The cost of prescription drugs has been rising fast. Driven by novel and improved treatments for illnesses such as hepatitis C and cancer, fewer drugs coming off patent than in prior years and our aging population, drug benefits costs have been increasing for several years.
For employers offering drug benefits plans, this is a formidable challenge. Not surprisingly, employers are focusing more on cost containment as drug prices continue to push premiums up. But implementing cost-cutting measures can be a daunting task. Reducing benefits leads to employee dissatisfaction. And the burden drug costs put on employees — in a time of relatively low wage growth — could have a negative impact on their morale and an employer’s ability to attract and retain them.
There are ways to address rising costs and engage employees. But doing so means employers need to focus on creative plan design and frequent, consistent and relevant communication with plan members.
Engagement in action
One large Quebec company did just that. Its drug benefits plan covers almost 10,000 unionized members (both active employees and retirees) as well as their dependents. In total, more than 25,000 people are insured under the plan.
Since 2009, detailed drug utilization reviews for the company’s benefits plan found more than 75% of its costs are associated with prescription drug use. With drug costs rising, premiums increased by more than 8% annually in a four-year span. So plan members — who are responsible for paying the largest portion of the cost of coverage (more than 75%) — were eager to find ways to contain premium increases. (Every year, 225 representatives get together to look at the benefits plan and find solutions to improve it.)
The union needed to balance the health needs of its employees with sustaining program costs. So, three years ago, the union made changes to the group insurance plan, providing incentives for insured employees to choose more cost-effective medications.
In one initiative, the revised plan offered a higher reimbursement percentage for generic drugs. And the plan replaced the traditional annual deductible with a $6 per-script deductible for multi-source brand drugs (brand name drugs whose patent has expired so interchangeable generics are now available for substitution) or a $9 per-script deductible for patented brand drugs. In short, when plan members purchased generics, they paid less.
None of this would have worked, however, if employees hadn’t fully understood what the new plan entailed and its effect on them. The employer adopted a robust communications program across all available media: intranet, print communications (including documents sent to employees’ homes) and short videos. The employer communicated with plan members at least three times each year.
The first of those communications began six months before the company implemented any changes. Plan members were informed of the upcoming revisions, receiving both paper and online communications.
How to save has been a key ongoing theme in the communications program. For example, a list of new generics available is communicated to plan members annually. To avoid having to pay the per-script deductible every month, employees are encouraged to request three months’ worth of medications from the pharmacy. This helps save on dispensing fees, reducing per-script deductibles to quarterly instead of monthly.
Employees’ real-life examples of savings tips — for instance, using generics instead of brand name drugs — are also shared with members based on statistics specific to the group.
Every fall, a personalized communication goes out to more than 500 insured employees, informing them that a generic version of their regular medication is available. The purpose is to tell them there’s an interchangeable generic drug they’ll pay less for out of pocket that will help the plan’s overall health (and, therefore, help keep premiums down).
This approach has been highly effective. After the first targeted communication, more than 55% of members opted for the generic version of their medication on their next purchase, leading to plan savings of more than $250,000.
Backed by a strong communications campaign, the changes to the group plan have provided several significant benefits. Following implementation at the beginning of 2012, premiums did not increase for two years, and members subsequently received a premium holiday for two pay periods in 2014.
Rising drug costs, meanwhile, have been significantly mitigated. Before the changes to the plan, generic drugs comprised less than half of members’ drug purchases. Three years after implementation, the share of generics has risen to two-thirds.
Results, in terms of premium cost and generics utilization, are now significantly better compared with other benefits plans in different industries in the same province. But perhaps the best result about the new plan is, a large part of the savings have been reinvested, increasing the reimbursement — that is, doubling the maximum annually — for preventive care such as psychological services.
As this Quebec organization shows, benefits cost containment can be done effectively. Employers simply need to be creative, collaborative and open — and commit to communicating with plan members every step of the way.
Charles-Antoine Villeneuve is a vice-president and the Eastern practice leader with Aon Hewitt’s health and benefits team.
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