Escalating Prescription Costs Worrying Patients and Payers

A new drug called Sovaldi has an 80 percent cure rate for certain types of Hepatitis C infection when taken in combination with a drug called ribavirin. That’s good news for the approximately 3.2 million Americans with chronic Hepatitis C. The bad news is the drug costs $1,000 per pill, or about $84,000 for a course of treatment.

Although Sovaldi actually cures Hepatitis C ─ “potentially preventing those infected from developing cirrhosis or cancer of the liver,” insurers are balking at its price. In a blog post, America’s Health Plans (AHIP), a health insurer trade group, said, “Sovaldi has shown tremendous results…Unfortunately, the drug’s maker has priced it at an astronomical level that is not sustainable for consumers, innovation or society.”

Prescription drug spending in the U.S. grew by 3 percent in 2013, after a decline of 1 percent between 2012 and 2013, according to IMS Health, a consulting and data firm. Increasing costs ─ particularly for new drugs ─ is likely affecting your employees’ health.

Many of the most costly drugs treat various types of cancer. Spending on cancer drugs worldwide reached $91 billion in 2013, a 28 percent increase in just five years. It’s no wonder that a cancer diagnosis makes a person 2.65 times more likely to file for bankruptcy than people without cancer.

Doctor Writing on PadEmployers’ Balancing Act

Some insurers are dealing with costly drugs by passing a larger portion of costs on to patients. Some employers have turned to pharmacy benefit managers (PBMs) to control their prescription drug costs. They “carve out” prescription drug benefits from their health plan and provide drug benefits through the PBM. Volume buying allows PBMs to give participants retail and mail-order drugs at deep discounts. They also contract with manufacturers to obtain rebates that can be passed on to clients.

While PBM pricing is often more transparent than insurance company pricing, a PBM’s financial interests may not always align with those of their clients. Some PBMs retain the difference between the discount applied to the client’s invoice and the actual amount reimbursed to the retail pharmacy. With mail-order purchases, certain PBMs rely on their market power to generate revenue by purchasing volume-based brand and generic drugs at a deeper discount than the prices clients pay. And sometimes they refuse to reimburse for certain high-cost drugs.

Bloomberg News Service reported that Express Scripts, a pharmacy benefits manager, might stop reimbursing for Sovaldi once other new hepatitis C therapies are on the market, which is expected to occur next year. For a pharmacy benefit manager, refusing to reimburse patients for expensive drugs like Sovaldi means a better bottom line. But for employers, steering patients away from drugs that are proven effective could prove penny wise and pound foolish.

Although a Sovaldi costs $1,000 per pill, Gilead, the drug’s manufacturer, points out that the cost of a liver transplant can exceed $300,000. When looking at the cost of a drug, sometimes a benefits manager has to look at the bigger picture. If a drug such as Sovaldi can cure a disease or prevent chronic conditions from worsening, how much is it worth to an employer that will likely have to pay for additional medical and disability costs?

Your organization, if it’s typical, might be able to save on prescription drug costs by cutting waste and increasing compliance. A 2012 report funded by the U.S. Agency for Healthcare Research found that 20 to 30 percent of medication prescriptions are never filled, and that approximately 50 percent of medications for chronic disease are not taken as prescribed. This has tragic consequences, leading to approximately 125,000 deaths… at least 10 percent of hospitalizations, and a substantial increase in morbidity and mortality.” The cost? Between $100 billion and $289 billion every year.

As with many benefits programs, an integrated approach works best to increase prescription drug compliance and reduce waste. A comprehensive disease management program will help identify those with or at risk of developing chronic conditions, develop appropriate treatment or prevention plans and then help people comply with their treatment plans. In short, disease management programs help people learn to take better care of themselves. They usually involve a combination of nurse counseling, behavior modification programs, communications and support, along with involvement by the participant’s physician.

In order to use their benefits wisely, employees need to know how they work. Do your plan materials provide them the information they need in a clear and understandable manner? Does your plan provide a way for employees to comparison-shop for their drugs?

For suggestions on controlling your organization’s prescription drug and other employee medical costs, contact USI.

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