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Benefits and Pensions MonitorControlling Drug Costs And Meeting Claimants’ Needs New drugs are not automatically included, providing a barrier against many new high cost drugs, but plan members may not be able to afford an ineligible drug which is vitally needed. This disadvantage can be managed through a claims appeal process which considers the merit and expected impact on the plan of special cases. ʻTherapeutic formulariesʼ cover a defined list of drugs which is reviewed and assessed periodically for therapeutic effectiveness. As new clinical information becomes available, drugs are added or removed. Such formularies cover the majority of drugs found on typical ʻprescription-requiredʼ drug plans. Excluded items include ʻme tooʼ drugs which offer little advantage over the existing (less costly) therapies. Lifestyle/ discretionary drug categories – such as smoking cessation, anti-obesity, or erectile dysfunction/fertility – are usually not covered. These drugs may be covered under a secondary benefit provision at limited or lower levels, or excluded altogether. Multi-tiered reimbursement plans – Multi-tiered plans limit exposure by applying varying reimbursement levels. Tiers can be defined in a number of ways – by categories of drug dispensed, providers, or covered persons. Savings depend on reimbursement levels. Following are three examples: ◆ By Drug Dispensed
◆ By Provider
◆ By Covered Person
Two-tier reimbursement plans are more common than three-tier plans as described above which are rare – the likely reason being carrier-related system limitations. Most pharmacy benefit managers can accommodate two- or three-tier arrangements. Pre-authorization – This process screens drugs subject to misuse and high cost ʻmultiple useʼ drugs to ensure access for appropriate use only. Designated drugs are clinically reviewed against set criteria to determine eligibility for specific plan members. This doesnʼt limit the financial risk for drugs which are appropriately prescribed. New drugs are reviewed by a pharmacy consultant to determine the need for pre-authorization. Specialty drug plans – Alberta, British Columbia, and Ontario have introduced Specialty Drug Programs which potentially reimburse all or part of high cost therapies for designated health conditions (for example, some cancers, organ transplants). Such programs tend to be discreetly managed. Income testing is often included in eligibility criteria, but for some programs all residents are eligible regardless of income. Through a pharmacy benefit manager, such as ESI Canada, some carriers/ plan sponsors can structure plans to exclude drugs which are eligible under these specialty drug plans without an income test, whereby claims must first be submitted to the provincial program before being considered by the group benefits plan. Such plans are limited, so the number of claims affected may be few. However, the savings achieved on a single claim using this technique could be substantial. Hospital drug plans – Ensure private plans are second payor for drugs normally only given in a hospital setting. This technique requires pharmaceutical expertise and monitoring. Again, carriers aligned with certain pharmacy benefit managers can structure plans to exclude drugs (for example, chemotherapy and antibiotics given intravenously) paid for under hospital plans. Risk management/high amount claims pooling – Claims pooling can help to limit the risk associated with high cost drugs, without limiting or transferring costs to plan members. The amount of an individual ʼs claims in any year above the specified ʻpoolingʼ level is charged to the insurer rather than the plan. While protecting members against financial hardship, this can increase the demand and risk for high cost drugs, resulting in higher plan costs and increased pooling levels. Plan member education and accountability – Plan sponsors should step up efforts to educate plan members and other influencers (such as unions) on these issues and engage them in finding ways to control costs that address their mutual interests. Make sure the ʻvalueʼ of benefit plans is transparent. All stakeholders need to appreciate the challenges and responsibilities involved in good plan design.
Drug Cost Controls At Work How well do these cost control features work? Some are too new to measure, but the following examples (based on two real plans) help illustrate the impact of some of these techniques. Plan 1 – Multi-employer Members Plan
Priorities – Good value coverage for members Drug cost controls at work:
Results, as reflected in five year drug cost trends – This plan (Chart 3) consistently experienced markedly better than expected costs, based on prevailing industry trends.
Plan 2 – Employer Sponsored Flex Plan
Priorities – Competitive benefits, member choice, good value, and sustainability Drug cost controls at work:
Results, as reflected in five year drug cost trends – This plan has also enjoyed consistently better than expected costs, compared to prevailing industry trends, as illustrated in Chart 3. How do the results under your drug plan compare? If you are tracking or exceeding industry cost trends, this may be the time to take a closer look at some of these cost control options. A good first step is to carefully review the top 20 drugs under your plan and track the year-over-year trends to see what patterns emerge. Consider what changes are most important based on your plan goals and take advantage of appropriate cost control techniques. As these issues gain momentum, benefit carriers would be wise to listen closely to their clientsʼ needs. Suppliers who take the lead in developing robust cost control initiatives could gain a meaningful competitive edge. ■
Sandra Dudley and Andrew Tsoi-ASue are principals in Eckler Ltd.ʼs Toronto benefits consulting practice.
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