Prescription drug costs continue to be a major component in a plan sponsor’s overall healthcare budget. Controlling costs means taming their escalating prescription drug expense, and working with a plan’s Pharmacy Benefit Manager (“PBM”) is an integral strategy. At WBC (www.wbcbaltimore.com) we recognize how important this relationship is and continue to monitor the changes in the PBM world that impacts their ability to be effective cost containment agents. Here are the Top 7 PBM Trends you can expect to see in 2015:
1. Specialty Drugs – Specialty continues to surpass all of the earlier predictions regarding how big a portion of a plan sponsor’s drug spend it will represent. Current trends have specialty equaling 50% of drug spend by 2018. The PBM that can articulate and demonstrate the most effective specialty strategy will be the long-term market segment winner! Prior authorization and quantity limits are a must for any specialty management attempt!
2. Risk Stratification – As a part of the specialty strategy, plan sponsors will need to decide whether to limit certain super-expensive drug therapies to only the sickest patients. Risk stratification and the resultant patient warehousing enables a plan sponsor to channel finite resources to meet their member populations’ most dire needs. We’ve seen this with the budget-busting expense in treating Hepatitis C. Several states have adopted risk stratification for their Medicaid programs.
3. Formulary Exclusivity – A formulary is a list of preferred and non-preferred drugs that will be offered under a PBM’s list of covered drugs. A drug’s position on a formulary greatly influences its ability to capture market share in a specific therapeutic category. PBMs are becoming much more aggressive in eliminating a drug manufacturer’s competitor products in exchange for more favorable pricing and enhanced rebates. We’ve seen Express Scripts, CVS Caremark and a number of others adopt proactive formulary exclusions that will only escalate in the future.
4. EGWP – The Employer Group Waiver Program (“EGWP”) has been a greater cost savings to many plan sponsors who offer retiree medical coverage when compared to their use of the Retiree Drug Subsidy (“RDS”). 2015 will be a blow-up year for EGWPs and we believe it will represent 75% of the retiree drug market place for those plan sponsors. Now’s the time to be reviewing proposals and keep in mind that it takes about 6 months of lead time in order to effectively implement the change.
5. Generic Pricing Comparison – 2014 saw a huge spike in the pricing of many generic drugs. Keep in mind that many generics have 8 to 10 different manufacturers and that generic drug pricing can have a significant range in unit costs. Comparing unit cost pricing of generics will become an important cost containment tool. Remember that a stated discount off of AWP means nothing when trying to compare costs between PBMs. An 80% discount off of a $75 prescription is more expensive than a 73% discount from a $50 drug.
6. Clinical Program Evaluation – PBMs are trying to enhance their value to their clients by providing a long list of clinical management programs. These can include step therapy, compound management, medication therapy management, prior authorization, fraud, waste and abuse. A plan sponsor should have their PBM and/or consultant assess and evaluate the actual value and impact of these programs prior to adoption. Not all programs are equal and need to be compared.
7. Contracting – The PBM services contract can still be a nightmare for unwary plan sponsors. The sketchy definitions and potential pricing disconnects often times leaves the plan sponsor frustrated and confused, and worst of all, paying significantly more for their plan’s prescription drugs then they thought! So-called “transparent” contracting is bleakly opaque at best. Never accept the standard PBM contract since it is written with language that enables the PBM to apply interpretations that disadvantage the plan sponsor.
More to come throughout the year on the latest trends, business practices and events that impact your pharmacy benefit programs!