Rx Plan Consultants

Rx Plan History
To manage drug cost and provide a well designed benefit, today’s benefit administrator must be better informed and well versed in how prescriptions are marketed, sold, distributed, prescribed, dispensed, and understand how drug claims are processed. Rx Plan Consultants provides the following core information to support your future decisions based on the right science.

Who Provides Prescription Drug Coverage
Nearly 70% of Americans today have prescription drug coverage. The majority of individuals receive a health/medical care plan with a drug benefit incorporated that is offered by their employer as part of their total compensation package. Employers, as the plan sponsor, are responsible for contracting the administration of the drug benefit with a health plan or pharmacy benefit manager (PBM). The employer fiduciary responsibility imposes a need to provide oversight and guidance to the benefit to achieve maximum value with the organizations’ resources managed in the most prudent manner.

Today’s Employers Are Experiencing Higher Prescriptions Drug Cost
Employers are keeping a close watch on prescription drug cost, and their ability to maintain and offer an affordable quality prescription drug plan in the future is at risk due to uncontrolled and dramatic annual cost increases. Prescription drugs represent approximately 20-30% of total health care plan expenses, and are dependent upon utilization, member demographics and plan design. Drug rates are trending at much higher rates than other medical care costs. National surveys by leading health care consulting firms are showing employer’s drug costs have been running in the range of 10-20% annual increases over the past 5-10 years.

Ideally employers would like to keep drug cost within single-digit increases and in line with their budget increases. Without control, employers will either limit the benefit or continue to shift more cost to the employees. Looking forward, the situation is likely to get worse as high cost specialty oral and injectable drugs used by a small number of plan participants (typically 1-3%) are now trending at 15-20% annually and are expected to reach the 20-40% trend in the upcoming years. This higher trend rate will contribute to mantaining double-digit drug trend rates unless plan sponsors take action by addressing their prescription plan design and utilization management.

If employers are to maintain control over their health care expenses, managing their annual drug cost spend and trend increase is essential.

Why Drug Cost Increases Are Occurring
The top three PBMs in the U.S. in 2007 had total revenues over $139 billion. Pharmaceutical manufacturers are one of the most profitable industries in the world and exist in the U.S. with a free market and the ability to raise pricing at any time they desire. Patented brand drug prices rise annually at a much higher rate than generic drugs. The sad news is that drug plan sponsors are at the mercy of PBMs and drug manufacturers who often collude to place high-cost branded medication on the drug formulary, encourage their use, and sometime engage in actively switching patients to these drugs. While drug prices themselves are costly, they are only one of three factors that contribute to the employer’s drug cost and trend rate. The other two major factors are 1) utilization – the increase in the average number of medications purchased per year by members, and 2) drug mix – the combination of generic and various brand named drugs purchased and paid for by the plan sponsor.

Employers rely on their health plan or pharmacy benefit manager (PBM) to negotiate discounts on drug prices through network pharmacies and negotiate and collect manufacturer rebates. Employers recently have been demanding transparency and contractual language with their PBMs that provide for pass-through pricing (i.e., full benefit of the retail pricing discounts), innovative plan design, disclosure of conflict of interest and improvements in generic dispensing. Despite asking for improved pricing, which is becoming harder to obtain in the market today, plan sponsors are limited in their scope of cost containment and often resort to cost shifting and cost sharing with its members through higher copays, deductibles and annual maximum limits.

Member utilization is another major factor that drives increased plan cost as members continue to increase the number of medications taken. This may result from having more health conditions, market entry of medications for conditions which previous had no drug therapies, and new approved indications. With the multiple factors facing employers today they must take greater control over the drug benefit and create strong cost containment strategies. ROPD provides the solution for drug plan sponsors to address their utilization through our innovative plan design.