Prescription drugs are a pressing topic for HR leaders and their benefits advisors for at least two reasons:

  1. Costs continue to rise at an alarming rate, consuming a growing share of employers’ healthcare spending.
  2. Recent federal rules apply to group health plan sponsors. The rules include drug cost and utilization reporting requirements, plus the need to give plan members access to prescription drug price transparency information starting with two products on Jan. 1, 2023, then expanding to all drugs by Jan. 1, 2024.

More than ever, employers need effective strategies and partnerships to address these challenges. Jordan Counts, Quantum Health’s manager of pharmacy services, recently spoke with Shelby Luzenske, PharmD, director of pharmacy at Rx Savings Solutions (RxSS), a leading drug price transparency solution. They discussed the rapidly evolving prescription drug landscape and what self-insured employers should know and do to ensure they are keeping pace and controlling costs.

Q: How would you quantify the challenge prescription drug costs pose for self-insured employers?

A: It’s definitely a headache. In its most recent annual survey of large employers, the Business Group on Health found that 99% consider prescription drug costs an area of concern. Another recent survey showed that more than 60% of employers consider their spending on drugs unsustainable, given cost increases over the past several years. Mercer reported that in 2021 overall prescription costs rose at an annual rate of 7.4% and more than 11% for specialty drugs. There’s a sense that it’s getting out of control. I think self-insured employers are looking at any avenue to make a difference in their cost trend.

Q: What are the main factors driving these continuing cost increases?

A: Obviously, there’s general inflation over time. But new drugs coming to market are entering at higher price points than we’ve seen in the past. For drugs already on the market, typically it’s been the brand-name products where we see most of the price increases. However, in January 2022 we saw about 80% of drug price increases were on generic products. That could be a result of manufacturers looking to maintain demand for branded products by making them appear relatively affordable compared with generics. Meanwhile, I think we’re also seeing a reduced new-to-market supply of generics as manufacturers focus on producing pricier branded products and specialty drugs. So, I think there are a lot of contributing factors.

Q: What role can drug price transparency solutions play in helping employers and their health plan members deal with the situation?

A: We’ve seen a lot of interest in price transparency tools in the last 10 years, and adoption has picked up in the last three to five, in particular. The available solutions for employers to consider can be categorized according to functionality. At the basic level — one that can check the box for transparency rule compliance — is a tool that allows a member to go online, type in the name of their medication, and compare price points for different on-formulary drugs at different pharmacies.

At the other end of the spectrum is a solution like RxSS. It not only allows a plan member to compare prices, but also looks at what clinical alternatives might be available within the formulary to bring down a medication’s cost. By that we mean options such as changing the dosage form from a tablet to a capsule. Or looking at switching to a different active ingredient within that same class of medication. Or checking to see whether a medication might be one on which the patent has expired, and the manufacturer is now selling that same branded product at a generic price point. At any given time, there are a few hundred of those FDA authorized generics on the market.

All these clinically appropriate possibilities — and there are more than 38,000 in our engine — can help bring down the cost of a given prescription therapy. The key is putting that information at a consumer’s fingertips and giving them the ability to act on it with minimal friction or barriers.

Q: In 2021, the Consolidated Appropriations Act included new drug cost and price reporting and transparency requirements. What should self-insured employers be doing now to comply?

A: The final rules that emerged from the act include a couple of primary items self-insured employers should be focused on. If they aren’t already, HR and benefits leaders should work closely with their third-party administrator, PBM and benefits consultants to understand those detailed requirements and decide how best to meet them.

One key requirement is that employer-based health plans submit and publish data about their prescription drug costs and utilization. Another major requirement is that self-insured employers provide a price comparison tool, available online, that lets members compare price and cost-sharing details for a wide array of medical services as well as prescription drugs. The rules specify that by January 1, 2023, the tool include 500 medical services and two common, high-cost medically administered medications. By January 1, 2024, all medical services and drugs need to be included. Those deadlines are coming up very soon.

Q: What features should employers prioritize when choosing a drug price transparency solution?

A: I think there are at least three. First, there’s the member engagement element. Is it a basic tool that allows a member to compare prices at different pharmacies, or is it a solution that will proactively engage the member when a cost-savings opportunity has been identified for a medication they’re taking? Second, there’s the level of clinical sophistication. Does the solution guide a member through the many alternatives that exist for potentially reducing a prescription’s cost? And third, does it come with an ROI guarantee? Are you going to recoup what you invested? Focus on those criteria and it should help you choose a highly effective drug price transparency solution.

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