Pharmacy Benefits a Big Chunk of Employer Health Care Costs

A survey from Buck Consultants indicates how employers can look to spend their pharmacy dollars more effectively.

More than three-fourths (77%) of respondents to Buck Consultants’ Prescription Drug Benefit Survey reported spending 16% or more of their health benefit cost on pharmacy benefits, up from 72% in the previous year.

The most common range selected for the percentage of health care cost spent on pharmacy benefits was 16% to 20% (selected by 37% of survey respondents). In this year’s survey, 4.6% of respondents indicated spending more than 30% on pharmacy benefits, which is twice the percentage in last year’s survey (2.3%).

Buck notes that many plan sponsors are concerned that their pharmacy benefit program is not maximized or as cost-effective as it could be. There is an array of cost and quality-control strategies (coverage rules and clinical programs) to consider when building a pharmacy benefit program, Buck says. A strategy and specific policies for the coverage of all medications is necessary to meet an employer’s philosophical and budgetary needs. This requires a comprehensive review of the plan design, coverage rules, and clinical programs currently in place and those that are available to meet plan sponsors’ needs and objectives, in addition to ensuring that vendor pricing is marketplace competitive.

The target cost-sharing range (i.e., percentage of total pharmacy benefit plan costs paid by participants) for their current plan chosen by most survey respondents (35%) was 16% to 20%. Thirty-nine percent selected cost-sharing range targets that were 21% or more, and 26% chose ranges with target cost-sharing levels of 15% or lower.

Buck says plan sponsors need to set plan participant cost-sharing policy based on their plans’ specific claim and utilization experience, in addition to industry-specific benchmarks and other factors. It recommends plan sponsors evaluate their current participant cost-sharing to determine the current level and whether changes are needed.

The survey asked respondents to indicate their use of 16 different tools and programs. Nine of the 16 tools were reported as “in use today” by more than 50% of respondents.

The percentage of survey respondents that reported using a formulary was 89%. Formularies have been a popular tool for the past three decades, Buck notes. The majority of survey respondents use three-tier formularies, but value-based formularies have increased in popularity.

More respondents in this year’s survey than in the previous one (52% compared to 42%) reported using programs that address “gaps in care,” with 18% indicating plans to implement such programs in the next 12 months. The percentage of survey respondents that have implemented or plan to implement programs that address patient adherence was higher in this year’s survey than in the previous one, 73% compared to 68%. Buck notes studies have shown that, for many chronic conditions, patients who comply with their prescription drug regimens have lower overall health care costs.

Another tool used by more survey respondents in this year’s survey than in the previous one (37% compared to 31%) is mandatory use of mail-order pharmacies (or penalties for use of retail pharmacies) for maintenance medication refills.

In addition to these cost-saving strategies, Buck recommends plan sponsors take advantage of current marketplace conditions, which make 2015 an excellent time to negotiate aggressive renewals. Plan sponsors can also conduct a pharmacy benefit manager competitive bidding process to achieve optimal pricing terms and other contract provisions that influence a plan’s financials and service levels.

The survey report is available for $395 and can be ordered from