If your company’s pharmaceutical spending isn’t a problem yet, look out. Studies show that pharmaceutical costs are rising at three times the rate of medical inflation, and these expenses often account for 30% of an employer’s total health benefits spending. A major reason: The costs are hidden inside contracts written to be confusing so that the pharmaceutical companies can collect extra profits. Instead of blindly overspending on pharmaceutical costs year after year, work to reduce expenses without sacrificing the quality of care your employees receive.
Opportunities Inside Your Current Plan
The biggest savings opportunities on the pharmaceutical side of your health plan are hidden inside your claims data. Your claims data is such a big opportunity for savings, we dedicated another blog post to the topic. Once you sort through your data and understand the impact your pharmacy benefits manager (PBM) and employees have on your over pharmaceutical expenses, you can take strategic steps to lower your overall costs.
Look For Rebates
Although you should receive fairly regular rebates on prescription medications, many PBMs retain these rebates for their own companies. On average, US businesses lose $25-$35 a month per employee on missed rebates, meaning you could miss out on more than $400 per employee each year.
Instead of allowing this trend to continue, check your medication formulary (the list of medications covered under your plan) and see whether the medications your employees receive offer rebates. If they do, contact your PBM to ensure each rebate comes through to your company. In doing so, you may unlock new saving opportunities.
If you don’t have someone in-house with the necessary skills to cover these steps, talk to an advisor for assistance. Because an experienced advisor understands formularies and communicating with PBMs, they can find the best opportunities for your company.
Examine Your Medication Formulary
Many of the medications covered by your formulary are overpriced or ineffective. Instead of keeping them on your plan, consider removing them. If an overpriced medication has an affordable and effective generic available, replace it with the alternative so that your company avoids paying for unnecessary medications.
After your initial analysis, schedule time to review your data each year. Prices change regularly, so medications that may be worth pursuing now could become too expensive in the future. Conversely, those effective medications that are too expensive now could eventually lower in price.
The research is worth the effort. When companies fully commit to optimizing their formulary, we often see them save 10%-40% on employee prescriptions each year. With these savings reinvested back into the health plan, you can reduce its financial burden on your company.
If you’re uncomfortable managing these tasks on your own, work with an advisor. A thoughtful, experienced advisor will work on your behalf to ensure you receive the best deal possible.
Check your data to determine how your employees receive prescriptions and medications. Questions to review:
- Do employees visit doctors who prescribe more medication than necessary?
- Do employees visit facilities that prescribe more medication than necessary?
- Has your PBM secured wholesale prices on medications to keep costs down?
Use the answers to your entire company’s advantage. If employees visit doctors and facilities that offer a higher level of care, there could be less need for prescription medications because the health outcomes from their facilities and physicians are generally better. When employees do need medication, wholesale prices reduce overall expense for your company.
Solving the Pharmaceutical Challenge
Pharmaceutical costs have accelerated out of control across the country, but that does not have to be the case for you. Pulling and analyzing the right data helps your team make plan decisions that halt rate increases and lower prescription costs for your employees. By reinvesting these savings back into your health plan, you can reduce or prevent the annual price increases that many companies across the country suffer each year.