What is the biggest issue self-funded employers have with their prescription benefit plan? Your first answer might be cost but that really isn’t the problem with medication benefits. Sure, we’d all like to get our prescriptions for free. Even accessing them for less would be nice. However, after hundreds of claims reviews showing significant cost savings opportunities of 20% or more on drug spend, we still watch employers struggle to evaluate options, discern truths, and implement change in their drug benefit plans. Why? One might argue that it is resistance to change, a lack of good advisory services, competing priorities, or maybe even indifference. These things may be true in part across some situations but if cost was really the problem, wouldn’t employers jump at savings opportunities?
No, cost isn’t the primary problem. After all, employers are spending money on medications as a way to help employees get or stay healthy and ultimately increase productivity. Employers expect to spend something and get some kind of result. An employer’s drug spend is a benefit to a group of people in which they have a vested interest and the intention is that it actually benefits them in the best way it possibly can.
So, what is the self funded employer’s drug problem? Consider how an employer typically manages the pharmacy benefit. Once the decision is made to self-fund, employers are presented with options for overall health benefits for employees. For purposes of this discussion, there are two key elements of a self-funded health benefit: medical benefits and prescription benefits. The medical side of the benefit typically comprises about 75%-80% of the employers total healthcare spend and the pharmacy side of the benefit sits in the 25%-30% range.
From there, a broker or advisor pulls together cost and claims data to design an overall plan for the employer. Within the plan are recommendations for sharing costs with employees and selections for key pieces of plan fulfillment: third party administrators, medical networks, perhaps an onsite or near-site clinic, and myriad other options. The medical plan may or may not be administered by the same company administering the prescription plan. The employer evaluates options, recommendations, and assumptions while moving toward a decision based on information presented. Contracts are signed, the plan is implemented, and then life rolls on.
The employer gets periodic updates on plan costs throughout the year and possibly a more detailed report before the renewal process begins again in the fall. Around renewal time, the advisor or broker reappears, sets the tone with the message that plan costs will be going up and then navigates around the wailing and gnashing of teeth that follows.
The employer laments the rising costs but the real frustration lies with two primary issues: 1) clear visibility on what’s causing increases in cost and 2) the ability to do something about it. Costs themselves aren’t the issue. The real issues are: are we spending more than we should be? (rephrased as: are we getting as much as we can for our money?) and why can’t we have more control over what it accomplishes? The annual death march toward renewals becomes a necessary evil that is endured every year because we’ve come to accept the inevitability of our own lack of control. Sometimes frustration sets-in, brokers get fired, vendors are changed, and the cycle begins anew but generally with little real impact. We feel better for a while thinking “It didn’t change much but at least I did something.”
Along the way, we get talked into shiny object solutions that promise results but end up being failed attempts to move the dial on costs, outcomes, or any sense of satisfaction for the efforts, and money thrown down the dark hole we call pharmacy benefits. We are literally throwing millions of dollars every year at something over which we have little influence other than restricting access in some fashion or choosing a new vendor.
Rx as an Investment
Why is the money spent on drugs for employees different than any other investment a company makes? If an organization purchases a piece of machinery it expects the equipment to produce something, right? If a company invests in a software project, it expects a clear result. If we hire someone, we believe they will perform a certain function for us that produces a measurable outcome. We see all of the above as investments and we monitor them, we manage them, and we adjust as needed to get what we expect out of them. Does the money a company invests in drugs for the benefit of employees have to be a mysterious sunk cost sitting beyond our reach or influence?
Employers have a drug problem and it isn’t just about costs. We want our money to be spent well. We want to know what it’s doing for us and for our employees. We want to monitor what we’re spending, optimize how it’s spent, use it to influence what it can, and then gauge its impact on desired objectives. Our problem isn’t the costs, it’s that we feel powerless to do anything about them or their results. When it comes to our investment in medications for our employees, ours is a problem of stewardship.
The current system of pharmacy benefit management is failing to meet the needs of the employers for which it was built to serve and the employees they seek to benefit. How so? The current PBM model simply pushes money around. It is an administrative function rather than a strategic function. Amid all of the distractions of formularies, re-pricings, claims, therapeutic interchange, step therapy, prior auths, brands, rebates, and specialty drugs is lost the ultimate objective: cost effectively supporting the health and welfare of the employee and his/her dependents to their benefit and to the benefit of the sponsoring employer.
Today’s traditional PBM approach does not steward the employer’s drug investment well and has grown to be most effective at one thing: shifting margin into its own business model. Benefit administration has become an end unto itself and the key stakeholders are really just an afterthought. PBMs have gotten pretty good at administering plans but remain quite poor at making any real difference for employers or employees.
A Different Approach
We need a way to steward our Rx investment strategically. A fundamentally different approach from traditional pharmacy benefit management. Strategic Rx Stewardship would encompass what our PBMs were originally built to do for us (provide access to meds, improve buying power, administer members and claims, and report on activity) but would add four critical ingredients: 1) real-time visibility into our active Rx investment, 2) actionable insights on key challenges and opportunities, 3) some level of influence over the effectiveness of our investment as a real benefit to employees, and 4) mechanisms for ongoing monitoring and measurement of our Rx investment so adjustments can be made.
The answer is not pushing more drugs to more patients more efficiently, but to use the Rx investment as a mechanism to engage employees in employer sponsored healthcare while empowering them with access to more cost effectives medications. Today, PBMs represent an opaque world of competing incentives, hidden costs, and access restrictions rather than a mechanism that empowers good stewardship of our Rx investment.
Let’s explore a different approach to drug spend. Rather than getting lost in the arcane world of plans, networks, benefits-speak, and access restrictions, imagine having a straightforward service, a utility, that gives us real-time visibility over spend, insights into opportunities for improvements, the ability to take action on those insights, and the means to measure progress against objectives and external benchmarks.
In this world, the employer seizes the initiative on its investment in medications and proactively uses it to reduce costs while improving the lives, and productivity, of employees. Isn’t that why we offered a drug benefit in the first place?
Strategic Rx Stewardship
Strategic Rx Stewardship would be comprised of four key elements:
- Insights into drug spend, employee behaviors, and health outcomes.
- Access to cost-effective Rx
- Influence over employee health through coordinated Rx and medical programs delivered through sponsored health partners.
- Impact measurement and real-time feedback on programs designed to improve outcomes.
Some might say that PBMs provide insights into spend and behavior but PBMs are notoriously secretive and protective of “their” data; data that is actually our data. Even when such data is obtained, what can we derive from it? Raw data is often meaningless and insights are difficult to identify and require statistical and clinical expertise to discern the signals from the noise. It is easy to see increases and decreases, it can be incredibly difficult to ascertain the reasons why. Good stewardship of the Rx investment begins with strategic insights that can be converted into action.
Prescription drugs are ubiquitous and access is not a problem. However, misaligned incentives, opaque contracts, many-layered distribution systems, and games with rebates make it difficult to obtain best-price options or assess cost effectiveness. We need a way to provide employees with access to health-supporting medications when needed, at the best possible price, and in a way that supports our stewardship efforts. Avoiding expensive, limited-access options, staying out of opaque PBM contracts, and accessing all available manufacturer rebates provides the best path to access, affordability, and effectiveness.
A Pathway to Influence
Employers today accept as fact that they can do very little to impact employee behavior or the care that employees receive. We have grown to accept that all we can do is pay the benefits bill and let it go from there. Or, we provide access to sponsored clinics hoping that the services help in some way. We need a way to understand available options to influence employee health behaviors and to participate more actively in their implementation and ongoing management. At the very least, we need visibility into targeted programs and the option of taking proactive steps to help employees.
Sponsored health centers can be the lever that employers need. A sponsored clinic should be the nexus of care and give the employer a hand in influencing the health of its employee population; not by involvement in clinical decisions but through implementation of targeted programs.
With insight into areas of opportunity and mechanisms for participation in, and influence over, clinical programs, the employer can dramatically increase its ability to steward its Rx investment appropriately. However, good stewardship is incomplete without effective measurement of outcomes. Real-time feedback on progress and effectiveness of money spent on medications for employees is the final piece of Strategic Rx Stewardship.
By understanding what money is being spent, what programs are being offered, the level of engagement in those programs, and clinical measurements or outcomes, the employer can determine if the Rx investment is meeting objectives or if adjustments need to be made. With real-time impact measurement, the employer can act in new ways to steward dollars invested most effectively.
The time has come to seize control over our drug investment and its results. The time has come to change how we approach that investment and what we expect from it. We don’t need pharmacy benefit management, we need Strategic Rx Stewardship.