Rx Plan Costs: Peering into the Black Box

Not knowing the true cost of prescription drug coverage still frustrates employers and employees alike—even with improved access to information.

Plans that are fully insured get very little information on manufacturer rebates, dispensing fees, and discounts off of Average Wholesale Price, because these are closely guarded by the insurers and embedded in their costs. Self-insured plans can negotiate each key element, depending on the size of the group, but the question is, “Do I really trust what my carrier is telling me I am getting?” Sometimes an audit of the plan is needed to see whether the insurer is adhering to the contract.

Large employers also have to decide whether to keep their Rx plan with their medical carrier or carve it out and contract directly with a Pharmacy Benefit Manager (PBM). Some larger plans have the ability to join coalition purchasing arrangements.

Staying with the medical carrier offers the advantage of having integrated data for clinical programs, reporting, and eligibility, and you may get a break for stop-loss coverage. The carve-out PBMs believe that since they focus only on a single area of health care, they can perform better.

For larger, self-insured plans, truly transparent pricing and administration is available, and boutique PBMs are pushing arrangements that rely on Web-savvy users. But these plans can be confusing to employees who are used to a basic copay structure.

The key is making sure you understand how your program is structured, all the elements of cost, and what your insurer or administrator is keeping to offset their costs.  The focus needs to be on obtaining the lowest net cost to the plan using all levers.

But while the discounts, rebates, dispensing fees, and administrative costs in that black box are important, the best way to manage costs is increasing the use of generics and implementing clinical programs tailored to your workforce.

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