The (specialty) drug discount advantage for self-funded employers

The generic version of the multiple sclerosis drug Tecfidera is called Dimethyl Fumarate. This generic medication has been available since 2020.

Usually when a drug becomes generic its price goes way down. However, the Dimethyl Fumarate has a huge variability in cost depending on which pharmacy you use to fill it.

Grocery store pharmacies like HEB, Giant, Publix and Jewel-Osco sell Dimethyl Fumarate for $37 to $104 for a one-month supply. However, Costco, Walmart, Walgreens and CVS sell the exact same generic medication for $1,500 to $2,171.

That’s 58 times more expensive.

For employer-sponsored health insurance plans, that higher cost is being paid by the employer.

Question: If there is such a large price difference among pharmacies, why don’t patients naturally fill their prescriptions at the lower-cost locations/?

Answer: Plan design.

Many employer health insurance plan designs do not differentiate the patient out-of-pocket cost depending on where the patient fills their prescription. Low-cost pharmacies and high-cost pharmacies have the same copay.

Of course, plan members are not going to choose lower-cost pharmacies…there is no incentive for them to.

Because of the complexities of the health insurance industry, there are many factors that cause this.

Firstly, the pharmaceutical pricing itself is unclear and convoluted. It has many different negotiations between drug manufacturers, insurance companies, and pharmacies determining the final cost.

Patient habits also play a role in this, individuals typically opt for familiar pharmacy chains, unaware of the drastic variations in pricing.

Related: Hot self-funding takes from SIIA’s 2023 National Conference

Solution: This problem is exactly why new alternative health care companies vary prescription copays at different pharmacies:

High-cost pharmacies = higher copays.

Low-cost pharmacies = lower copays.

Alternative health care companies are revolutionizing health care accessibility in this way. By filtering through all the different pricing variations, employer-sponsored health insurance plans can help insure health care accessibility and cost transparency

Many alternative health care companies are prioritizing making the patient more knowledgeable. By giving the patient the knowledge and the incentive to go to lower-cost pharmacies, employer-sponsored health insurance plans can be more efficient and beneficial.

This is a great example of why, as an employer, a person should consider a different plan for their employees. Aligning themselves with an alternative health care company that meets their goals and helps navigate the health insurance industry is critical.

Ultimately, addressing this issue of variation in pharmacy prices required a multi-faceted approach that combines technology, policy changes, collaborative effort, and education.

Align plan design with desired plan member behavior. Incentives are superpowers… Let’s use them correctly.

Question: How can employees be more knowledgeable about lower-cost pharmacies?

Answer: Unfortunately, there is no centralized database or website that has the negotiated prices at different pharmacies for a particular PBM. For example, if an employee’s PBM is OptumRx and she is taking Januvia for diabetes, there is no website that has the OptumRx price for Januvia at Walgreens vs. CVS vs. Walmart vs. another pharmacy.

Solution: Pharmacies will tell employees the cost if they call pharmacies individually. That process is time-consuming. That’s why SimplePay Health has Health care Navigation that replaces customer service for the insurance carrier and SimplePay Navigators contact pharmacies on behalf of employees to obtain prices. The SimplePay Navigator then shares the pricing information with employees so they can decide which pharmacy they would like to use.

Question: How can employers go about picking a new health plan that better incentivizes employees to use lower-cost pharmacies?

Answer: Many employers do not explore using a PBM carved-out from their carrier because they are fully-insured. Additionally, many employers do have a copay plan design that financially incentivizes employees to use lower-cost pharmacies with lower-dollar copays, again because they are fully-insured and the carrier does not offer a fully-insured product designed in that manner.

Solution: Go self-funded. If a group is self-funded, they can carve-out the PBM to a transparent, pass-through PBM or another PBM of their choice separate from the carrier that administers the medical claims.

Eric Bricker is Medical Director at SimplePay Health.