MANAGED CARE

There's room for employers to trim their drug costs

Prescription drugs may be viewed by employers either as an unwanted expense or as an investment in the well-being and productivity of their employees, but whatever their view, "the cost of prescription drugs is of tremendous concern" to them.

This observation by Barbara Hawes, R.Ph., a healthcare consultant with Towers Perrin, was at the core of a recent discussion by experts from managed care, retail pharmacy, medicine, and industry. The panel session, "What Pharmacy Providers Are Doing to Heal Your Programs," was part of a two-day healthcare conference in New York City sponsored by Towers Perrin, a human resources consulting firm, and the Conference Board.

The conference brought together health benefits planners and human resources administrators seeking solutions to the rising cost of health benefits. Many were from top U.S. healthcare companies, including Pfizer, Johnson & Johnson, AstraZeneca, Merck-Medco, and Walgreens.

None of the participants quite got around to giving a definitive answer to the billion-dollar question of what pharmacy providers are doing to heal employers' health benefit programs. But they did touch on some significant themes, including the rising cost (and therapeutic benefits) of prescription drugs; the growing importance of genomic research in developing targeted new therapies; and some of the remedies required for constraining drug costs, including more generic substitution and use of mail order.

Hawes pointed out that drug expenditures have been rising at a much steeper rate than health costs in general, noting that the nation's drug bill rose 206% in the 1990s, compared with a 97% growth for health costs overall. But, she said, national health expenditures are now "catching up" to drug expenditures "in terms of double-digit increases."

Speaking about genomic research, Alan Spiro, M.D., another Towers Perrin health consultant, said the targeted therapies developed by gene researchers were going to shift the focus of patient treatment to pharmaceuticals at the same time they dramatically increase the cost of pharmacotherapy. The good news, he said, was that the risk of developing particular diseases will now be determined much earlier, and treatments will be tailored to particular patient needs. For example, he said, a drug will no longer be developed just for asthma but for a particular form of asthma. "This is shorter term than you think," he said. "This is happening very quickly."

One factor behind the rising cost of prescription benefits, panelists suggested, was that patients are shielded from the actual costs of medications by low insurance co-pays. Louise Karger, M.D., a New Jersey physician in private practice, suggested that raising co-pays might be one way to foster patients' perception of what drugs really cost. "For me to pay $10 for $250 worth of pharmaceuticals doesn't make too much sense," she said. "There has to be a middle ground. I think most patients can realize the value of drugs to their lives. So paying $30 or $40 instead of $10 for $285 worth of drugs is not all that unreasonable."

Another factor in rising drug costs, said David Joyner, senior v.p. at Caremark Rx, was the failure of employers to drive more generic utilization. "You'd be amazed at the number of employers who still choose not to mandate generic drugs," he said. "If you can maximize [generic utilization], I can tell you there will be a significant savings afforded to you. There is still significant opportunity to drive generic substitution." He said companies need to get out the message to end users—patients—that generics are bioequivalent to brands.

James M. Schmid, national director of pharmacy operations at Walgreens, suggested that generic usage has therapeutic as well as cost benefits. He said Walgreens had done studies showing that generic utilization improves patient compliance because it makes the cost of drug therapies more affordable.

Panelists had differing opinions on the use of mail order to reduce prescription costs. "We still feel mail is the most cost-effective way to deliver prescription drugs," said Joyner. "Obviously, as the population grows older, the percentage of maintenance medications will go up significantly. So you're going to see a lot higher usage of mail in that population."

Hawes had a different take. While mail "was once a no-brainer for savings," she said, "that may not be the case" any longer. One reason she gave is that benefit plan designers had offered such attractive incentives to switch employees to mail that the cost benefit for employers has almost been erased. She also said retail pharmacy discounts are now much more competitive compared with mail. Thus, she continued, only very large employers whose prescription volume offers "a significant differential in discounts" between mail and retail delivery can make mail service work economically.

Bruce Buckley

A New York-based pharmacy journalist, the author contributes frequently to Drug Topics.

Bruce Buckley. There's room for employers to trim their drug costs.

Drug Topics

2002;5:74.