No one buys drug insurance. We buy health insurance. Yet, the drug portion of that health plan can and should also be a strategic investment in your employees, which can positively impact your bottom line.
That’s because patients dealing with chronic diseases, including 6 out of 10 adults in the U.S., typically take maintenance medications to help manage their conditions — conditions that are almost always more expensive when not well managed.
As employers, we should be designing our health plans to foster affordable access and adherence to therapies. Productivity improves and plan and employee costs are reduced.
The cost of nonadherence to therapies can be catastrophic for all involved, yet the reality is that more than 56 percent of patients abandon their prescriptions at the pharmacy counter when they cost more than $250.
Here are four proven plan design options that are well worth considering to reduce costs and improve care:
Option 1: Add chronic disease management medications to your preventive drug list.
Moving medication therapies for diabetes, hypertension and many other chronic conditions to your preventive drug list bypasses the deductible. A patient with a chronic disease has enough “skin in the game” living with it every day. This simple step costs you next to nothing and greatly improves adherence to prescribed therapy. A June 2022 study from Express Scripts showed that capping the monthly cost of all diabetes drugs at $25 would reduce the overall health care spend on diabetes by 16.3 percent. The savings came from reduced ER visits and hospitalizations.
Option 2: Pass rebates through to plan participants during the deductible period
Average rebate on a branded drug is approximately 48 percent of list price. If you aren’t passing these rebates through to your employees during their deductible period, they are literally paying double what your plan is paying for the same drug. They have paid a premium for access to your health plan, but they aren’t getting the benefit of plan-negotiated rates unless you tell your Pharmacy Benefit Manager (PBM) to pass them through. And it’s important to note that PBMs keep a percentage of these rebates and won’t bring this up if you don’t ask.
How much will this cost? Next to nothing.
A recent actuarial study by Milliman showed the overall impact of passing rebates through would be less than one percent of total health plan cost. Importantly, this did not factor in any savings from having healthier participants. (See Express Scripts study in #1 above.) It’s also a fact that most patients with a chronic disease will meet their deductible every year.
If you inflate the cost of a drug, you save nothing as the plan will simply pay another claim that it wouldn’t have had to pay otherwise.
Option 3: Ensure lower-cost generics and biosimilars are covered
This sounds like a no-brainer, and it is, but it’s not the case in too many plans. With only 1 in 4 new generics being placed on formularies when they’re introduced, highly rebated brand drugs are crowding out the lower list price drug offerings.
PBMs have a perverse incentive to drive volume to the high-priced drugs since they keep a percent of the rebate and/or otherwise get compensated based on the drug’s list price. This means your employees are often forced to pay for a higher-priced drug during their deductible period when a lower-cost generic or biosimilar is available.
Option 4: Ensure generic drugs are on the generic formulary tier
Less than half are actually placed in the generic tier of formularies today. This is down from more than 90 percent a few short years ago.
Your employees have no incentive to take the lower-cost drug once they’ve met their deductible. Their copay is the same either way. That can’t be good for your health plan’s bottom line and your employees are over-charged for a low-cost drug. In many cases, the copay for a generic drug today is substantially higher than the cash price.
A great example of this is Metformin, a very common prescription for type 2 diabetes. Generic Metformin can be purchased for $4 at many pharmacies. How many of your plans are charging $20 or more for the lowest copay tier for that drug? Who is getting the difference?
It should be obvious by now that it’s essential to manage your PBM. They’re great with math and know how to drive their own bottom lines. As just one example, Optum Rx, a wholly owned subsidiary of United Health Care (UHC), generated more than 50 percent of UHC’s total net income in 2021.
Drugs are only 10-15 percent of a total plan spend, yet they are driving that kind of profit?
Your plan is broken if your employees are going to GoodRx to get their drugs. If they’re paying your plan premium, they shouldn’t have to go outside of that plan to get affordable medications.
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Check Out Our Recent Webinar
To learn more about this and other ways to help boost employees’ health and your bottom line, view “Manage Diabetes Risk and Cost in Your Health Plan,” which was presented during HR Daily Advisor’s ‘HR Employee Benefits Week’ in July.
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George Huntley is a founding member of the Diabetes Leadership Council and currently serves as CEO of both the Diabetes Leadership Council and its affiliate, the Diabetes Patient Advocacy Coalition. He has been living with type 1 diabetes since 1983 and has 3 other family members also living with type 1. A passionate advocate for people with diabetes, George served as the National Chair of the Board of the American Diabetes Association (ADA) in 2009. George is also the Chief Operating Officer and Chief Financial Officer of Theoris Group, Inc., a professional services firm headquartered in Indianapolis, Indiana that provides engineering and information technology solutions. In his corporate role, George has been the plan administrator of a self-insured health plan for over 20 years.