Year after year, the costs associated with providing pharmacy benefits to employees continue to rise, making it more difficult for employers to maintain their bottom line while offering the benefits their workforce deserves. To strike this balance, it’s essential to think outside the box and leverage innovative cost-containment tactics.

Looking for tailored guidance on your organization’s pharmacy benefits plan? Click here to learn more about CBIZ’s dedicated pharmacy consulting services.

Why are Pharmacy Benefit Costs Increasing?

High inflation coupled with the FDA’s continued approval of a greater number of costly drugs has resulted in drug price inflation, and specialty drug costs continue to increase, currently accounting for 50% of employers’ pharmacy spend.

While these factors certainly contribute to the exorbitant cost of pharmacy benefits, drug pricing strategy is often nontransparent, leaving much room for speculation regarding the exact reasons behind the price hikes.

This lack of transparency has been a topic of growing interest in recent years, leading to increased scrutiny and regulation of pharmaceutical drug prices with the passing of legislation such as the 2022 Inflation Reduction Act (IRA).

Regardless of the reasons behind rising pharmaceutical costs, employers are actively seeking new and improved ways to curb their Rx spend without cutting benefits.

How Can Employers Cut Rx Costs?

Pharmacy Carve-Out

In a pharmacy carve-out scenario, the employer has greater visibility into and control over clinical programs, as well as contractual stipulations and plan performance. In addition, a carve-out increases plan design and network enhancement flexibility, which allows employers to adopt more innovative clinical and steerage programs that enhance medication adherence and create the opportunity for better financial outcomes.

Co-pay Programs

Co-pay programs aim to absolve the member’s cost share, thus incentivizing them to use more expensive drugs. Employers can turn this into a mutually beneficial tactic by:

• Allowing the use of coupons to absolve members’ cost share but not allowing the use of coupon dollars to count toward members’ out-of-pocket expenses.
• Introducing the concept of a variable co-pay program, wherein co-pays are set artificially high to maximize coupons for various medications.
• Setting a higher coinsurance rate to utilize more of the manufacturers’ contributions on behalf of employee-patients.

Pharmacy Coalitions

Pharmacy coalitions aggregate the purchasing power of midmarket employers, allowing them access to lower pricing typically reserved for large employers.

Rebates

Rebates are a form of price concession paid by a pharmaceutical manufacturer to the health plan sponsor or the PBM working on the plan’s behalf. While rebates can be perceived as a source of revenue for an employer’s drug spend, the intent of any plan sponsor is to achieve patient clinical adherence, condition management and employee satisfaction at the lowest overall price.

We predict increased exposure to rebates in 2024, driven by biosimilars offering price relief at nearly 80% off the list price at the point-of-sale, therefore eliminating the need for a rebate afterward.

Patient Assistance Programs for Specialty Medications

Some pharmaceutical manufacturers sponsor patient assistant programs (PAPs) that offer financial assistance in the form of free or low-cost medications to underinsured individuals. This assistance is intended to enhance their existing prescription drug coverage and can result in significant reductions in overall specialty Rx spend.

International Pharmacy

One strategy to avoid the exceedingly high prices of some prescription medications in the U.S. is simply to procure them from elsewhere via an international program that complies with the “enforcement discretion” FDA policy. Tier 1 countries have safety and efficacy standards that equal or exceed U.S. standards, and they’re able to offer chemically identical drugs at significantly lower prices than those offered in the U.S.

The Benefits of Working with a Pharmacy Consultant

Employers deserve objective and reliable pharmacy guidance aligning with their key health plan initiatives, health care reform and industry trends. A dedicated pharmacy consultant offers that. At CBIZ, our managed pharmacy consulting practice works with clients to review past pharmacy experiences and provide strategic recommendations that are specific to your organization’s needs and culture and governed by pharmacy management best practices.

In addition, we distinguish ourselves from other brokers in the marketplace by maintaining objectivity. We are proud to say that we do not own, operate, or have ties to a pharmacy benefit vendor, nor do we operate our own PBM coalition. This allows for truly unbiased examination, assessment, and counsel of our clients’ pharmacy benefit management programs.

To learn more about CBIZ’s approach to pharmacy consulting, connect with a member of our team today.