Pharmacy Benefit Management

Did you know that prescription drug spending in the United States is projected to be $445 billion in 2015?

While new medications have provided significant benefits to many — and increased the productivity of many workers — the continued pace of cost increases will be a burden to employers and employees alike.

Trend: An Increasing Share of Your Benefit Dollar to Prescription Drugs

Private health insurance spending for prescription drugs has moderated somewhat, with the growth in utilization of many generic drugs. Offsetting this impact has been the dramatic increase in the introduction of 'specialty' drugs. Overall pharmacy trend is driven by several factors:

  • Increasing utilization as pharmacological solutions emerge, new optimums are established for certain measures of health, and patient expectations change.

  • Changes in the mix of drugs used, including a surge of new generics as blockbuster brands lose patent protection, growth in development of biotech drugs, and promotion of new brands directly to the consumer.

  • Price inflation, reflecting manufacturer pricing, was offset by the recent wave of new generics.

Question: How is your Pharmacy Benefit Manager (PBM) improving patient results?

We begin by reviewing current pricing terms and plan design. We compare plan performance on selected metrics to benchmarks. We evaluate ways to achieve improved plan performance, such as structuring cost share for appropriate member contribution; creating incentives for members to be cost conscious; and implementing clinical programs that contribute to quality because quality and cost are inextricably linked.

Question: What should we look for in our Pharmacy Benefit Manager's Clinical Management Programs? Clinical management strategies should be based on a combination of safety, appropriateness, and financial concerns.

  • Appropriately designed clinical management strategies can serve as an independent check on prescribing patterns, a key component of national recommendations to promote patient safety.

  • Today, increasing numbers of drugs are effective only in patients with certain disease characteristics. Clinical management programs can serve to reinforce use of drugs in the right patients, while avoiding use of those drugs in patients who are not likely to benefit from them.

  • Promoting safe and effective drug use benefit plans directly by reducing costs for treatments not likely to be of benefit and indirectly by reducing costs of managing adverse responses to drugs. A robust clinical management program employs a combination of selected prior authorizations, step therapy, quantity limits, and other strategies to meet the goals above.

  • Properly constructed prior authorization programs assess appropriateness of indication, absence of contraindications, and recommended dose and duration of treatment. Commonly used with specialty drugs, prevention of one inappropriate use can result in savings of $1,000 or more per month.

  • Ideal step therapy programs guide prescribing to less expensive, proven alternatives. In some programs, alternate drug classes are prerequisites while other programs may promote the use of generic alternatives as the prerequisite step. Step therapy programs should be used selectively, where clear alternatives exist that do not put the patient at risk. Savings generated from these programs can vary widely, depending upon construction. In some cases, the impact may be limited to maintaining current levels of utilization instead of watching utilization continue to climb. In other cases immediate cost reductions may be seen equivalent to 10% or more of drug class spend. The design of step therapy programs is a critical indicator for savings projection.

  • Quantity limit programs can be selected to meet the goals of improving patient safety while allowing appropriate access to drugs. As a safety initiative, these programs bring attention to members using drugs in a manner which is unsafe or could potentially worsen the patient's condition. Savings range considerably depending upon the design and selection of drug classes targeted.

Specialty Pharmaceuticals

A growing percentage of new products pending approval before the FDA are biologics or biotechnology agents. New indications for existing biotechnology agents also continue to grow. Strategies to control costs in this area include clinical management protocols and use of specialty distribution channels. Although minor drug cost savings can be achieved with specialty distribution channels, the greatest value is improved patient care through access to these highly specialized pharmacies.

How does your Pharmacy Benefit Manager provide coverage for "specialty" drugs - for the 2% of participants who take these medications, and often constitute 25% of your total pharmacy spending? Will you cover them under your medical plan, or as a rider to the pharmacy benefit? Will you require pre-authorization prior to dispensing?


Several common brand name drugs are slated to be available generically in the next 2-3 years. Strategies to encourage ready adoption of these opportunities are one of the simplest opportunities to reduce cost. Although significant savings may not be immediate, after lapse of any period of exclusivity prices generally drop substantially.

Are the cholesterol-lowering drugs (statins) generating the highest claim cost for your company due to their growing popularity?

  • Did you know that the American Heart Association lowered the recommended LDL level to under 80?

With this announcement, the number of Americans who are recommended to take a statin increased from 32 million to 50 million. Employers should brace for a continued pace of increase in pharmacy-related expenditures.*

Consumer Reports offers a "best buy" summary of statin medications Consumer Reports also has summaries available for other pharmaceuticals, including nonsteriodal anti-inflammatories (NSAIDs) and proton pump inhibitors (PPIs).

Targeted Therapies

Pharmacogenomics is evolving science that is increasingly providing physicians tools to personalize drug regimens to the individual patient. Based on knowledge of the genetic profile of an individual, this technology can eventually allow greater individualization of care so that risks of adverse effects is reduced, doses are more exact for the individual, and likely responders to the treatment can be identified. Current applications of this science can be found in treatment of cancer and heart diseases.

Contact the pharmacy experts at C.M. Smith to discuss your pharmacy program. We can help make sense of a complex and expensive benefit, and improve value for your covered employees and dependents.

* - Scott Levin Co.