Drug companies are on the hot seat over pricing of new drugs, particularly specialty medications that can have course of treatment price tags in the tens of thousands of dollars. How are payers responding? The 2015-2-16 Prescription Drug Benefit Cost & Plan Design Report from the Pharmacy Benefit Management Institute gives some insight. (PBMI Report) The report is based on a survey of 302 employers of all sizes. Employers stated as their top two goals for managing prescription drug benefits managing specialty costs and reducing inappropriate utilization. 80% of employers said the reform law has increased their prescription drug costs at least somewhat and 85% said the reform law has had no or a negative effect on quality. The headline on costs is that in 2014 employers experienced a 10.2% increase in per member per month drug costs, up dramatically from 2013’s 2.6%, and driven largely by a 19.2% rise in specialty medication costs. About 1.72 prescriptions per member per month were filled at these employers, with the gross average monthly cost being around $89 and the cost after rebates and discounts being $76.
Employers have responded largely by increasing cost-sharing. Four-tier copay or coinsurance designs are becoming more common, with the fourth, and most expensive, tier typically being used for specialty drugs. While actual copay amounts for generic drugs in real terms have been relatively flat for years, cost-sharing on branded medications have risen over 50% in real dollars. Copayment and coinsurance structures have become more complex and probably harder for consumers to understand. Over the last few years, the use of coinsurance, which generally costs employees more, has crept up from around 14% of employers in 2008 to 35% in 2015. Average copays in 2015 for a three-tier plan were $10.78 for generics for a retail 30-day prescription, $24.24 for a 90-day retail fill, and $19.74 for mail generic fill. Corresponding averages for the preferred branded tier at the same fill locations and rate were $30.46, $70.13 and $56.66. And for the non-preferred brands they were $55.66, $121.98 and $102.51. When the employer has a fourth tier for specialty medications, the average copays are $132.23, $245 and $198.41. You look at some of these numbers and you see why prescription abandonment is a problem. When coinsurance is used, the average is around 20% for any fill method for generics, around 26% for preferred brands and about 37% for non-preferred brands. The averages mask considerable variability–some plans are quite rich, for example zero dollar copays on generics and some are pretty expensive, with a $30 copay even on a generic fill. You can see that patients would be very wise to use either mail 90-day or retail 90-day fills, as the average copay is only about 2.2 times the retail one, so the savings can be significant.
And as if consumers weren’t getting socked enough, the use of deductibles for prescription drugs rose from 14% of plans in 2014 to 36% in 2015. The average deductible for medication coverage was $325 for single coverage and $960 for family. Overall employees paid about 21% of claim costs in 2014, with the highest percent being paid at retail pharmacies for 30 day fills and the lowest percent at specialty pharmacies. But the absolute dollars are almost certainly much higher at specialty pharmacies given that the average claim size is substantially greater for those drugs. Some employers are offering financial incentives to encourage employees to choose lower-cost options. About 30% will lower copays for doing a health risk assessment, with 23% doing that only for certain drug classes. About 10% tie a lowered copay to care management program participation. And the drug manufacturers have been very clever about using copay coupons, which reduce a patient’s cost, to circumvent cost-control strategies used by employers, so employers and their PBMs have had to respond to those programs. About 10% of employers take some action to manage use of coupons, with 37% of those blocking their use. Employers likely have mixed feelings about coupons, as they might increase inappropriate use, but they also may encourage a patient to use a needed drug that otherwise wouldn’t be taken for cost reasons. More tomorrow.