By Lerone Sidberry
When it comes to what’s contributing the most to increases in employers’ health benefits programs, it will come as no surprise that pharmacy drugs rank as one of the top three cost drivers by eight in ten U.S. employers.
There’s a puzzling aspect to this ongoing trend, though. When asked to identify cost management strategies, employers typically don’t mention what may be the simplest and least disruptive way to reduce their benefit costs: re-negotiating their pharmacy benefit management (PBM) contract.
The latest survey by the National Business Group on Health on healthcare strategy and design found employers expecting their total cost of providing medical and pharmacy benefits to rise 5 percent this year for the fifth year in a row. The total average per employee cost of healthcare is expected to rise to $14,156, with employers covering nearly 70 percent. And with new, high priced drugs coming onto the market, it’s no surprise that pharmacy is ranked the top cost driver by 26 percent of survey respondents.
Yet pharmacy is the least analyzed component of healthcare benefits. Most people have no idea what’s under the hood of their PBM contracts – they’re typically in place for years without anyone taking a look at them. Yet, we know that when experts negotiate with the current pharmacy benefits manager, the terms can easily be improved upon.
And there has never been a better time for employers to look at their general and specialty pharmacy strategy to see if they have optimal pricing terms and other savings opportunities.
In fact, the contract reviews we provide to clients on a complimentary basis have resulted in savings to employers of between 6 to 35 percent, with average annual savings of 20 percent. That’s savings attached to moving one pricing contract to a more aggressive one..
Employers should ask themselves three questions about their current pharmacy benefits to determine the potential for savings:
- Do I know the terms of my contract and if they are optimal in today’s market? (If your medical carrier is managing your pharmacy benefits, you may not know the specific contract terms. And if you haven’t negotiated the terms significant savings are possible.)
- Do I have a PBM contract that guarantees pricing terms and rebates? Is it auditable, with a recovery process for any shortfall in performance?
- Am I confident that specialty drugs, like those for hepatitis C, are being properly priced and managed by my current provider?
If you answered ‘no’ to any of these questions, it makes sense to perform a review or audit of your pharmacy spend. If you haven’t had your PBM contract reviewed in the last 12 to 18 months, , you could be missing out on a tremendous opportunity to manage your organization’s drug spend.
Visit our website and explore how a PBM audit can help you control your prescription drug costs.
Your HUB International employee benefits team is ready to help your business review and re-negotiate your pharmacy benefits contract.