Employers Use Third Party Managers to Save on Drug Programs

June 17, 2011 (PLANSPONSOR.com) - A recent nationwide survey from Buck Consultants reports that a majority of employers are using third-party pharmacy benefit managers (PBMs) to process and pay prescription drug claims. 

Compared with 47% in 2009, the study found that 57% of employers are now using PBMs, which are able to offer discounts and rebates from pharmaceutical manufacturers. Most respondents indicated that pricing (67%) and PBM customer service (65%) were “highly important” considerations when opting for PBMs.  

“Strong competition among PBMs for employer business has created a buyer’s market for PBM pricing, and we expect this competition will intensify as health-care reform is implemented,” said Michael Jacobs, principal and national clinical practice leader at Buck Consultants. “Therefore, employers can be aggressive in their negotiations with PBMs.”   

According to the survey, specialty medications, used to treat chronic catastrophic illnesses such as multiple sclerosis and hepatitis C, are typically used by only 1% or less of covered employees, but represent 15% or more of pharmacy plan costs. These specialty medications are complex drugs that are often self-injected or infused and can cost more than $2,000 for a 30-day prescription. Despite the rising cost of these drugs, 33% of respondents did not know the percent of overall drug spending attributed to specialty medications. 

The majority of employers (58%) use the same participant cost-sharing for specialty drugs as for other prescription drugs.  

The most common components of specialty drug management programs are: 

  • Utilization management (45%);
  • Centralized distribution (39%);
  • Coordination with case managers (35%); and
  • Step therapy protocols (34%).

"Specialty drugs will be the major driver of pharmacy cost increases over the next three to five years," said Jacobs.  "We anticipate specialty drugs will represent upwards of 30% of drug costs within the next three or four years. Considering the double-digit annual cost increases we've seen recently, it's clear that more needs to be done to manage the costs of these medications moving forward." 

 Ninety-six percent of respondents provide active employees with prescription drug coverage; 50% offer retirees prescription drug plans, and 75% of those employers intend to continue this benefit to Medicare-eligible retirees over the next three years.The top reasons given for this service are: the positive impact on medical claims, business competitiveness, attracting and retaining key employees, and the belief that it's the right thing to do. 

Pharmacy benefit costs continue to increase and, on average, currently represent more than 15% of employers' total health-care costs. 

The most common prescription drug management initiatives in use today are:  

  • Formularies (90%); 
  • Utilization management programs (78%); and  
  • Large cost-sharing differentials between cost-sharing tiers (77%).   

Employers also consider EAPs (90%), disease management programs (84%), and wellness programs (80%) to be tools that help manage prescription drug benefit costs and effectiveness.   

The Prescription Drug Benefit Survey is Buck’s third survey on this topic, and identifies strategies employers use to manage their prescription drug benefits and costs. More than 220 organizations participated in the survey, representing a broad range of industries and more than 2.5 million full-time employees.