Exorbitant Prescription Drug Costs – Helping Employers Respond to This Unsustainable Trend

Written By: Edward Smith

Date: January 29, 2016

Exorbitant prescription drug costs continue to threaten the sustainability of employer health plans and cause significant financial distress for employees. As the WSJ article enclosed indicates, even congressional probes and frequent negative press does not slow the large pharmaceutical companies from raising prices, nor pharmaceutical benefit managers (PBMs) from rigging the system in their favor.


The examples are numerous and well documented. Though price inflation of specialty drugs often makes the news, many frequent prescriptions are also being levered to take advantage of employers and their employees. For example, Amgen just raised the price of the anti-inflammatory drug Enbrel by 8% in late December, which follows an 8% increase in September and a 10% increase last May. Enbrel costs about $704 a week for the typical dosing for treatment of rheumatoid arthritis, according to CMS, or more than $36,600 a year. Can you imagine increasing the price of one of your products or service lines to this degree over 7 months?


I offer details below regarding the work we’re doing to help employers respond to this unsustainable trend in Rx pricing.


Most Pharmacy Benefits Manager (PBMs) receive revenue on a per script basis each time employees fill a prescription. Additionally, major national carriers, some TPAs, and even some benefit brokers share in company rebates and the pricing spread (between the copay and the cost to the plan).


Quite simply, one of the best methods of curbing the excesses found in the PBM industry is to identify a truly “pass‐through” PBM that actually receives no drug manufacturer monies, that optimizes rebates, that uses an evidence‐based formulary, that transparently discloses all costs, and that charges only a modest administrative fee. As you might imagine, this is much easier said than done but we have successfully “trained” a few PBMs (rewriting their contracts) using our Rx consultant, who is a pharmacist and former PBM owner, to analyze, design, RFP, and monitor/audit the PBM programs for our clients.


When we deploy a customized formulary and plan design, create preferred Rx networks with complete access but incentivized steerage, RFP to “transparent” PBMs, and implement strategies to reign in exorbitant specialty drug costs, the two examples below are typical of the cost reductions we achieve with very little disruption to employees.


Multi-line Manufacturing Company


$1,308,295 – Total Rx Spend in 2013
$992,760 – Total Rx Spend in 2014


Actions Taken: Removed spread and established preferred / non-preferred pharmacy network.




$1,293,632 – Total Rx Spend in 2014
$934,098 – Total Rx Spend in 2015


Actions Taken: No existing spread. Maintained current PBM. Established a preferred / non-preferred pharmacy network. Removed Mail Order and implemented 90 days at retail with a Preferred Pharmacy.


Additionally, for companies with over 1,000 employees, we’ve been able to further enhance total savings by utilizing a partner PBM consulting firm that works primarily for purchasers and health plans.


Their analysis is complementary to the one done by our in-house Rx consultant, with the exception that its evidence‐based approach suggests substituting “therapeutic equivalents” of brand drugs, using different compounds to accomplish the same result. Their work has consistently produced another 10‐15 percent savings and, while its methods can be considered “disruptive,” the results can save significant dollars for both patients and purchasers while improving health outcomes. I have attached 3 samples of their work for your review.


We have found this two-pronged approach (with many embedded tactics) to be very effective in bringing Rx spend closer to a reasonable level. I hope this information is helpful to you and please know that I’m glad to discuss further if you wish.

Referenced Article:
Drugmakers Raise Prices Despite Criticisms – Pharmaceutical companies cite high cost of research as reason for price increases

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