How Employers are Dealing with Rising Pharmacy Costs

C+R Research recently attended the Pharma Market Research Conference (PMRC) in Parsippany, NJ on February 1^st and 2^nd.

Not surprisingly, one of the biggest topics at this conference was the rising cost of pharmaceuticals. In particular, the rising cost of specialty pharmaceuticals.

If you are not familiar, specialty pharmacy includes “high-cost, high-touch medication therapy for patients with complex disease states.” Examples include Hep C drugs like Harvoni, which comes with a price tag of about $1,000 per pill.

According to industry sources, specialty pharmacy is responsible for driving up the national health expenditure in the US (which has been increasing at a rate of over 5% per year).

Several of our clients in health insurance and healthcare IT have been asking us to find out more about what employers are doing to manage the rising costs of specialty drugs. With that in mind, we partnered with our client, Anthem, to find out what employers are doing to combat the rising costs of specialty pharmacy coverage. Our study will be published in the upcoming issue of Benefits Quarterly; here are some of the key themes we uncovered:

• Employers are concerned with the rising costs of specialty drugs, and they’re taking preventive measures to try to manage them (such as requiring prior authorizations for high cost medications or requiring that certain pharmacy networks be used to reduce costs).
• Employers plan to use more approaches in the future than they use today (for example, many plan to try step therapy and/or plan to negotiate wholesale discounts for specialty drugs even if they are not doing these things today).
• Though employers are trying different methods, many aren’t using more tightly managed benefit strategies. These generate savings but may limit employees’ covered drug choices or pharmacy choices. It’s worth noting that tight management strategies, such as a closed specialty pharmacy network or coverage of only preferred specialty medications, are growing in industry adoption.
• Finally, and perhaps most importantly, the research showed that, while employers are adopting individual tools and techniques, employers as a whole have not adopted a unified strategy for managing specialty drug costs.

With specialty drugs generally being covered under medical and pharmacy benefits, it has been shown through analyses performed by Anthem and other organizations that integrated medical and pharmacy benefits can result in improved health outcomes and better cost management across both benefits.