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California Business Journal
Nathan White, RxBenefits commentary for CalBizJournal.com21

5 Hidden Costs in Pharmacy Benefits

Pharmacy benefits costs are on the rise, and more than 60% of employers say their prescription drug spending is costly and unsustainable.

by Nathan White, Special to California Business Journal
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It has become a priority for many self-insured employers to reduce the cost of their pharmacy benefits while protecting the health of their members. Unfortunately, the industry is very opaque, and it can be challenging to uncover the hidden costs.

Here are the five most common.

1. Unscrupulous Drug Pricing Practices

Most prescription drugs represent medical breakthroughs and priceless treatments, but some do not. While we can all get onboard paying for new therapies that offer life-altering and life-saving treatment, we should take issue with drug manufacturers using shortcut methods, like evergreening and parity pricing, to drive higher margins and capture more market share. These legal practices introduce costly, wasteful low clinical value drugs to the market, catching payers unaware.

Impact: If not managed appropriately, problematic drug pricing practices present unlimited financial threat to employer-sponsored Rx plans.

2. Bundled Pharmacy Arrangements (Remaining Carved-In)

Bundled, or carved-in pharmacy arrangements, put self-funded plans at a cost disadvantage. These plans pay more because of one-size-fits-all benefit plan designs, hidden higher rates, lower rebates, and misaligned clinical decision-making. For non-Fortune 100 companies, carving out pharmacy is a critical component of managing affordable healthcare benefits. Carved-out plans gain critical utilization insight to help manage the drug benefit to lowest net cost, such as drugs driving plan cost, plan spend before and after rebates, and clinical decisions made on the plan’s behalf.

Impact: Staying carved-in with the medical carrier leaves significant dollars on the table, with plans averaging 28% first-year savings in a first-time carved-out pharmacy contract.

CalBizJournal 5 Hidden Costs

Common pharmacy contract pitfalls include being locked into a multi-year arrangement that loses value year-over-year, ignoring rebate yield and how Rx utilization impacts rebate dollars, lack of client-level guarantees, unspecified specialty and limited distribution drug exclusions, and vague drug definitions. An annual contract that contains the best rates, rebates, and terms allows plans to experience continued year-over-year cost savings.

Impact: Misaligned contract terms cost plans an average of 14% per year.

Inadequate Clinical Oversight

To ensure employers are not overspending on inappropriate prescription drugs, they need data-driven clinical strategies that address their plan’s specific risk areas and monitor for appropriate Rx utilization. Implementing targeted clinical strategies that won’t jeopardize member access to needed medication helps plans stop paying for drugs that don’t matter to preserve funding for those that do.

Impact: Not having a comprehensive, targeted clinical solution in place costs plans up to 10% every year.

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Poor Member Experience

In today’s competitive job market, it’s imperative that employers offer an attractive benefit package that ensures employees and their dependents have access to the most clinically appropriate, cost-effective prescription drugs available. It’s equally as important that members have access to a customer service team staffed with compassionate, knowledgeable people who treat them with respect and deliver a personalized service experience to resolve their benefits questions on the first call. Doing right by the employees means improving benefits value, not settling for subpar service.

Impact: Poor service has unacceptable human implications and results in lower employee satisfaction, higher turnover, and a greater volume of complaints to HR.

Are you paying too much for pharmacy benefits? Find out how RxBenefits and the carved-out PBO model can help you lower costs, optimize care, and improve service. rxbenefits.com/pbo

Nathan White, chief client officer, joined RxBenefits in 2017 with more than 18 years of experience in pharmacy benefits client consulting, account management, and medication compliance and safety with both CVS Health and OptumRx. Nathan’s successful career is fueled by his passion for helping benefit consultants and clients cut through the complexity of the pharmacy ecosystem. He utilizes data to help them make intelligent pharmacy benefits decisions and develop tailored solutions that meet their unique needs.

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Nathan White, Special to California Business Journal

Nathan White, Special to California Business Journal

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