To reduce costs, plan sponsors need to eliminate prescription drug waste
Public and private drug plans provide coverage to millions of Canadians each year. Organizations that fund these plans often view prescription drug coverage as an integral component of their strategies to attract and retain employees. As the cost of prescription drug coverage continues to rise, some plan sponsors simply shoulder the extra cost; others ask employees to pay a greater share. Unfortunately, no matter who ends up paying more, the affordability of drug plans becomes more tenuous.
This situation has motivated many plan sponsors to implement caps or controls, leaving employees who depend on prescription drugs to subsidize an increasing portion of the cost of their medications. A recent study—Cost-control Mechanisms in Canadian Private Drug Plans, conducted by the University of British Columbia and McGill University—found that more than 16% of employees now have annual or lifetime maximum drug coverage limits on their plans, and this number is growing.
The unfortunate reality is that this cost shift to employees wouldn’t be necessary if plan sponsors could reduce the huge amount of money currently being wasted within their drug plans (i.e., spending more without improving health outcomes). The Express Scripts Canada 2013 Drug Trend Report found that, in 2012 alone (the most recent period for which these statistics are available), private plans wasted up to $5.1 billion in drug spend—roughly one-third of the $15.4 billion spent by private plans on prescription drugs in 2012. In other words, $1 for every $3 spent on drug benefits by the average Canadian plan sponsor goes to waste.
To maximize the value of a prescription drug benefit, plan sponsors must reduce three types of waste wherever possible.
1) Channel waste occurs when an employee uses suboptimal dispensing intervals for maintenance medications and does not go through the most cost-effective distribution channels (for example, refilling a maintenance medication for chronic conditions more frequently than is clinically necessary). According to the Express Scripts Canada 2013 Drug Trend Report, the estimated cost of channel waste was up to $1.2 billion in 2012.
2) Drug-mix waste occurs when an employee uses a higher-cost medication that generates no additional health benefits over a lower-cost medication. The report indicates that the estimated cost of this waste in the private sector drug spend was up to $3.9 billion in 2012.
3) Non-adherence waste occurs when an employee does not take his or her medications as prescribed. Consequences can include a decline in health and increased treatment costs, which can lead to absenteeism and additional drug therapy, physician visits, hospital admissions and disability costs. Non-adherence is a major problem in Canada. According to Express Scripts’ research, only 71.8% of high blood pressure claimants are adherent to their medication, only 70.6% of high cholesterol patients are adherent, and just 64.5% of diabetes patients are adherent.
When an employee uses pharmacy services that are more expensive, or takes a medication that costs more but offers no clinical advantage, waste ripples through the system. Poor decisions unnecessarily increase costs for both employees and plan sponsors.
But why do employees make poor decisions? Don’t they care about costs and health outcomes? Why haven’t employee communications driven higher levels of engagement and informed decision-making? And why haven’t plan sponsors been able to manage waste with plan design and benefit controls?
Express Scripts research shows that the vast majority of patients want exactly what plan sponsors want: healthier outcomes and lower costs. However, the large amount of waste in private sector drug plans proves that there is a huge gap between what employees want and what they actually do. Understanding this intention/behaviour gap—and how to close it—is the key to figuring out what can be done to help employees make better decisions, reducing waste and drug plan costs for plan sponsors.
It isn’t easy for employees to choose wisely. The 2012 Sanofi Canada Healthcare Survey found that only 13% of employees say they understand their benefits extremely well. So it’s also likely that they don’t really understand drug therapy choices or drug pricing. In addition, employees are guided by busy healthcare advisors, who often lack the information, time and motivation to help them make good decisions in a benefits plan context. To make matters worse, people are wired for inattention and inertia, making it very difficult to capture their attention long enough—or at the right time—to change behaviour, especially when it comes to drug benefits.
A New Strategy
The facts speak for themselves: traditional employee communication strategies, combined with current plan design and benefit controls, have gotten plan sponsors to where they are today, with up to $1 of every $3 spent on drug benefits going to waste. Plan sponsors need a new strategy—one that actually helps employees make informed and cost-conscious decisions.
The U.S. drug benefits market provides great insight into potential strategies that could work effectively within the Canadian system. U.S. drug benefits plans—typically managed by pharmacy benefit managers (PBMs)—look much like Canadian drug benefits plans, but they are managed very differently. Unlike the traditional adjudication controls used in Canada—which are applied after patients passively make their drug and channel decisions—U.S. PBMs provide active PBM services: a set of best practices and technologies based on years of clinical and behavioural research that is proven to help employees make better decisions and reduce waste. In fact, in a 2010 study published by the International Foundation of Employee Benefit Plans, an estimated “71% of the U.S. population is covered by private plans that are actively supervised by PBMs, and these more actively managed plans generate average cost reductions of approximately 29%, compared to plans with no PBM support.”
Case in Point
For several Canadian plan sponsors, an active PBM service has enhanced the drug benefit and improved employee decisions, resulting in reduced waste and lower drug benefits costs. Take the example of a large national publicly traded Canadian transportation company with more than 13,000 employees across the country. This plan sponsor identified the need to take proactive steps to reduce the waste within its prescription drug benefits and close the gaps in care.
The company’s HR department had become increasingly concerned about some of the costs related to that program. In 2011, the company received $7.8 million in total pharmacy claims, of which $5.2 million was for maintenance prescription medications—a continuation of an upward trend that the company believed threatened the sustainability of its health benefits program.
The company added an active PBM service on top of its existing benefits plans, with no changes to the core benefits. The Canadian-designed service used several clinical programs and behavioural science strategies commonly used with U.S. benefits plans, modified for use in Canada. These proprietary strategies included active choice, message-framing campaigns, adjudication interventions, real-time patient handling processes and therapy optimization. While these strategies sound complicated and are new to drug plan management in Canada, they were extremely effective and drove significant savings for the plan sponsor with virtually no member concerns.
More specifically, with the active PBM service, the plan sponsor achieved the following results.
• 90% reduction in channel waste Pharmacists worked with patients to establish clinically appropriate dispensing intervals for maintenance medications, which ultimately reduced costs for the employee and the plan sponsor.
• 20% reduction in drug-mix waste Results showed a 7% increase in the use of lowest-cost alternatives, which was achieved through strategies such as targeted campaigns and therapy optimization best practices.
• 20% increase in the proportion of adherent patients [measured via the medication possession ratio (MPR)] Based on drug claim analysis over a one-year period, patients below a certain MPR threshold are deemed non-adherent because they do not have sufficient medication on hand to be adherent. In this case, the MPRs increased by more than 20% for three conditions: high blood pressure, high cholesterol and diabetes.
• 15% in plan savings Overall, the company experienced savings of 15% for the maintenance medication component of the prescription drug plan. One of the most interesting results was the 17-fold increase in employee adoption of the new program, with absolutely no participation incentives. This increase was completely attributable to the effectiveness of the behavioural sciences strategies (including active choice, adjudication interventions and real-time patient handling), which drove member engagement, patient adoption, informed decision-making and cost savings.
Reducing waste within prescription drug benefits plans and closing gaps in care are absolutely critical to help plan members achieve healthier outcomes at lower costs. And the most effective care doesn’t always have to be the most expensive alternative. Research has revealed that the biggest gap is not between what plan sponsors want and what employees want, but rather between employees’ good intentions and their observed behaviour. The key is to unlock these good intentions by using behavioural science, clinical expertise and actionable data to drive better decisions.
Michael Biskey is president, and John Herbert is director, pharmacy and clinical services, with Express Scripts Canada. mbiskey@express-scripts.com; jherbert@express-scripts.com
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