Prescription drug spending continues to be one of the mostpressing concerns for employers when it comes to health care costs. And while drug costs, especially for specialty pharmacy drugs, are expected tocontinue to rise, there are strategies that may help businesseskeep those increases to a manageable level, especially if they candevelop partnerships with brokers and pharmacy benefitmanagers.

Drugs drive health care spending

There is widespread agreement that drug costs are not rising as sharply as they have in the past—butthe trends are still not good for employers. Specialty pharmacy hasbecome the focus, as both costs and demand continue to grow.

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“The specialty pharmacy trend is a significant concern and it isnot abating,” says Ellen Kelsay, chief strategy officer for theNational Business Group on Health. “When you look at the drugs inthe pipeline, there's no indication that trend will moderate in thefuture.”

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A recent survey by Mercer found that up to 50 new specialtydrugs are expected to hit the market annually for the next fiveyears, which could increase costs for employers by $25 billionannually. A story by Reuters on the Mercer survey noted that onenew specialty drug treatment for leukemia costs $475,000 perpatient.

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“What we're seeing right now is that approximately 1 percent ofa payer's claim volume is specialty drugs, but it comprisesapproximately 40 percent of their spend,” said Kelly Chillingworth,senior pharmacy consultant with Lockton Benefits Group. “It'sreally scary for employers, especially if they have a family with asick kid, or somebody with cancer therapy, or if a new drug comesout that costs $1 million a year. They're nervous.”

Cost control strategies

Employers are addressing these cost concerns with a variety ofstrategies. Closed formularies, tiered payment plans, step therapyand direct negotiation with drug manufacturers are some of the waysthat employers are trying to hold down costs.

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But these strategies have some downsides. Limiting choicesthrough a formulary is not popular with patients or physicians.Tiered plans shift more cost to consumers. Step therapy—where apatient tries a less-expensive therapy first—can be complicated andtime-consuming, not to mention frustrating for patients whosesymptoms are not being addressed.

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“One thing that brokers and employers are wrestling with is howmuch to rein in choices. People don't want to be forced to changewhen it comes to prescription drugs—that's one of the areas oftension,” says David Evans, an agent at Mass Mutual Financial Groupand senior vice president of Independent Insurance Agents andBrokers of America. He says his company works with employers andtheir workers to find the best balance for all parties. “You try toarrive at a good balance of cost and coverage. You try not to bedisruptive.”

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Evans adds that communication with employees is key—companiesmust explain why they are pursuing a specific strategy and what itwill mean for enrollees. “If people are going to cost-share more,you can communicate and help them be proactive, to talk to theirdoctors about their options.”  

PBMs can help—but choose carefully

Especially for self-funded health plans, a good pharmacy benefitmanager (PBM) can be an important part of controlling drug costs.Benefits experts say finding a good fit is critical—and brokers canplay an important role. “Depending on a PBM's size, what they canleverage, and what partnerships they have will determine thequality of the discounts on the drug side,” Chillingworth says.“Sometimes, people think PBMs are bad, but they're really not; itjust depends on who you're working with and how transparent theyare. We try to partner our clients with the best fit for them.”

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“I've had good experiences and I've had experiences where Iquestion the motivation [of PBMs],” says Kevin Davis, seniorbenefits consultant at Univest. “It's key to have data and dialoguewith all parties involved. If you have good data and fulltransparency, it can be a good experience.”

New challenges, new tools

Chillingworth, who advises companies on how to control theirspending on drugs, notes that one way to reduce costs on specialtydrugs is to think outside the box a bit. “We really have to getcreative with pharmacy these days,” she says. “Sometimes it makessense to pay for a drug on the medical side, sometimes it makessense to pay for it on the pharmacy side.” She adds that thelocation where the drug is administered (a clinic versus a hospitalsetting) or purchased can also affect what discount is applied. Andeven a small discount can help. “Even a 1 percent discount on athousand dollar drug can make a big difference,” she notes.

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Transparency tools, which have been improving in recent years,are another way to hold down costs on the consumer level, expertssay. GoodRx, BlinkHealth and Milligram are some of the online toolsavailable to consumers. These tools can tell consumers whatpharmacies in their area are charging for a specific drug, allowingconsumers to shop for the best price. This is especially helpfulfor patients on high deductible health plans. However, consumersshould remember to save receipts and submit them to the plan tomake sure it counts against their deductible.

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Kelsay notes that there are also transparency tools that allowphysicians and patients to look at drug costs at the time of theoffice visit. “If the physician writing the script can see what thecost of the drug is, what the patient's share is, and at what costpoint the pharmacies will dispense the drug, the physician andpatient can have that conversation in tandem, rather than havingthat discussion separately,” she says.

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Changes in the market

The recent announcement of a merger between CVS pharmacies andAetna may be a sign of things to come. The $69 billion deal wouldcombine one of the nation's largest retail pharmacy chains with oneof its largest health insurers. Debate continues on whether suchmergers will make health care delivery more efficient or simplylimit choices as competition declines.

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Much discussion has also taken place around terms such asvalue-based purchasing and supply-chain management. Kelsay notesthat companies may invest more upfront in therapies if thevalue—the effectiveness of the therapy—is also high. “Someemployers say, 'I will happily pay more for a drug if know what thevalue equation is,'” she says.

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Kelsay adds that the supply chain of prescription drugs issomething that may need to be reformed. “An emerging theme we'rehearing is that the supply chain is performing sub-optimally,” shesays. “Employers are part of that, but PBMs and other stakeholdersare also expressing displeasure. I think it's ripe forreexamination and change.”

Getting the public's attention

Some experts say the concept of direct-to-consumer marketingalso needs to be reexamined. Davis notes that the U.S. is one ofonly two countries that allows direct-to-consumer advertising ofprescription drugs. “The drugs I see advertised are some of themost costly drugs around,” he says.

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“There's quite a bit of money invested in advertising bymanufacturers,” says Kelsay. “The employer view is that this mightbe contributing to higher costs. It certainly brings greaterawareness of what drugs are out there, but it's also contributingto the pricing of those drugs.”

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And as with many public issues, this one has a political side.High-profile hearings about EpiPen costs and other big-ticket drugshave some wondering if Congress would weigh in, or even PresidentTrump, who has criticized drug manufacturers in the past. Butexperts caution against expecting any quick action out ofWashington.

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“Trump has on occasion produced some rhetoric against drugcompanies,” Evans says. “But this administration tends not to go ina straight line. I don't see a major change coming in the next 12months in terms of government regulation.”

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