Many Americans and employers agree that a top priority for President Trump and Congress should be lowering prescription drug costs. That was underscored this week with introduction of bipartisan legislation – the Fair Drug Pricing Act – a step in the direction of greater price transparency. The bill would require drug makers to justify their pricing and itemize their expenses before raising prices more than 10% in one year, or 25% over three years, on drugs that cost at least $100. (Remember the EpiPen controversy from last year?) Shortly after receipt of this pricing information, HHS would be required to make the data publicly available. In addition to providing a check on sharp price hikes, this could help PBMs and other drug purchasers make more informed decisions.
The Fair Drug Pricing Act mimics bills that have been introduced in more than a dozen state legislatures, and a growing number of state and federal lawmakers have offered a variety of proposals to address the issue. Congressional Democrats, for example, have proposed to allow Medicare to negotiate prices, remove tax breaks drug makers receive for advertising expenses, speed generic drugs to market, and allow Americans to import medicines from Canada, among other things.
The pharmaceutical industry opposes and will fight most of the proposals, but it’s clear that the industry and policymakers are feeling the heat over drug prices.
With all the uncertainties around healthcare legislation swirling, cost control of pharmacy spend remains top priority for employers. On one hand, employers obviously want their employees to have access to the medications they need: drugs like insulin, blood pressure treatments, and cholesterol blockers have long played a critical role in employees’ health. But now new specialty biotech drugs – some of them true medical breakthroughs – are flooding into the market, at costs much higher than previous therapies. Drug prices spiked by 9.8% between May 2015 and May 2016, and there are more sharp increases ahead. Drug costs are quickly becoming unsustainable, for both employers and, increasingly, plan members. Many high-cost brand name drugs may have rebates to reduce their net cost, but the member or patient typically does not see these rebates so their out-of-pocket cost is still high. And even the cost of some generic drugs has risen dramatically.
Fingers are being pointed everywhere—from regulations and research to the cost of lawsuits when new drugs perform poorly. While other stakeholders work on those issues, there are actions employers can take to shift the equation in their favor. Here are a few ideas:
Analyze the data on prescription drug spend in your plan
Prescription drugs are the top driver of health benefit cost increases today. In a recent report by the Pharmacy Benefit Management Institute, pharmacy benefit costs increased 10.2%, driven by 19.2% growth in specialty pharmaceuticals.
It’s important to know what’s driving cost growth in your program. When looking at your data, here are a few things to focus on:
- Drugs – What drugs are plan members using?
- Channel – From where patients receive their drugs and are they leveraging the lowest-cost channels?
- Supplier – Are you maximizing the prescription benefit manager relationships?
- Care – How do the drug therapies match up to best practices and evidence based medicine?
Educate employees on what they can do to lower their Rx costs
Employers can help employees be smarter when talking to their physician about their medications and making purchasing decisions. If your program includes any of these cost-saving Rx benefit features, make sure your employees understand them:
- Lower copays for generic drugs
- Lower copays for drugs in formularies
- Preferred pharmacies
- Mail-order suppliers
- Prior authorization requirements
- Step therapy requirements (members try lower-cost drugs first before they can move up to higher-cost prescriptions)
Focus on specialty drugs now
Specialty drugs for complex conditions account for 38% of all prescription spending even though they are used to treat about 1 to 2% of all patients. (Consider this recent example of how one employer discovered just two plan members were accounting for 2.5% of their total health budget due to specialty medication prescriptions.) The most expensive biologic breakthrough treatment regimens can exceed $750,000 per year. For the entire US healthcare market, specialty medication spending has nearly doubled since 2011, reaching more than $160 billion. With 40-50 new specialty medications set to enter the market each year, there is no end in sight.
To help gain control over your spending on specialty drugs, consider working with an expert to conduct a specialty diagnostic of medical and pharmacy plans to assess the current state and identify areas for improved management. Once the diagnostic results are in, employers can make informed decisions on revisions to their plan structure. We see savings typically in the 5-10% range. However, these savings occur in the short-term, and so it is a good idea to revisit the plan structure at least semi-annually as provider capabilities change over time.
If you’d like to learn more about the specialty pharmacy topic, join me for an upcoming webcast hosted in partnership with HR.com on May 17. We will explore the specialty pharmacy ecosystem and discuss options to stay ahead of the cost curve.
For more on Specialty Rx, please read David’s recent article in Benefits Quarterly.
Since the Presidential election, many have commented on expected legal and regulatory changes. One of them being prescription drug pricing. It seems that Republicans and Democrats can all agree on the need for more transparency into the cost of drugs. As far as doing something to lower the cost, initially it seemed that with Republicans dominating both Congress and the White House, we might not see much action in this area. But Trump made it clear in his press conference yesterday that he plans to go after drug costs. While no specific plan has been announced, relief for rising drug costs would be welcomed by employers -- provided that pressure applied on Medicare drug costs does not mean cost shifting to private payers. We are keeping close tabs on this issue.
The Kaiser Family Foundation recently polled Americans to identify their health care priorities for the next President and Congress. At the top of the list were issues related to prescription drug costs – specifically, making sure drugs to treat chronic conditions are affordable for consumers (74%) and government action to lower drug prices (63%). From an employer’s perspective, the latter is more important, as it would manage the total cost of the drug rather than simply limiting a member's out-of-pocket expense, which just shifts cost back to the plan. While drug prices will be a hot topic for lawmakers and the regulators to address when new leaders take office in January, employers might not want to wait and hope. Over the next five years, it is expected that 40 new specialty drugs will hit the market each year. Now is the time to develop a strategy to get in front of that influx of new high-cost drugs.
As discussed in an earlier post, the EpiPen controversy has put issues surrounding drug pricing very much in the public view. But while ensuring the affordability of life-saving pharmaceutical products deserves attention, it’s a complicated issue with many stakeholders. There is little government guidance for employers and their vendors on benefit design, such as which drugs to include on high-deductible health plan preventive drug lists so that they bypass the deductible. While adding the EpiPen might seem like an obvious step, there are many drugs that fall into the gray area between prevention and treatment, and for any individual employer to try to draw that line could put them at risk. More guidance from the government would help in the short-term, but ultimately the affordability problem will only be solved by addressing underlying drug prices.
Over the past few years, there have been some short-lived alternatives to the EpiPen, but the only one currently available is an authorized generic for Adrenaclick, which may not be significantly cheaper than EpiPen and is in limited supply. While we’re already seeing activity among other drug manufacturers looking to get a competing product on the market, it will take some time. Mylan’s generic version of the EpiPen, however, will likely be available within a few weeks.
Here are some questions to discuss with your PBM or health plan now, to ensure your members have the access they need to this product and you’re controlling spending to the extent possible.
- What is the status of EpiPen and the authorized generic of Adrenaclick on the formulary? This is important because formulary status can determine drug coverage, the amount of patient contribution, and what manufacturer rebates might be obtained.
- How are any earned drug rebates being accounted? Rebates from the drug manufacturer may be one critical aspect of how to recoup some of the plan sponsor’s expenditures, so the primary payers should ensure those rebates are completely flowing back to them.
- Is EpiPen on an inflation protection program? Such protection strategies are a growing trend in managing drug expenditures and they look to ensure that the pharmaceutical manufacturer have some type of price protection or cap on how much they can increase their pricing. Unfortunately, this type of pricing protection may only be associated with increasing the rebates to keep pace with the ingredient price increases; however, it may offer some relief to plan sponsors.
- Is a generic interchange available for EpiPen? For now, the answer is mostly no, but this will be an option to consider once Mylan’s generic version is actually available.
- Will the generic price points be better for employees than the negotiated brand price? Though generics traditionally are the lowest-cost option, if the generic does not offer a significantly lower price, the plan sponsor should explore whether the branded version, net of the rebate, is actually a lower-cost option.
- Are there programs to manage the quantities being dispensed? Such strategies are often applied to ensure patients are not stockpiling large quantities of a medications.
- Are there ways to better account for the drug manufacturer couponing efforts? As the drug manufacturers have been providing more coupons to cover the cost of their products, plan sponsors continue to struggle with how to account for copays patients actually do not pay because, for example, they are applied to the deductible. Although these coupon programs traditionally only benefit the patient, plan sponsors have begun to consider how they might benefit from this type of manufacturer funding, as they still pick up most of the cost for most drug therapies.
Finally, as you monitor availability and price, you may want to review employee communications as well. You may want to consider providing educational materials that provide resources for employees that need help with the cost of EpiPen. And, if plan members can save money by asking a physician to prescribe a generic as availability grows, that’s a message worth reinforcing.
Unless you’ve spent the last few weeks vacationing on an internet-free tropical island or remote mountain-top (if so, lucky you!), you’ve read something about the controversy surrounding the EpiPen, the severe-allergy drug injector sold by the pharmaceutical company Mylan. Since 2007, when Mylan acquired the EpiPen, the list price has risen from about $100 for a two-pack to about $600. There are virtually no alternatives on the market, and the medication is potentially life-saving – in other words, not optional. A grassroots social-media campaign, driven largely by parents of children with food allergies, pushed Mylan to offer a $300 “savings card” to commercially insured patients to reduce their out-of-pocket costs and to broaden the eligibility for uninsured patients to receive free EpiPens. What they didn’t do was reduce the list price for the drug, and the barrage of negative press continued, affecting Mylan’s stock price. The company responded by announcing they would introduce their own generic version of the product in a few weeks, at half the price. It will be the exact same product as brand-name version – which the company will continue to sell for the full price. Although drug companies have introduced generic versions alongside their own brand-name drugs to compete with other generics, it doesn’t appear that another generic epinephrine auto injector will be available in the short-term.
Although this move may take heat off the company, the reason Mylan didn’t just reduce the price of the brand-name drug is because they hope and expect that sales of the brand-name version will continue – because (as this New York Times article suggests) some doctors will keep writing prescriptions for it by name, out of habit; because pharmacists will have a financial incentive to sell the more expensive, brand-name version; and because consumers with the $300 savings card might get the brand-name version for free but have a small co-payment for the generic version. On the other hand, some PBMs and carriers may have negotiated prices for the brand-name that are lower than the generic price! Employers will need to talk to their PBM or health plans to understand the current pricing structure and how, now that the target has moved and moved again, to get the best deal for their employees and their organization.
This story shines a spotlight on the urgent need for regulation to address pharmaceutical price-gouging and the extreme variation in prices paid by different purchasers for the same drug. On the defensive, Mylan’s CEO called out high-deductible plans as the real culprit; in fact, they exposed unfair price increases that might otherwise have gone unnoticed, as they do in so many cases. But the EpiPen story also highlights a problem with consumerism: you can’t be a smart shopper if there is no alternative to a product that your life, or your child’s life, may depend on.
Opioid abuse. You’ve probably read lots of stories about it recently, but have you seen the stats? They’re alarming, to say the least: There has been a fourfold increase in opioid prescriptions from 1999 to 2010 and a fourfold surge in deaths due to overdose.
Opioids are medications that relieve pain, such as hydrocodone (e.g. Vicodin), oxycodone (e.g. OxyContin, Percocet), morphine (e.g. Kadian, Avinza), and codeine, as well as non-prescription drugs such as heroin. As a group they’re the third most commonly abused drugs after alcohol and marijuana, and they’re now responsible for killing more people than automobile accidents, according to the Substance Abuse and Mental Health Services Administration.
They have also been blamed for a decrease in life expectancy among certain groups of middle-aged Americans. Among self-insured employers, some estimates claim that 32% of opioid prescriptions are misused or abused, while Mercer data shows that opioid users 18 and older cost 5.5 times as much in total allowed medical and pharmacy costs compared to non-users.
The National Council on Alcohol and Drug Dependence reports that 70% of people using illicit drugs, including non-medical use of opioids, are employed -- and then there are all the employees whose work may suffer as a result of worrying about a loved one with an addiction. Among 18-25 year olds, 12% use opioids non-medically, as do 5% of those 26 and older. The CDC also reports that there is 6% utilization among those aged 12-17. Employees across the country are struggling with this disease -- diagnosed and undiagnosed, directly and indirectly.
Something needs to be done -- and all of us, including employers, can play a role in addressing this epidemic. You can help support those with addiction by training managers and supervisors to identify problems and referring employees to sources of help such as your EAP or Behavioral Health carrier. In addition, it’s important to develop communication tools for employee awareness efforts. And if your organization has a drug-testing program, check to see if the panel of substances tested for includes opioids.
Just as important is to prevent new cases. Review your medical, dental, and pharmacy benefit design to prevent the over-prescription of opioid medications. For example, the current recommendation is to limit prescriptions after procedures to seven days, which has been shown to decrease the development of new addictions. In addition, employers can ask their carriers or PBMs whether they flag members who are deemed high-risk for addiction, and if they follow up to ensure providers are consulting state Prescription Drug Monitoring Programs (PDMPs).
It’s also important to facilitate a successful return to work, by supporting the ongoing care needs of the employee as well as the families affected by addiction. And through careful monitoring of claims data, employers can look for red flags of addiction such as:
- Members obtaining large quantities of opioids
- Members prescribed narcotics by different doctors
- Members prescribed narcotics for more than 30 days
Prescription drug abuse is a serious medical issue, and should be treated as such. By taking action now, you can do right by your employees who may be suffering from addiction, while also doing your part to address a sensitive and complex issue plaguing our society.
This interesting piece in Kaiser Health News sheds some light on a real gap in healthcare: Physicians are barely trained in medical school on how to identify and treat addiction. In fact, only a few hours in the course of four years of medical school are devoted to teaching addiction medicine. Schools have been so slow to change that medical students at Harvard University, for example, have started conducting their own training on how to buy and administer drugs that reverse the effects of an overdose. And Stanford’s medical school adjusted its curriculum so that lectures on addiction will no longer be folded into the psychiatry series as a side note, but instead will be presented as a separate unit, relevant to future doctors in any subspecialty – and that training will continue when the students leave the classrooms for clinical rotations. As the story notes, medical schools have traditionally avoided teaching about addiction, partly because so many doctors have viewed it not as a disease but as a vice resistant to treatment in a medical context. But as this outmoded view fades, pressure is being put on medical schools to expand their curriculum in this area. While this is good news for employer sponsored plans, it will obviously take time for providers to be better trained on addiction treatment.
This month, the International Federation of Health Plans (iFHP) released its 2015 Comparative Price Report, a look at medical prices per unit in private health plans in seven OEDC countries, including the US. While you can guess that most procedures, tests and scans cost more in the US, you might be surprised at the size of the discrepancies. Let’s take a look at the most common surgical procedure performed in the US – the appendectomy. According to the iFHP, the average cost of an appendectomy in the US is almost double the cost in the UK and quadruple the cost in Australia. While the report doesn’t explain the higher average US cost, it does offer a clue by showing how widely prices for this surgery vary within the US – from about $9,000 at the 25th percentile to about $33,000 at the 95th percentile. This degree of cost variation – when it doesn’t result in better outcomes – is why US employers have turned to transparency tools, reference-based pricing, and value-based care.
The report also showcases extreme pricing discrepancy for seven specialty prescription drugs, with the US typically paying much, much more. A well-researched article in the Wall Street Journal that appeared late last year does a great job of explaining how other countries manage to keep their drug spending under control. A lot of it comes down to bargaining power. Government-run health systems in countries like the UK and Norway have substantial negotiating clout with pharmaceutical companies. In the highly fragmented U.S. market, payers range from employers to insurance companies to federal and state governments – and Medicare, the largest payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, pharmaceutical companies report the average price at which they sell medicines to doctors’ offices or distributors; by law, Medicare adds 6% to these prices before reimbursing the doctors, and the plan member pays 20% of the cost. According to the article, “The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors’ offices that have little negotiating heft.”
Another piece of the equation is being willing to not cover a drug that doesn’t offer enough of an advantage over an existing, lower-cost drug. For example, England’s National Institute for Health and Care Excellence, or NICE, will conduct analyses and make recommendations to the public health system about whether or not to cover a drug based on its value. If a drug is rejected, its maker will sometimes offer a discount – and then hope to make up the difference in the US?? From the graphs showing cost differences in the report, it sure looks that way. And, by the way, what’s your PBM doing to maximize the value of your drug spend?
In a new poll from Modern Healthcare, more than two-thirds of the 86 responding health care CEOs said they oppose a repeal and replace strategy for the ACA. Instead, they would prefer to improve upon the ACA. Their reaction does not appear to be political; they indicate concern over the Republican's "repeal and replace" because specifics are not known and only 9.3% favor the single payor system proposed by Bernie Sanders.
The CEOs showed overwhelming interest in transforming provider reimbursement to better promote value, and in curbing rising drug costs. This should be welcome news for employers. One of the key drivers pushing up health care costs in 2015 was prescription drug benefits. Employers reported a 22% jump in cost for specialty drugs and we’re also seeing increases in the cost of generic drugs. On the care delivery front, we’re seeing more employers using accountable care organizations, centers of excellence and medical homes. Our research has found that the implementation of pharmacy management and value based care strategies will drive cost, quality and patient experience improvements
Optum and Walgreens Boots Alliance (WBA) recently announced an alliance by which Optum Rx members can fill 90-day maintenance medication prescriptions at Walgreens stores at mail-order copays. Although cheaper, mail-order pharmacy benefits are not always popular with patients so this may be a welcome development for some health plans. Optum indicates that there will be two options. In one, there are higher copays if the member does not use Optum mail-order or Walgreens after two “grace fills.” In the other, the member would pay 100% of the drug’s cost if Optum mail-order or Walgreens is not used. Initial information indicates that mail-order pricing discounts would apply to these prescriptions. However, plan sponsors interested in this new arrangement should carefully review the arrangement to ensure pricing remains at, or below, current levels for both the patient and the health plan.