4 ways health plans help control prescription drug costs

Because many of the dollar amounts reported on cost increases are so staggering, health plans and pharmacy benefit managers (PBMs) are working together to address increasing drug costs. Here are four measures aimed to control premium and out-of-pocket insurance costs and help manage prescription drug costs.

1. Supplemental reporting and analysis

PBMs like CVS Health now report out on a quarterly basis to their health plan partners on trends from their whole book of business. This helps their health plan partners to better understand how their members compare to national trends, which in turn, offers more in-depth data to analyze when updating their formulary lists. A formulary is a list of prescription drugs, both generic and brand name, used by a health plan or PBM to identify drugs that offer the greatest overall value.

2. Utilization management programs

Health plans use utilization management programs, like step therapy, to offer members lower-cost medications before trying more expensive treatments. Within the step therapy model, health plans and PBMs often work with clinicians, like doctors in the plan’s provider network, to ensure members can maintain the best health possible with the most affordable drugs on the market.

More and more, health plans are collaborating with PBMs to introduce programs that also support better compliance for medical conditions like diabetes. By working with drug manufacturers, PBMs can offer free or reduced cost supplies, such as insulin strips, and use technology to have members electronically report their glucose levels in real time. These programs save members money and offer personalized, easy to access support, resulting in improved quality of life for the member and helping to avoid higher costs in the long term.

3. Moving specialty medications from a medical benefit to a pharmacy benefit

Health insurance companies are starting to change the way they categorize coverage for IV infusions. By covering them as a pharmacy benefit rather than a medical benefit, insurance companies can efficiently manage costs. PBMs are becoming a preferred way to cover IV infusions because they have negotiated rates on these medications. For example, CVS Health (AllWays Health Partners’ PBM) is confident that it has better built-in processes to help ensure evidence-based utilization and the use of cost-effective medications.

Note: When specialty drugs are covered through a PBM, they are still administered by a medical professional. Home health nurses are a valuable new option for patients. The drug may be ordered by the physician and delivered directly to their office, often referred to as “white bagging.”

Unfortunately, what is confusing about this switch from medical to pharmacy benefit, sometimes called a dual benefit, is that health plans today aren’t consistent in how they consider these benefits. Some view as medical, others as pharmacy. Plus, with many employers switching health plans every year or two (whether due to premium increases, service issues, or other reasons), it’s not an apples-to-apples claims comparison.

As more health plans switch this specialty drug benefit from medical to pharmacy, employers should have an easier time comparing new health plan benefit options equally moving forward.

4. Pharmacy rebates

Rebates are a form of price concession paid by a pharmaceutical manufacturer to the health plan or PBM (on behalf of the health plan). These rebates inevitably influence how a health plan’s formulary drug list is updated year-to-year, with higher rebate drugs being preferred brands. Proponents argue that rebates result from vigorous negotiations that help lower overall drug costs.

This short video by the Kaiser Family Foundation helps explain drug rebates in a simple yet interesting way. For a more detailed overview of how rebates work, Milliman released this comprehensive primer in 2018.

Looking ahead: Innovation needs to be affordable

When we look at the pharmaceutical breakthroughs in recent years, like when Gilead Sciences introduced Sovaldi and Harvoni to cure Hepatitis C, it’s phenomenal. The initial costs for these medications were also phenomenal: over $80,000 for a course of treatment. The balancing act for health plans, PBMs and employers is real. Until we have a way for patients to get the new drugs they need without breaking the banks of all involved, there’s still more to be done to make these great innovations accessible.

Change doesn't stop here

Whether the future of affordable prescription drugs is in the hands of  health plans and PBMs working together to develop programs that help offset or control costs, or legislation that brings greater transparency to the market, it's clear there’s much more to come in our country’s discussion of pharmacy costs and health care benefits.