Pharmacy insights


Benchmarking (ben(t)SHmärking) is defined as an evaluation process used to compare (something) against a standard. HORAN leverages benchmarking as a diagnostic tool to help build a strategy focused on defining an employer’s current state and actions to consider maximizing the benefit structure and expenditures for every client.
This benchmarking report is the second in a series of data resources. The first chapter, released in August 2022, focused on Plan Renewal Insights. The data in this chapter looks at three core areas related to pharmacy, all designed to support growth and efficiencies in health plans:
1. Drug Spend As A Percentage Of Total Spend Pharmacy spend is a major contributing factor in the overall health of the U.S. population. According to a report from The American Journal of Health-System Pharmacy, overall pharmaceutical expenditures grew 7.7% in 2021, totaling $576.9 billion. Perhaps it is the result of COVID-19, combined with the rise of specialty drugs, but the exorbitant costs continue to impact employers.
An effective cost containment strategy means examining medication options that allow employees to effectively treat their conditions, while considering options such as rebate programs or mail order pharmacy benefits.
A PBM manages prescription drug benefits on behalf of a health insurer. There are multiple options for partnering with a PBM, and it can be carved into a carrier plan or carved out.
Pharmacy claims costs are rising steadily at a rate of 6.5% per year since 2018, with concentrated increases among more expensive drugs.
Ensure that the most effective and least expensive medication is a plan member’s first choice. Employers can impact behavior by designing an effective pharmacy benefit, implementing utilization management programs and deploying employee education.
2. Don’t Leave Any Money on the Table
Complete a thorough review of your pharmacy contract, formulary and network to optimize your spend.
The pharmaceutical environment is influenced by innovation, legislation, rising costs and lack of transparency. This means constant change that can impact your plan, your employee experience and your cost.
Medication compliance plays a critical role in pharmacy cost containment and the overall health of your employee base. Adhering to medication refills and directions can help employees better treat chronic and acute conditions alike, reducing inpatient expenses and overall costs for patients and employers.
Between 2018 and 2021, drugs that cost more than $1,000 per script increased from 45% of the total pharmacy spend to over 60% of the pharmacy spend. While not all drugs over $1,000 are considered specialty medications, many are.
Less than 2% of population use specialty drugs, but they account for 51% of total pharmacy spend.
Average annual cost of specialty drugs is $38,000 compared to $492 for non-specialty drugs.
2/3 of medications introduced to the market over the next 5 years will be specialty products, up from 61% in the past five years.
medications were initially manufactured to treat rare conditions but with advancements in science and technology, specialty drugs are now treating both complex diseases and more common chronic illness, like asthma and eczema.
The Pfizer
covid-19 drugs
These drugs represent less than 1% of total pharmacy spend, meaning
is further proof that specialty drugs continue to drive costs, but generic drugs used for common conditions are far more prevalent
most
AMLODIPNE BESYLATE
SODIUM
HCL
Conditions treated by these medications include high blood pressure,
the low cost of certain medications
treat chronic conditions,
found that individuals with unmanaged high blood
cost three times more annually
per year in
Family Foundation, individuals with diabetic
employers
preventive medications
no cost to improve access, increase adherence
incentivize employees
expensive
Biosimilar: Biosimilars are emerging and are an approved version of the “innovator” drug that are designed to have the same clinical effect as name brand options, and bring pricing relief when patents expire. Biosimilars are expected to deliver $38+ billion in savings from 2021 to 2025.
Carved In: The employer contracts directly with a medical carrier for both medical and pharmacy benefits. There is no direct relationship with the PBM.
Carved Out: The employer contracts directly with the PBM and medical carrier separately. There is a direct relationship with the PBM.
Discount: A price reduction negotiated with a pharmacy by the PBM.
Formulary: List of medications covered under the plan. Some plans may not cover certain medications. Most carriers offer multiple formularies.
Generic Medication: Generics are required to be the same as a name brand medicine in dosage, safety, effectiveness, strength, stability, and quality, as well as in the way it is taken.
Narrow/Tiered Network: Carved out anchor pharmacy (such as CVS or Walgreens) to obtain better discounts and pricing for the plan and its members. Major chains and some independents remain innetwork.
Rebate: Form of price concession paid by a pharmaceutical manufacturer to the PBM, which may or may not be passed through to employer.
Specialty: According to the National Association of Specialty Pharmacy (NASP), “a specialty drug is more complex than most prescription medications and can be a biologic or traditional drug. The complexity may be due to the drug itself, the way it is administered or the condition it is used to treat.”