The healthcare landscape has drastically evolved since employers started implementing drug plans, but employers—and their consultants—have been slow to adapt to those changes, and their drug plans are now paying the price.
“Changes in the market have been substantial, but plans haven’t changed too much. We need to evolve the plans more. Employers need to look at their plans. What is it there for? What do you want to cover?” said Michele Bossi, leader of Buck Consultants’ health and productivity consulting practice, at the Canadian Pension & Benefits Institute fundamentals session on drug plan management this week.
She pointed out that people used to take drugs because they were sick and that most prescriptions or treatments were for acute illnesses. Few claims exceeded $5,000 per person a year. Now, it’s a different story. With the number of “lifestyle drugs” on the market—birth control, erectile dysfunction drugs and fertility medication, for example—in addition to medications that treat chronic conditions, claims per person frequently exceed $5,000.
So what are plan sponsors to do?
Bossi suggests taking a hard look at your plan and making some serious decisions. How do you want to cover lifestyle drugs? Will you have a deductable? Who gets treatment with biologic drugs, and for how long? Do you need special authorization for certain drugs? Do you do have automatic substitution for generics?
Bossi explains that the goal of a benefits program is to have healthy, productive employees—but what about spending $50,000 to prolong a life for a few months? “It’s a terrible question to ask, but it’s one that employers are being asked,” she said.
“Employers really need to define their benefits philosophy,” she continued. “What do you want to offer? Is it a perk? Do you want to cover both the same way?”
Generics is one place employers could start. Mike Sullivan, president of Cubic Health, also presenting at the session, said that currently, most plans have only a 30% utilization rate for generics. So, although plan sponsors may have been expecting big savings with the new legislation around generic pricing, it likely won’t happen.
Practical steps
“If [drug plan management] matters, why are so many plans poorly managed?” asks Sullivan. “A lack of information. People haven’t been taking advantage of the information that is available to them.”
Sullivan advises plan sponsors to look at their drug plan data. “You can do so much with the information. You can see the entire health profile of your group with your drug plan information. If we use it more and it becomes commonplace, I’m convinced there will be some interesting changes in place.”
Another step that both Bossi and Sullivan suggest plans seriously consider is moving to electronic claims if they haven’t done so. For plans that are relying on the “shoebox effect” to keep costs down, both Bossi and Sullivan say moving to electronic claims will pay off in the long run.
“If you are on a paper base claim system, you may not have the same control over costs,” said Bossi. “Some people don’t submit claims when they are paper, but generally, in the long term, there is better control.”
“People think their claims are going to go up 15% to 20%,” said Sullivan. “In the analytics we have done, we have never seen that happen. Realistically, more like 1% to 3%.”
Take-away
All plan sponsors want to save money in their healthcare plans. The first step is to look at the plan and then consider implementing or making decisions on the following items—if they will work for your plan population, of course.
- implement dispensing fee caps;
- require generic substitution where appropriate;
- move to electronic claims;
- add deductibles but also have out-of-pocket maximums; and
- decide how to cover chronic diseases.
“With better management of the drug plan, you can have significant opportunities to enhance other areas of the benefits plan and do some interesting health and wellness,” concluded Sullivan.