Here’s a story: Nick was offered an awesome new job with “great benefits.” Under his previous employer’s medical plan, his generic drug cost $10 per month co-pay. The first month at his new job, he went in for a refill under his new employer’s insurance plan and was told the cost would be $53.
Thankfully, Nick was savvy and knew that insurance providers have contracts with pharmaceutical companies for certain brands, so they'll direct members to those or to less expensive versions of a drug. He called his new insurance provider.
Nick learned that his new insurance company didn't cover any acid reflux drugs on his medical plan. “Why wouldn't they cover one of the most highly prescribed drug categories?” This is one way insurance companies cut costs. Then he wondered, “Why do I have to pay the full retail rate without any discount through my insurance?” After much time and effort, Nick learned that when an insurance company removes a drug from the formulary, they don't typically pass on any of their negotiated discounts to the insured. Instead of paying $120 per year for his drug, he’s now paying $636.
Does this story sound familiar? If so, consider adding a strong Prescription Savings Program. This inexpensive benefit can be a huge help to employees who are trying to save on their bottom lines.
Here are answers to four common questions as you consider this option to help your employees:
1. How do Rx Savings programs work?
Pharmacy benefit managers negotiate drug pricing from each pharmaceutical company for each pharmacy.
In other words, PBMs negotiate pricing on every drug at every pharmacy, so there are different prices at every pharmacy. As is good business practice, pharmacies negotiate prices depending on their customer base. For instance, Pharmacy A might have a lot of soccer mom customers, so they charge less for Amoxicillin to get moms in their door, but charge a lot for heart medication to recoup the dollars they lose on Amoxicillin. Meanwhile, Pharmacy B might have more elderly customers, so they charge more for Amoxicillin and less for heart medication.
About two-thirds of drugs have pricing that fluctuates. In this case, both locations might have the same average savings, but on very different drugs.
All of this fluctuation makes it hard for a normal American to be a good consumer and find the best price. Most employees just pay the price negotiated by their insurance plan, which may or may not be the best price available.
A Prescription Savings program gives another option and provides “behind the scenes” transparency to employees.
2. Who are Rx Savings programs good for?
A Prescription Savings program is good for
· self-funded employers because it keeps some of the Rx costs off the plan.
· fully-insured employers with higher out-of-pocket cost plans or a deductible on the prescription benefit.
· all employers because it’s a solution that helps with the “PR issue” of increased out-of-pocket costs as they’re forced to pass more expense to their employees.
3. When do Rx Savings programs work best?
For common generic drugs with a $5 co-pay under insurance, employees should just pay the money and be happy.
About one-third of drugs has pricing that’s set by the pharmaceutical company and there’s no fluctuation between locations. The good news is that employees can quickly tell by searching their drug using the Prescription Savings plan’s price look up tool.
For about two-thirds of drugs, not only is there a big discount from the retail price, prices can fluctuate between pharmacies. If a drug is lower in one store, it probably means another drug is more expensive than at other stores. In reviewing medications in a price look up tool, I’ve seen them fluctuate from $4 at Walgreens on one corner to $150 at a Walmart just down the street.
Let’s take Nick’s drug. His doctor prescribed Pantoprozale for his hereditary acid reflux. His price was $53/month through his insurance. By using an Rx Savings network, Nick could see if there’s a discount on his drug in his local area. Plugging Nick’s prescription into my Rx pricing tool, I found a pharmacy that was four times less than another and 10 times less than the retail price he would’ve been charged. That means Nick went from having to pay $53/month or $636/year to $5.15/month or $61.80/year.
We always say it’s a good idea to flash an insurance card AND savings program info at the pharmacy. Then, the pharmacist can determine which provides the better price.
4. What should I watch out for?
Not all Prescription Savings programs are created equal. Some give weak discounts and at very few locations, so ask for this information. Some programs advertise a broad savings range that sounds good, but you want to know what their average discount is. For instance, “Save 10 to 85% on prescriptions” sounds promising. But if the average savings is only 18%, that’s misleading. Look for a broad range and a 40% or more average discount.
Find a program that allows employees to look up prescriptions at local pharmacies in an app or web portal. First, you want to be sure to provide technology that works for everyone. Second, you want to know that the program offers savings at thousands of locations and verify that there are plenty in the group’s local area.
Lastly, consider if the Rx discount includes the entire immediate family. This is extra helpful for those employees who don’t have full insurance coverage for their families.
With a double-digit increase prescription trend for the next decade, we know formularies will continue to shrink. Why not provide a tool that helps employees and their families with the out-of-pocket Rx costs and teaches them to be better healthcare consumers?
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