Employers are right to be worried about pharmaceutical prices.

A recent study from the Health Care Cost Institute (HCCI) showed that even though usage of health care services declined in 2014, health care costs still went up. The culprit was spending on prescription drugs, which grew faster in 2014 than any other medical service.

What’s Behind the Pharmaceutical Cost Increasesmoney and pills

The HCCI study said spending on brand-name prescriptions grew at the fastest rate, increasing 8.2 percent to $593 per capita. At the same time, usage of such drugs declined 15.6 percent.

HCCI’s definition of “brand-name prescriptions” includes specialty mediations designed to treat hepatitis C drugs – such as Olysio, Sovaldi and Harvoni. The study said these Hepatitis C medications were the biggest reason for increased spending on brand-name prescriptions, with an average price per filled day of hepatitis C drugs totaling $983.30. That compares with $38.30 for other brand-name, “anti-infective medications,” according to the report.

Pharmacy costs are expected to continue to rise, with a 2015 Aon Hewitt study predicting pharmacy costs would increase 9.5 percent in 2015; 10 percent in 2016; and 10.5 percent in 2017.

The study identified factors that included “high price inflation for brand and specialty drugs;” fewer “blockbuster” drugs losing patent protection and moving to generic status; and a leveling off in generic drug dispensing rates.

Taking Proactive Steps toward Cost Management

The Alliance and National CooperativeRx/WisconsinRx – a not-for-profit prescription drug purchasing coalition that is a preferred partner for The Alliance – are taking proactive steps to help employers manage the costs of prescription medications.

National CooperativeRx recently announced that it negotiated an extension to its pharmacy benefits management (PBM) contract with CVS/caremark. Although National CooperativeRx’s existing contract with CVS/caremark would not have expired until year-end 2016, National CooperativeRx successfully pursued a contract extension that will:

  • Maintain or improve all pricing discounts
  • Reduce dispensing fees
  • Increase all rebate guarantees and maintain 100 percent pass through of all rebates
  • Provide improved discount and rebate guarantees estimated at $55.5 million for the 3-year term
  • Maintain plan flexibility as the contract does not mandate any clinical programs

An independent review by national consultants rated the contract extension as having best-in-class value.

Analyzing Employers’ Pharmaceutical Spendinganalyzing data

The Alliance is also working with National CooperativeRx to integrate data about spending on prescription medicine into its data warehouse.

The goal of this project is to help employers understand the total cost of care for health and pharmacy benefits. That’s because multiple studies have shown that even as employers and other purchasers have found ways to reduce health benefit costs, spending on prescription medicines has rapidly increased.

The Alliance will use prescription medicine data to learn more about employers’ spending on prescription and specialty medications, which may be purchased through a PBM or through the medical plan. This will help The Alliance offer meaningful advice to your organization and enable us to best represent your interests in the provider contracting we do on your behalf.

In time, The Alliance hopes to collect this information from members who use other pharmacy benefit management partners.

Learning Together About Prescription Costs

The Alliance continually works to help employers understand the market forces that drive health care costs. We regularly share information about prescription medicine costs in our newsletter and blog. We’ll also continue to tackle related topics at Alliance Learning Circle events.

Working with partners like National CooperativeRx, we will continue to bring you tools you can use to keep pharmaceutical costs from spiraling out of control.

Paul Meyer

Paul Meyer

Chief Operating Officer at The Alliance
Paul Meyer joined The Alliance in 1996 and served as the director of finance and operations until he became chief operating officer in 2007. As the COO of The Alliance, his main duties include overseeing the claims and customer service, finance, MIS, and HR departments as well as business planning and reporting. Meyer also serves as the treasurer of The Alliance Board of Directors.

In addition to his work at The Alliance, Meyer serves as board chair for National CooperativeRx / WisconsinRx, providing direction for this not-for-profit prescription drug purchasing cooperative. Meyer also serves on a number of other boards, including the Wisconsin Statewide Health Information Network (WISHIN), Catholic Charities of Madison, and All Saints Neighborhood.

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Paul Meyer

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