Achieving Drug Costs that Wont Break the Bank

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Achieving Drug Costs that Wont Break the Bank

• Tom Reed, Unique Industries, Inc.
• Kevin OHara, Corporate Synergies Group, Inc.

2
Overview

• Current State Of Prescription Drug Coverage
• Early Attempts at Moderating Costs
• Viewing Rx as an Independent Cost Driver
• Getting Aggressive
• Where Do We Go From Here?

3
Historical Context

• Prescription Drugs vs. Other Medical Costs
• The Doubled-Edged Sword of Rx
• The Transition from Indemnity Models
• Ridered Prescription Benefits
• Co-Pay as a Reimbursement Strategy

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Recent Comparative Change
Source KFF/CMS
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Actual Underlying Rx Trend
Source Segal, 2006
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The Two-Edged Sword of Prescription Drugs

• Americans are clearly spending more each year on
  prescriptions
• The underlying cost of prescriptions has only
  recently begun to moderate
• Taking the necessary pharmaceutical agents today
  will likely postpone or eliminate the need for
  costly medical procedures in the future

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The Shoebox

• Major Medical-style programs dominated the
  marketplace for the first 50 years of rx coverage
• Deductible/Co-insurance mechanisms
• Built-in claims lag and submission suppression
• Operational inefficiency

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Co-Pay to the Rescue

• With the rise in co-pay-based medical programs,
  the co-pay methodology gained a foothold in
  prescription drugs
• Easy-to administer and less burdensome on the
  member
• As with medical, tended to isolate the purchaser
  from the underlying cost
• Single tier plans predominated

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Shifting the Playing Field

• Split Co-Pays The Dynamics Begin to Change
• Separating and the Medical and Prescription
  Elements
• Administration of Prescription Benefits
• Carve-Out Rx and their Funding Models

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Split Co-Pays

• As the cost escalated and the availability of
  less costly alternatives emerged, two-tier
  co-pays became the norm
• Reticence to accept the generic as
  pharmacologically equivalent stymied early
  acceptanceand continues today
• Member and prescription drug manufacturer
  workarounds arose Claritin/Clarinex

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Three Tiered Formularies

• Has become the standard
• Open Formulary/Mixed Model
• Demonstrated effect on trend
• Co-Pay Spread Issues
• Law of Unintended Consequences
• See Four Tiered Formulary
• See OTC

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Pharmacy Benefit Management

• The rise of PBMs
• Isolating the Rx and Medical elements
• Do what you do best
• Bulk Purchasing/Discounting
• Flexibility in Plan Design
• Network
• Care/Case Management
• Carve-Out Rx

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The Case for Carve-Out

• The Unique Industries Story

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Techniques

• Closed Formulary
• too Draconian?
• Transparency/Rebates
• Where does all the money go?
• What is the REAL underlying cost of the
  prescription medication?
• Carve-Out Injectibles
• Determine the medical coverage elements
• Where appropriate, shift obligation to the
  medical carrier

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Techniques

• Benefit Statements for Rx
• Much like Total Comp or Hidden Paycheck
  statements at year-end
• Same Usefulness in Reinforcing Company
  Contributions
• Baseline Drug Formularies
• Lipitor/Crestor
• Setting the Cost by Drug and Shifting Focus

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Techniques

• Reverse Co-Pay
• Formulary establishes amount the COMPANY will pay
  by therapeutic category
• Highlights underlying drug costs and
  pharmacological equivalents
• Defining AWP/MAC
• Wide diversity of baselines

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Techniques

• Mandatory Generics
• Mandatory Mail
• Setting Co-Pay is Crticial
• The Magic Machine
• 50 mg and 100 mg Viagra 93.99 (drugstore.com)
• 20 mg, 40 mg and 80 mg Lipitor 116
  (Walgreens)
• REAL Consumer Driven Healthcare Employee-Shared
  Savings

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Techniques

• Four Tiered Formularies
• Pitney-Bowes
• Five (and more) Tiered Formularies
• Re-Coupling Rx and Medical Care and Disease
  Management
• Predictive Disease Management Opportunities
• Facility of Data Exchange

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Techniques

• OTC Drug Coverage
• Nexium/Prilosec
• Step Therapy
• Age/Gender/Dosage Edits
• Re-Importation
• FSAs and Prescription Coverage

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Next?

• Global fees?
• Medicare as Single Source Payer?
• Determining Short-Filling?
• MERPs/HRAs for Prescription?