Employers in Wisconsin are locked in constant competition to attract and retain the best talent in the state. Human resources directors want to provide the richest possible benefits, but at the same time, they’re accountable to their organizations to control costs. It’s a fine line to walk, and the rising cost of specialty drugs is making it even tougher.
A study conducted by the AARP Policy Institute found that the inflation rate of chronic use specialty drugs was a whopping 161 percent between 2006 and 2013. Compare that to the general U.S. inflation rate of 18.4 percent over that same period, and it’s easy to see this is no small problem.
What is to blame for the rising cost of specialty drugs?
Many factors contribute to the swelling expense of chronic use specialty drugs, but they can be boiled down to the familiar principles of supply and demand.
First, let’s look at demand. Usage of these drugs has increased significantly in recent years. Express Scripts Trend Report 2015 highlights a 6.8 percent increase of specialty drug utilization from the previous year, compared to a 1.9 percent increase for traditional drugs.
Then there’s supply, or to be more accurate in the case of specialty drugs, the anticipation of supply. Drug manufacturers have limited patents that only protect their products’ exclusivity for so long. When a patent starts waning for a popular brand, manufacturers recognize that competitors will soon flood the market with more supply. They often respond with dramatic unit cost increases.
The result is an untenable situation for employers in which a single member taking specialty drugs can significantly increase member premiums and the cost to insure the entire group. For employers looking to rein in the rising cost of pharmacy benefits, there are some strategies that provide more immediate relief.
Three strategies to combat specialty drug costs
There’s no magic bullet allowing Wisconsin businesses to take full control of pharmacy benefit costs. Best practices call for a little give-and-take between employers and employees. Think of it like this: When it comes to specialty drugs, applying limits to the few can increase access for the many. The following three examples are among the most popular and effective ways to save.
1. Utilization management. This strategy involves putting more aggressive rules into place to govern the use of high-cost specialty drugs. According to the National Business Group on Health’s (NBGH) most recent Plan Design Survey, 74 percent of large group employers have already begun doing this in one way or another. Two of the most effective forms of utilization management are step therapy and prior authorization programs. These popular methods help restrict specialty drug use, but they are being outpaced by the increase in unit cost.
2. Specialty pharmacy. While most employers recognize that required use of a preferred pharmacy for specialty drugs can reduce expenses, they may not be aware of other values it provides. Many of these pharmacies, like those who partner with Security Health Plan, provide financial assistance to members, and can ensure that they’re enrolled in the proper copayment programs. They can also provide further education about the product, monitor adherence, manage side effects and coordinate home delivery.
3. Specialty drug tier. Implementing a specialty drug tier is a highly effective and underutilized strategy to control pharmacy benefit costs. Typically, this requires greater cost sharing by employees, but promoting manufacturer copay savings programs can provide the means to defer additional costs to manufacturers instead. Surprisingly, only 38 percent of NBGH survey respondents said they were employing a specialty drug tier, even though this strategy helps to directly combat the rising unit cost of these medications.
Security Health Plan offers a wide variety of 4-tier cost-sharing options. To date, we’ve helped Wisconsin businesses by implementing many prescription cost-share designs against our existing formularies. That variety gives us the freedom to identify and implement solutions that work for our contracted groups — and their employees.
To learn more about how health coverage from Security Health Plan can benefit your business, visit www.securityhealth.org/cost-share or call us today at 1-800-472-2363.