Strategies to reduce Rx costs

Growth in U.S. health insurance costs has again outpaced the rate of inflation and growth in workers' wages, according to the Kaiser Family Foundation.

Employer-sponsored health insurance premiums grew 7.7% between 2005 and 2006, whereas the inflation rate was half as much at 3.5% and wage gains held at 3.8%, according to KFF.

An answer for plan sponsors wanting to manage escalating health care costs while protecting plan members' benefits can be found in three proven tools for managing drug spending: increase the use of prescription generic drugs, control the costs of specialty drugs and expand the use of prescription home delivery.

Generic drugs

The cost-savings opportunity of generic drugs stems from the large number of brand drugs losing patent in 2006 and beyond. There is an estimated $50 billion pipeline of brand drugs going generic through the rest of this decade.

While many employers already are on the generic bandwagon, there still is a huge opportunity to realize savings without ever compromising health outcomes. For every percentage point increase in the generic fill rate, there is a corresponding 1% decrease in pharmacy spending. Increasing generic utilization saves employers and employees money because, on average, a generic drug costs $60 less than a brand name drug.

Generic versions of brand medications are required to contain the same active ingredients as their branded counterparts, thus offering the same clinical value. Substitution of FDA-approved generic medications for their identical brand drug is widely supported by law, regulation and benefit design. Unless the physician indicates otherwise, it happens automatically more than 95% of the time at U.S. pharmacies.

The opportunity to use generic drugs is frequently still available, even when a generic equivalent is not available. Often times a lower-cost therapeutically equivalent alternative medication is available with a clinically comparable result to the brand. A 2005 study by Express Scripts showed that in just six major drug classes, there was a potential to save $25 billion nationally by utilizing generics in clinically appropriate settings. The savings can be achieved without shifting costs to employees by simply substituting generic alternatives for more costly brand drugs.

Specialty pharmacy

Specialty drug costs reached $40 billion in 2005. These costs are expected to more than double in four years to $90 billion, which is three times faster than the growth rate for traditional pharmacy. This dramatic cost increase translates to specialty drugs accounting for 28% of total drug spending by 2009, providing a unique and important role in controlling health care costs.

Specialty pharmacies provide coordinated delivery of specialty drugs to treat complex conditions such as cancer, multiple sclerosis, rheumatoid arthritis and hepatitis C. The specialty pharmacy also provides management of multiple aspects of a patient's treatment, which can include instruction on the self-administration of a therapy; clinical support; assistance with billing and reimbursement; and educational materials, including online information portals.

Employers wanting to effectively balance the great potential of specialty medications with care management and cost challenges can do so by focusing on three strategies.

First, increasing patient compliance leads to lower treatment costs, reduced medical costs and enhanced productivity. Second, plans that limit the size of pharmacy networks handling specialty drugs can reduce costs up to 10% when adopting an exclusive network. Finally, working directly with physicians to ensure appropriate treatment and proper dosage can improve care and create significant savings.

Home delivery

Home delivery pharmacies are a proven option for employers wanting to reduce health care costs. A study by the Pharmaceutical Care Management Assn., which represents PBMs, projected home delivery service will save $85 billion on prescription drug costs over the next 10 years.

Unfortunately, consumers are not taking full advantage of this cost-saving tool. If all prescriptions used to treat chronic health conditions were to flow through home delivery pharmacies, the cost savings would nearly double over the next 10 years to $167 billion and home delivery service would jump from 20% to 50% of all prescription drug expenditures, according to the PCMA.

In addition to the cost-savings benefit, home delivery offers greater safety due to lower dispensing error rates compared with the retail environment. With a high level of automation, home delivery is the safest and most effective way to get medications to patients.

Implementing drug trend management strategies such as increasing the use of generics, controlling specialty drug costs and maximizing home delivery use enables employers to manage escalating health care costs and protect the health care benefits for plan members.

Dr. Ed Weisbart is chief medical officer at Express Scripts Inc., a pharmacy benefit manager, in Maryland Heights, Mo.