The high and growing cost of prescription drugs continues to place a financial burden on members and plans. Plan sponsors are striving to best manage their pharmacy benefit in a complex and ever changing ecosystem.
Implementing thorough drug optimization strategies becomes imperative as it helps plan sponsors reduce waste and ensure the most efficient medication use.
Ninety-two percent of employers are concerned about high-cost drugs in the pipeline, and 91% are concerned about pharmacy cost trend overall. These concerns are well-founded, considering that prescription drug costs rose by nearly seven percent in 2022 and they are said to be growing double the rate of overall health care costs. Employers also experienced an increase in the median percentage of health care dollars spent on pharmacy, from 21% in 2021 to 24% in 2022. Low clinical value brands and high cost generics are also gaining traction in the market, contributing to wasteful traditional drug spend.
With all of that said, it is not surprising that in 2023, plans identified that one of their biggest opportunities was guiding members to lowest cost drugs.1 But it is no easy feat. The pharmacy ecosystem has become increasingly complex over the years, thereby emphasizing the demand for a more comprehensive approach to optimizing drug spend. There are endless, individual solutions that result in plan fatigue and confusion because they solve only part of the problem.
Despite the fact that plans have some drug optimization capabilities already in place, they still need a simple approach to drive significant drug cost savings. Additionally, members and other health care stakeholders, like prescribers and pharmacies, are often not aware of specific drug saving opportunities and are not able to take the necessary steps to help lower spend.
Drug optimization, simply put, aims to avoid wasteful spend and drive usage of the most cost effective, clinically sound drug. But this stretches beyond the traditional drug management strategies of formulary and utilization management. Maintaining member choice is also a priority for many plans. With strategies in place at the pharmacy, prescriber and patient level, and as part of plan benefit design, drug optimization is a critical approach for plan sponsors to manage their spend more holistically and effectively.
Several strategies exist to address the challenges of wasteful drug spending:
- Lower cost drug alternatives are often available, but many times members, prescribers and pharmacists are not aware. Targeted outreach and digital engagement with these audiences to inform them on and encourage the use of alternatives can generate significant savings for members and plans.
- While new drug innovation is a key driver to improved health outcomes, new-to-market drugs and devices that do not have FDA approval can create significant waste. Implementing strong controls at the benefit-level is an effective way to prevent wasteful utilization and protect members from potentially unproven drugs and devices.
- Brand to generic drug substitution is a well-known cost saving practice when the generic drug proves the same clinical efficacy. But it’s important to know that in some unique circumstances generic drugs are sometimes more expensive versus branded drugs. Targeting high-cost generics and dispensing the lower net cost brand alternative at the point-of-sale is a key strategy to combat this wasteful spend.
These strategies are most effective when they are part of a holistic drug optimization approach. As plan sponsors consider impactful ways to manage spend in 2024 and beyond, the power of drug optimization must be maximized.
1 Midwest Business Group on Health, 2023 Employers Health Benefits Priorities.