Workplaces Fight Skyrocketing Prescription Drug Costs

The prescription drug train went full speed ahead in 2014 and is not losing steam. A new report from the International Foundation of Employee Benefit Plans asked employers how they are managing prescription drug costs and responses revealed that, among other expense-saving methods, 18% of organizations are setting limits for specialty and biotech drugs.

We've noticed a slight uptick in organizations placing limits on specialty and biotech drugs since we last surveyed our members in 2014. At that time, 15% placed limits. The estimated price tag for treating a patient with a specialty drug is high: For some chronic conditions, a year of treatment with a specialty drug can exceed $100,000. In many cases, specialty drugs represent only about 1% of all prescriptions but account for one-quarter to one-third of total drug spend.

The most popular cost-controlling methods for organizations are tiered pricing and a mail-order drug service, with 89% and 82% of employers currently implementing these initiatives. As for drug formulary lists, 71% of organizations have this tool in place, and 63% are using a pharmacy benefit manager (PBM).

Other techniques include:

• Reference-based pricing/cap on certain drugs - 6%
• Collective purchasing groups - 14%
• Coverage of select over-the-counter drugs - 15%
• On-site or near-site pharmacy - 16%
• Discontinued or limited coverage of cosmetic/lifestyle drugs - 17%
• Preferential pricing agreements (negotiated with pharmacies/manufacturers) - 18%
• Drug card program - 28%
• Preferred provider networks - 35%
• Mandated use of generic drugs when available - 37%
• Prior authorization/utilization management - 38%
• Step therapy/therapeutic substitution - 46%

Employers are finding it necessary to vigilantly watch prescription drug prices. They are striving to keep costs controlled by trying new approaches like using five or more tiers for cost sharing, where the highest tier is for the highest-priced drugs--usually specialty drugs. Moving forward, employers will continue exploring unique cost-saving measures like referenced-based pricing.