Archive for category Prescription Drug Spend
As employee benefit budgets remain tight, employers are adopting plan design changes that reduce drug benefit coverage and improve pricing according to findings from the 2011-2012 Prescription Drug Benefit Cost and Plan Design Report published by the Pharmacy Benefit Management Institute (PBMI).
The 2011 survey was completed by 274 employers and other plans representing 5.2 million members. Key survey results include:
- Plans using a four-tier design increased from 17% to 25% between 2010 and 2011. Nearly 50% of large employers (more than 20,000 lives) now have a four-tier plan design.
- Specialty copays increased by 37% in 2011. The average specialty copay grew from $61 in 2010 to $84 in 2011. Nearly 1 in 4 employers now place specialty drugs on a fourth tier.
- PBM pricing pressure in mail is mounting as the average discount off AWP rose by 10 percentage points for generics dispensed through mail, increasing from 58% in 2010 to more than 68% in 2011.
- Reduced coverage of specialty pharmaceuticals on the medical side is on the rise as 24% of employers now restrict coverage of specialty drugs under the medical benefit, up from 12% in 2010.
This report is a valuable reference tool for all industry stakeholders, covering the full spectrum of pharmacy benefits and continually changing market dynamics. New to this year’s report are rebate figures for retail 90 and specialty prescription claims
Since the advent of the PBMs, the concept of reference pricing for pharmaceuticals has seen multiple waves of interest and policy discussion but only minimal uptake. Reference pricing, sometimes referred to as a therapeutic MAC, requires patients to pay the full difference between the price charged at the pharmacy and a reference price reimbursed by the insurer. The reference price is the price of a low-cost drug in a therapeutic cluster of drugs considered clinically equivalent in the treatment of a condition.
Over the years, reference pricing has been used successfully in many countries, including Canada and Britain, to manage prescription spending without reducing quality of care. However, concerns over complexity and member satisfaction as well as the PBM industry’s historical reliance on rebates (prior to the growth in pass-thru models) have been barriers to the adoption of reference pricing in the U.S.
A study just published in The Journal of Managed Care Pharmacy, reports the results of Arkansas’ experience with reference pricing for proton pump inhibitors (PPIs) for its state employees. Arkansas implemented reference pricing for PPIs including esomeprazole but excluding generic omeprazole, on September 1, 2005. Beneficiary cost share for all PPIs except generic omeprazole was determined from comparison of the PPI actual price to the $0.90 omeprazole OTC reference price per unit.
Over 43 months of reference pricing, net plan costs for PPIs fell dramatically by 49.5% PMPM compared with the preperiod, despite an increase in the pharmacy dispensing fee. In the first quarter of 2009, the net spend for PPIs was only $2.19, despite the state’s significantly higher than average utilization of PPIs. While PPIs costs have been declining recently for most plan sponsors as more patients use generics, the state of Arkansas’ savings greatly exceeds those of other plan sponsors without reference pricing. The authors estimated the net savings at $1.31 PMPM over the nearly four year study period relative to a very large and diverse comparison group. As the authors point out, the savings would have been even greater had they included generic omeprazole in the reference pricing list.
Equally important given concerns that reference pricing is too complex for the average consumer, utilization of PPIs did not change yet beneficiary costs actually decreased by 6.7% due to a large movement away from branded PPIs to OTC and generic omeprazole. Between 2004 and 2009, marketshare for omeprazole, generic and OTC combined, grew from 57 to 86%. Given these results, it appears that the employer did a nice job of making beneficiaries aware of lower cost therapeutic alternatives, which patients took full advantage of over the course of the study.
The study authors make little mention of the member “noise” resulting from this plan design change; but given the large uptake in omeprazole that was observed and the state’s long-term, continued adoption of the program, it is reasonable to conclude that any member noise was manageable and likely dissipated quickly with time, as I have repeatedly seen with other types of major plan design changes. Bottom line: This evaluation provides solid evidence that reference pricing for PPIs can save real dollars without reducing utilization. For plan sponsors looking to optimally manage their drug spend, referenced-based pricing is worth consideration.
I recently received a question as to which drug class or population/disease state, if ever, would I recommend a zero dollar member cost share. This is a great question, and there actually are some situations in which I would recommend use of a zero dollar copay.
First, let me briefly review why I do not recommend $0 copays as a standard part of the benefit design, even for classes such as diabetes and cardiovascular disease.
- The primary reason is that most patients do not stop taking medication because of cost, particularly in a commercially insured population (see figure for common reasons for non-adherence). Accordingly, copays are being waived without any possibility of benefit for the vast majority of patients. This known fact is evidenced in the small improvements that are seen in compliance after implementing a copay waiver program—averaging 2-4 percentage points and representing 1-2 weeks of additional therapy. Targeting copay waivers to patients at high risk for adverse events and who truly have cost as a financial barrier would be an ideal approach, but it raises HR and equity issues that are not easily resolved.
- The second consideration to keep in mind is the potential for fraud. I have heard from frustrated employers who implemented zero dollar copays for chronic conditions only to find that employees began sharing medications with family and friends with the same condition. Quantity limits can help control this potential problem partially but not entirely. I have not studied this phenomenon personally so I cannot speak to the magnitude of the problem.
I would however, recommend use of a zero dollar copay program under certain conditions. First, zero dollar generic copays are a great tool for promoting use of lower cost, therapeutic alternatives for patients currently using brand medications. I would consider them for therapy classes for which you have step therapy in place as the two programs are complementary. Step therapy will promote generic use for new users, and the $0 generic copay program is a carrot strategy for promoting generics with current brand users. The $0 generic copay helps to grab the member’s attention and provides an extra little incentive for making the switch. I would not make the copay waiver indefinite, however. Six months of free generics is sufficient. Based on my experience and rigorous evaluations, these programs have a solid ROI; and the patient saves money too of course.
Second, a population for which I MIGHT consider a $0 generic copay is hypertension and cholesterol, and other cardiovascular medications in seniors. The rate of adverse cardiovascular events (absent treatment) is much higher in the senior than in the commercial population; so IF price elasticity is at least as high as we see with commercial members, there is the potential to materially reduce the rate of adverse cardiovascular events and to achieve a net savings from reduced hospitalizations. The key to this decision is determining the actual price elasticity of demand within your senior population. As little contemporary public data is available on price elasticity within the senior population, individual vendors will have to assess the elasticity within their own data. Once identified, a simple analytic tool, like the VBID calculator, can be used to determine the potential reduction in hospitalizations and medical spend that can be achieved. Of course, implementing copay waivers in the Medicare Part D program is a greater administrative challenge than a commercial plan or retiree plan, which would be a relevant consideration.
A third population for which I would PILOT a $0 generic program is patients at HIGH risk for adverse cardiovascular events but who have NOT initiated pharmacotherapy. The classic example is the patient with a recent myocardial infarction who has not initiated a statin and/or beta-blocker. While cost is not likely to be the reason for non-initiation for most patients, it might be a useful short-term incentive, when combined with the right intervention, for encouraging use. I would say pilot first because it simply may not be effective and there is the risk that a zero price could actually deter use if it serves as a quality indicator for non-initiating patients. Another growing challenge is that many patients will appear as non-users because of the $4 generic programs which do not always result in a claim being submitted.
For those of you looking for more information on copay waivers, see the recent Fairman editorial in JMCP and a paper Steve Melnick and I published last year on the potential financial savings from copay waivers.
The concept behind drug trend reports, now standard fare in the PBM industry, was pioneered by Barrett Toan, former CEO of Express Scripts. Toan believed that the old adage–” you cannot manage what you cannot measure”– applied to pharmacy benefit management. While common knowledge today, at the time, the industry did not understand the basics of how price, utilization, and drug mix contributed to drug trend overall, let alone by therapy class. Hence, the Drug Trend Report (DTR) was born. First published in 1997, the DTR has contributed greatly to the market’s understanding of drivers of drug trend and how to better manage wasteful drug expenditures. The value was seen immediately in the marketplace, as evidenced by the press coverage, the use by policymakers in D.C., and how quickly the other major PBMs followed suit.
Now that drug trend season is upon us, it is a good time to discuss appropriate and potentially inappropriate uses of these reports. In recent years, some organizations have attempted to use book of business drug trends as evidence of PBM effectiveness in managing drug trend. Such comparisons are simply not valid for couple of reasons. First, the magnitude of drug trend across PBMs tend to be more similar than different in any given year; and as the figure below shows, underlying market trends (e.g., new product launches, generic availability) are, by far, the strongest driver of trends from one year to the next. Second, varying methodologies and client mix (e.g., health plan vs. employer, age) in any given year significantly impact drug trend, making direct comparisons highly problematic.
Prescription Drug Trend: 1996 to 2008
The second area of potential misinterpretation relates to meaning of the drug trend number. As drug trends have slowed in recent years to single digits, plan sponsors have certainly felt some reprieve. However, this sense of relief can become problematic when a reduction in drug trend is confused with or viewed to be the same as a reduction in drug spend. Reason being, drug trend only examines the change in drug spend over time and provides no assessment of the appropriateness of the underlying drug spend.
Accordingly, a review of actual drug spend can paint a very different picture of current pharmacy benefit performance than does single digit drug trend. Anticonvulsants are a classic case in point. Drug trend fell nearly 30% in 2009 due to the availability of generics, but prevalence of use grew nearly 5%. Of course, the challenge is that much of the growing use in this class represents off-label use that is not scientifically supported, exceeding 70% in most studies.
Keeping these two caveats in mind, Drug Trend Reports are a useful reference tool in understanding the complexities of prescription trend drivers and cost management tools.