Friday, September 21, 2012

5 New Ways to Cut Employer Prescription Drug Costs

As prescription drug costs continue to increase, plan sponsors are looking for ways to cut said costs such as reducing spouse and dependent coverage.  While total health care is predicted to rise 5.3%, to $11,507 per employee in 2012, the increase is slowing.

More recently, employers have been increasing employee premiums, although this tactic can only be pushed so until diminishing returns begins to rear its ugly head [decreased employee retention]. Also, if healthy employees opt out of coverage self-insured employers might lose money.  That is why most companies keep premium increases in line with their cost increase.

Among other changes to improve prescription drug costs employers should consider these options for 2013 and beyond:
  • The adoption of account-based health plans, which include health savings accounts and health reimbursement accounts.  The higher deductibles in these plans shifts more of the cost to employees.  In many cases, the only costs are attributed solely to prescription drugs. 
  • Some companies, 38%, will reduce spouse and dependent coverage, while 29% will use spousal waivers or surcharges. As employees have to pay more to cover family members it may be more economical for the husband to be under one plan and the wife under another.
  • Limit company reimbursements for prescription drugs to only generic and specialty medications.  While brand medications help successfully treat many diseases, their generic counterparts prove to be therapeutically equivalent where efficacy is the primary concern. Some might say generics don't work and in this case my suggestion is too try another. A different manufacturer's product will do the job in many cases. 
  • Offer telemedicine consultations next year.  It is cheaper to contact a doctor by phone, e-mail and Skype rather than go to an office.  And an employee doesn't have to leave the workplace.  It's most often used for acute ailments such as flu and allergies.  It is not considered as a substitute to a doctor's visit.  When a prescription is required the doctor may simply forward an e-script to the employee's pharmacy of choice. 
  • Eliminate prescription drug coverage all together and instead pay for access to some sort of discount program or online pharmacy. Web sites like PrescriptionGiant.com may negotiate significant savings over chain drug stores and discount cards.  Employers could potentially eliminate huge mark-ups, administrative fees and other hidden costs that tend to be significant.  Obviously, PPACA guidelines will have to be considered in this scenario. 
Most employers we surveyed, 90%, are committed to offering health care benefits.  They know it's needed to attract and retain the best employees.  Still that leaves 10% whom are not committed.  If just one multi-national corporation stops offering health benefits then that will trigger other employers to follow suit even though most "say" they are committed to offering it.

Tuesday, September 11, 2012

The Truth about Prescription Drug Discount Cards

You've seen them in junk mail, doctor offices and grocery stores.  Prescription drug discount cards are ubiquitous and said to offer up to 75% savings on prescription drugs at retail pharmacies.  Is this really true?  Of course not.  In fact, prescription drug discount cards are one of the most misleading facets of the consumer drug industry.


Prescription drug discount cards are targeted for two sets of people:  uninsured and under-insured patients. Typically, no personal information is required as the cards are prepared in advance with all the necessary information.  For the purpose of this post, I consider participants of a HSA or other CDHC (consumer-directed health care) plan as under-insured.  


It's not too difficult for drug discount card companies to gain access to large pharmacy networks of 55,000 or more.  Furthermore, many of these drug discount card companies don't have much infrastructure at all.  In some cases, they are run from a home office giving one the impression they're a huge company with hundreds of employees and equal buying power.  Nothing could be further from the truth.

Here is how the prescription drug discount card works.  One simply picks up a card at their doctor's office, grocery store or dry cleaners - there is no registration required.  If a particular card requires registration undoubtedly the information is used for marketing purposes and not to activate the supposed discount guarantee.  At the time of a new or refill prescription, the card is taken to the pharmacy and presented to the pharmacist for any applicable discount.  The pharmacist or pharmacy technician will then enter the BIN, Group and Member ID numbers.    


Now the bait and switch begins.  The discounts promised by the cards are in many cases accurate. But, the starting point (original cost) is misleading.  The discount is based upon AWP or average wholesale price.  AWP is not the cost of the drug for the patient, pharmacy or manufacturer.  It is an arbitrary price used, in my opinion, to mislead the public and other non-informed purchasers of prescription drugs.

For example, the AWP for Metformin 500 mg x 90 is $125.00, but the actual cost to the pharmacy is only $6.50.  Your discount card offers 50% off ($62.50) Metformin and you think wow I saved $62.50 ($125 - $62.50)! Unbeknownst to you is Joe's Corner Pharmacy, without a card, would've agreed to a negotiated price of $12.50.  That difference or $50 is essentially a shared profit between the card issuer and network manager.  You've effectively been hustled.   

In the past, it was hard work; sweat and tears which gave people a big advantage.  Today, it is knowledge.  Those who have it win and those who don't get duped.  Think of the AWP as MSRP or manufacturer's suggested retail price.  Would you ever pay MSRP for a new automobile?  Strive to be well-informed about all your health care purchasing decisions and you'll avoid being a patsy.