The data behind the drugs: New strategies for lower prescription drug costs

Emerging therapies with high price tags known as Specialty Medications have driven overall drug prices higher even as traditional medication costs fall. Inflation, defined as a manufacturer raising the prices of existing medications, has further nudged drug costs skyward. This has significant financial consequences for individual consumers already facing mental or physical health challenges, as well as employers struggling to control drug trend every year.

One of the most effective ways to lower overall spending is by pulling back the curtain on prescription drug data. Understanding and having access to the right quantitative information ensures that the right medications are being distributed at the right time for the best price. The potential cost savings — which may reach into the thousands depending on current practices — can be redistributed to resources that further improve employee wellbeing and initiatives that drive business growth.

Making a data-first difference

Prescription data provides benefits professionals with actionable insights that can be used to make plan changes in near-real time. Historically, pharmacy benefit managers (PBMs) and benefits providers have compiled drug cost and availability data on a quarterly or annual basis by analyzing pages of spreadsheets. It could take weeks or months for their findings to be implemented. Improved analytics systems can automatically collect and parse drug data on a daily basis so changes can be made when impact is needed. This means that particularly expensive medications can be quickly substituted — where appropriate and with physician approval — for clinically equivalent lower cost alternatives.

Effective data collection platforms alert benefits teams when there are discrepancies between actual and reported spending, which is useful for catching costly accounting errors before they snowball. In most systems, a similar set of alerts notifies data analysts when the price of a given drug increases or decreases significantly. These notifications help benefits providers and consultants make informed decisions about pharmacy costs to ensure companies are spending their budgets efficiently.

At the same time, improvements in both access and understanding of pharmacy data has given finance and purchasing departments a bigger stake in the conversation. HR departments can now work collectively with broader intercompany teams to make benefits decisions because easily digestible data is readily available. They can therefore address the expected cost of medications and make business-wide optimizations much more effective.

Combining the new and the old

Working with a benefits consultant or broker who takes a modern approach to data should lower costs without reducing access to quality care. Updated versions of traditional cost containment strategies and newer data-driven ones can be implemented simultaneously to optimize plans. For example, an automated comparison of prescription costs at multiple pharmacies can help identify the least expensive dispensing location by using algorithms that flag potential cost savings opportunities. An automatically updated list of member prescriptions organized by refill frequency could be used to determine where a prescription might be filled with a higher quantity for bulk savings.

Since a consultant or broker is not affiliated with a pharmacy (unlike most major PBMs), they can look outside the PBM ecosystem to find effective ways to communicate lower cost options and adjust member medications accordingly. Meanwhile, the larger consultancies and brokerage firms are leveraging the size of their relationships with PBMs to secure better prices for their customer base. Selecting the right benefits partner can ultimately generate significant savings.

Leaning into carve-outs and implementing cost effective strategies

A heightened focus on expenses in a post-pandemic economy and easy access to data have helped benefit providers realize that one medication can completely change their overall spending trend. Since a single plan participant can have an outsized impact on pharmacy spend, providers are becoming more willing to implement unique cost relief strategies. Among the most notable are carve-outs. An insurance “carve-out” refers to when a specific set of benefits — such as specialty drug coverage or mental health services — are removed from a primary plan and subcontracted to another one. This allows benefit providers to transfer certain risks to an experienced third-party vendor, which enables the provider to offer more flexible or more cost-effective treatment options.

By comparing data month over month, benefits professionals can determine if a pharmacy carve-out is appropriate for long-term savings. Ongoing data collection and analysis can help pinpoint which plan participants and prescriptions are skewing costs. For instance, algorithms can easily be set up to exclude one-time expenses for drugs intended to treat short-term injuries or illnesses. Steps like this have allowed brokers to change the conversation from, “Why are my pharmacies costs rising?” to, “What can we do about it?”

Related: Is your health plan covering the lowest-cost drugs?

There are dozens of ways to lower prescription drug pricing, from identifying the right medications at the right time for a given patient to engaging independent perspectives on drug decisions. The most effective strategies are informed by real-time or near-real-time data. Having access to information — as well as knowledgeable professionals to help navigate it — can be invaluable for lowering increasingly expensive pharmacy costs. Benefits professionals who have access to and understand the data can create better solutions with actionable results.

Nick Conway is a Senior Vice President and Head of Product at NFP where he manages the analytics team and collaborates on pharmacy benefit solutions. He has almost 15 years of experience in the employee benefits space and deep Rx industry expertise.