Tackling rising prescription drug costs: A guide for HR benefits leaders

As an HR benefits manager, few things are more frustrating than unpredictable and escalating prescription drug costs. These costs have far outpaced general inflation for years, and a new study by Business Group on Health (BGH) reveals that, amid increases in the percentage of health care dollars spent on pharmacy, 92% of employers are concerned about high-cost drugs in the pipeline, with 91% reporting concern about pharmacy cost trends overall.

As employees grapple with economic uncertainty, benefits like quality health care and prescription coverage have never been more vital for recruitment, retention, and productivity. However, uncontrolled Rx spending threatens the viability of those offerings long-term.

The key is adopting a holistic view that balances immediate member needs with sustainable cost management. This involves understanding root causes, implementing checks and balances, and empowering employees with education. In this article, we will discuss how your organization can apply a proactive benefits plan that takes into account employees’ physical, mental, and financial wellbeing.

Analyze data to pinpoint key Rx cost drivers

The first step is drilling into your benefits data to identify the biggest factors propelling your Rx costs upward. For many employers, these include:

• Specialty drugs: One that typically has one or more of the following attributes: high cost, biologic in nature, used in the treatment of rare or complex chronic conditions, or requires special handling or administration. While only used by a small percentage of members, these innovative medications come with premium price tags, often exceeding $5,000 per script.
• Brand-name drugs: A drug sold by a drug company under a specific name or trademark that is protected by a patent. These drugs may be available by prescription or over the counter. Ongoing reliance on branded chronic care medications is fueling sustained cost creep.

Once you’ve spotted primary cost culprits, you can deploy targeted countermeasures, like prior authorizations, to ensure appropriate utilization.

Promote generic and biosimilar options

With patents expiring on many top-selling drugs, affordable generic and biosimilar alternatives are key to bending the Rx cost curve.

• Biosimilar: A biologic drug that is very much like another biologic drug (called the reference drug) that has already been approved by the U.S. Food and Drug Administration (FDA). To be called a biosimilar drug, a biologic drug must be shown to be as safe as, work as well as, and work in the same way as its reference drug. It must also be used in the same way, at the same dose, and for the same condition as the reference drug.
• Generic drug: A drug that is an identical copy of small-molecule drugs. This drug has exactly the same active ingredient as an originally patented brand-name, synthetic drug.

However, employee worries about efficacy and safety persist, hampering adoption.

To begin to turn these worries into trust, employers can:

• Provide clear communication about the FDA approval process for generics and biosimilars to help overcome reluctance
• Plan incentives, like reduced copays for generics and biosimilars
• Offer a nuanced formulary strategy balancing new therapeutic options with financial sustainability
• Work closely with your Pharmacy Benefit Manager (PBM) to strike the right balance for your workforce

Related: Why transparency matters: helping brokers understand drug pricing 

Invest in upstream health improvements

Since chronic conditions account for the vast majority of drug spending, getting upstream of these diseases is critical. More rigorous screenings, early intervention programs, and robust lifestyle change support can all help reduce incidences and slow the progression of these diseases.

Yes, these efforts require investment. But an ounce of prevention is worth a pound of cure when it comes to mitigating big-ticket claims.

Arm employees with data and resources

Finally, equip employees to make smart health care decisions by connecting them with cost and quality information. Most people have no idea if their prescription or provider is priced competitively until they get the bill.

Transparency tools shine a light on this opacity. Combined with supplemental decision support and second opinion services, they provide the insights employees need to reduce waste and optimize choices.

While you may not be able to fully control rising prescription drug costs, you can implement checks and balances to ensure responsible use of these therapies. Paired with programs to improve long-term health, you’ll relieve immediate pressures while working toward more tenable trends.

Janet Young, M.D., Clinical Analytics Advisor

Janet joined the Data Science and Methods team at Springbuk in Dec. 2019, and has been responsible for clinical oversight of methods and models. Janet received her M.D. from Yale University School of Medicine.