this enormous area of expense. According to their findings, Kaiser says that three main factors have driven prescription drug spending trends:

Utilization. The number of prescriptions purchased increased 39 percent from 1999 to 2009, while during this time the U.S. population grew 9 percent. The average number of retail prescriptions per capita rose from 10.1 in 1999 to 12.6 in 2009. 
Price. Retail prescription prices increased by an average of 3.4 percent in 2009. The average annual growth in price from 2000 to 2009 was 3.6 percent per year. The average retail price of a prescription rose to $71.69 in 2008, up from $38.43 in 1998.  These figures reflect manufacturers' changes in the prices for existing drugs and the introduction of new, higher priced drugs.
Types of drugs used. Here, trends can affect spending in both directions. New drugs, the report notes, can act to increase spending if they replace older, less expensive therapies, if they supplement (rather than replace) existing drugs, or if they treat a condition for which there previously was no drug therapy. However, they also can lower spending if a new drug enters a therapeutic category with one or two dominant competitors. Also, generic drugs, which become available when a brand name drug loses patent protection, can be very effective in lowering prescription drug spending.

What Can Employers Do About This Rising Expense?

In response to prescription drug costs, employers and health plans have implemented various cost control strategies. As noted above, it is important to constantly examine the impact of these strategies to ensure that they do not have the unintended consequence of actually raising other medical costs over time. An article published in the Journal of the American Medical Association (JAMA) looked at the relationship between drug plan cost containment measures and outcomes, and found that, for each 10 percent increase in patient cost sharing (copayments, tiering, deductibles, etc.), prescription drug spending decreases 2 percent to 6 percent, depending on the class of drug and the condition of the patient. However, for some chronic conditions, like diabetes, higher cost sharing is associated with increased use of other medical services.

The JAMA article authors noted that health plans implementing prescription drug cost-control measures need to understand how plan members may respond, and to try to make members aware of prescription drug costs without causing them to forgo necessary treatment. This highlights the importance of employee education when making any plan changes, and in benefit plan strategies overall. For example, when adopting a tiered copayment or coinsurance system in which generic drugs are available at a lower cost to plan members, use various employee communication channels to emphasize the therapeutic equivalence of generics, their safety, and their price advantages.

While prescription drugs are costly, their appropriate use is a key part of any health care program. Well-thought-out cost control strategies, coupled with employee education, can help ensure that your employees make the best, and most cost-effective use of your prescription drug benefit.

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