Battling Rx price increases: How to cut pharmacy costs in half
Paid charges for injectable drugs have climbed to $584.5 million, roughly 8.5% of the total paid charges for high-cost claims, according to a 2018 Sun Life research report on claims and injectable drug trends.
While this is just a piece of prescription drug cost, John Sbrocco, healthcare consultant at Questige – a benefits consulting firm out of Madison, New Jersey – is pulling the curtain back on why pharmaceutical drugs are so expensive and how companies can save thousands of dollars on their prescription plans.
During his recent webinar on pharmacy spending, Sbrocco breaks down the reasons why companies are getting killed on their prescription drug spend, where to spot negligence and what strategies to implement that cut costs.
The first step to cutting these costs lie with the pharmacy benefit manager. If an employer is working with CVS caremark, Optum or Express Scripts, Sbrocco says employers need to leave them immediately.
“You won’t beat them at their own game,” Sbrocco says. “I don’t care if you have a PBM consultant, preferred pricing or a coalition because you will not win.”
Also see: “Million-dollar medical claims increase by 87%”
Through spread pricing, hidden rebates, manufacturer’s revenue and kickbacks, Sbrocco says all of these interests are aligned with the pharmacy benefit managers, not the employer. He made the remarks during his webinar, “Flip the Script on RX Costs: How to Cut Your Pharmacy Spend in Half.”
“Employers let the legal drug cartels manage employee prescription dispensing and the cost of prescriptions,” he says. “A lot of [employers] should probably be embarrassed for what you’re allowing to happen to their employees; not just from a price standpoint, but from a health standpoint as well.”
To understand how far drug pricing has changed prior to the passing of the Affordable Care Act, Sbrocco used Acthar Gel – an adrenocorticotropic hormone used to treat relapsing multiple sclerosis – as an example of a drug that went from $40 per vial in 2001 to $40,000 per vial in 2018.
“How do price hikes like this occur?” Sbrocco asks. “The drug manufacturer buys out the competition allowing him or her to charge whatever they want. There might be a fine involved for making such an egregious price increase, but the money the drug manufacturer is making is 25 times the fine.”
When Express Scripts was questioned on the increase in price on these drugs, they responded by saying they are not contractually obligated to contain the employer’s costs leading brokers like Sbrocco to ask if the employer, or their broker, is even reading their contracts.
Many of the large insurance carriers, such as UnitedHealthcare, list on their websites that the terms of the drug cost are determined by the drug manufacturer. This allows carriers to determine what is needed to maximize their rebates for the drugs the PBM signs off on.
These rebate amounts are determined by the exclusivity of the drugs provided by the carrier. If there is only one drug option for treatment the carrier receives a larger rebate. The more drug options the member has the smaller the rebate the carrier receives from the drug manufacturer.
Same goes for the number of restrictions a drug has before the member can acquire them. If the drug requires preauthorization the rebate is reduced.
Employers are trying to beat the PBMs at their own game by attempting to claim the rebates for themselves by including it in their contract. However, Sbrocco says the pharmacy benefit managers have found a way around that contract addition as well.
“If a drug like Harvoni – used to treat Hepatitis C – costs $94,000 and the PBM makes $30,000 off the manufacture revenue, the pharmacy benefit manager is more than happy to give up a thousand dollar rebate if they are collecting the revenue from another source,” Sbrocco says.
These forms of revenue can take the form of administration fees, data processing fees, grants, access fees, selling employer information to drug manufacturers or basically any money not identified as rebates.
“The contract should not say the employer receives 100% of rebates, but instead say the employer receives 100% of third party revenue,” Sbrocco says, even though the PBM is unlikely to agree to these terms.
The name brand is not always the best option for the employee. Sbrocco says he is finding lower cost equivalents through brand to brand alternatives, brand to generic alternatives and generic to generic alternatives in order to find the best price with the highest quality.
If there is a lower cost drug on the market than the one an employee is currently taking, Sbrocco says his team will send a letter to the doctor notifying them of this different drug. Once the drug is approved by the doctor, he then contacts the pharmacy to inform the member of this lower cost drug. The employee can then decide if they want to continue using the same name brand drug or the more cost effective alternative to see if it provides the same result.
In the case of specialty drugs, they reflect 20% of pharmacy spend for employers and Sbrocco says it is going to increase to 50% in the next few years. The prices on these drugs can range from $1,000 per month to $100,000 per treatment.
“To reduce cost on these drugs there needs to be a neutral and unbiased third party conducting preauthorization on these drugs for the employer that does not receive incentives for just refilling the medication,” Sbrocco says.
Taking baby steps is advised when moving up to a specialty drug. Instead of jumping right to an injectable, start with an oral pill to see if that treats the employee first.
“Big pharma gives away almost $5 billion in meds, for free, every single year,” he says. “There is a matrix of opportunities to source these meds at little to no cost. We’ve been tapping into the resources for many years and we have the stories and the case studies to prove it.”