Prescription drug costs.Cagkan Sayin/Adobe Stock
Lowering costs while ensuring quality care – these are the twin focuses of employers everywhere as pharmacy benefits management changes rapidly. But there’s one strategy that employers and their brokers should become familiar with, fast: Drug list management.
Traditionally, payers have relied on formularies. But this approach has significant limitations, particularly when it comes to flexibility and costs. As an emerging alternative, drug list management offers a more dynamic and responsive solution that’s built for what payers need right now: flexibility, transparency, cost-containment.
The limits of traditional formularies – rigid, rebate-focused
Traditional formularies are designed to categorize medications into tiers based on cost-sharing levels. These tiers often prioritize medications with the highest rebates, which are typically negotiated by Pharmacy Benefit Managers (PBMs). While rebates can reduce the upfront cost of medications, they often come with strings attached. Formularies crafted to maximize rebates may include drugs that are not necessarily the most cost-effective or clinically appropriate for the patient population. Rebate-driven approaches have the following issues:
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Misaligned incentives: PBMs may prioritize drugs that offer higher rebates, even if they are not the most cost-effective or clinically appropriate options for the payer's members, because the PBM keeps a portion of the rebate.
Hidden costs: While rebates can reduce the upfront cost of medications, they often obscure the true cost of the drugs. Employers may end up paying more in the long run due to higher overall drug prices and increased utilization of rebate-driven medications.
Limited transparency: Employers and employees may lack visibility into the true cost and effectiveness of the medications covered by the formulary. This lack of transparency can hinder informed decision-making and lead to poor outcomes.
Administrative burden: Managing rebates requires significant administrative effort, including negotiating contracts, tracking rebate payments, and ensuring compliance with rebate agreements for the HR managers. This administrative burden also applies to providers, pharmacists, and patients – potentially limiting drug access to members in the long run.
A better way: drug list management
Drug list management offers a more flexible and responsive approach to managing prescription drug benefits. Unlike traditional formularies, drug lists are dynamic and can be customized based on real-time data and the specific needs of the employer and their employees.
Flexible: Drug lists can be tailored to cover the medications that employees are actually using, rather than wasting money on high-cost, low-utilization drugs. This customization allows employers to get the lowest cost for themselves and their members.
Costs contained in real-time: Drug lists enable payers to reprioritize, remove, or dis-incentivize the use of high-cost drugs in favor of lower-cost alternatives. This agile approach can also allow for cash price incentives, making for more flexibility and choice for the member and more opportunities to save for the member and the plan.
Enhanced transparency: Drug list management provides greater transparency around the most-preferred drugs. For example, if an employer wants to offer employees access to GLP-1s, drug lists can provide guidance on which options are the most preferred for cost and effectiveness.
Improved clinical outcomes: By focusing on the medications that are most appropriate for the patient population, drug list management can lead to better clinical outcomes. This approach ensures that employees receive the medications they need without unnecessary barriers or delays.
Look for a PBM that uses drug list management – and doesn’t make money of the drugs on that list
Core to the issue of cost containment is that in the traditional PBM model, many PBMs take a cut somewhere – either as part of the rebate on a formulary, in exorbitant administrative fees, as part of a spread pricing tactic, or from the pharmacy’s reimbursement. These games are under scrutiny, for good reason.
But employers and their brokers can work with pharmacy benefit solutions that do not profit from rebates or spread pricing and instead charge an all-inclusive fee that makes pharmacy management easier for employers while driving down costs – all in service of making the member experience optimal.
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