60% of employers indicated that drug and medical spending is costly and unsustainable
WASHINGTON – Jan. 8, 2020 – Faced with increasing prescription drug costs over the last several years, employers have been challenged with finding the best approach to this complex issue. The most common strategy used to manage these expenses has been group purchasing (currently 40%). Leading strategies that will be considered in the future are fully transparent pharmacy benefit managers (PBMs) (55%), outcomes-based contracting (48%), reference-based pricing (44%) and custom exclusions from drug formulary (38%).
These are among the findings from the National Alliance of Healthcare Purchaser Coalitions (National Alliance) employer survey and roundtables conducted with more than 80 large employers across the country through regional coalitions. The survey and following discussions identified employer perspectives and attitudes on drug pricing, contracting issues, benefit design and formulary decisions to define better value for healthcare strategies.
“Employers are working to change the conversation with their PBMs, health plans and other vendors to reduce waste and fraud and implement more effective strategies that improve health while mitigating these costs,” said Michael Thompson, National Alliance president and CEO. “We convened these discussions across the country and offer the resulting recommendations to aid employers and their vendors in contracting negotiations.”
Key insights include:
- Employers define “value” in their drug spend as having “the right drug at the right price,” appropriate utilization controls to reduce waste and fraud, and implementation of strategies that clearly indicate improved health outcomes.
- Current challenges for employers include understanding cost savings (55%), knowing which drugs go through the medical benefit (58%), over or misutilization of prescription drugs (61%), and various issues with PBM contracts and management.
- For employees, the most problematic issue is high cost sharing (68%). Some employers have no intention of moving away from this strategy of high cost sharing. Others are looking to a more “paternalistic” approach to promote the best quality and cost options.
- Effective formulary management is the overarching approach indicated by a majority of employers to best address savings and the impact of rebates will be a strategic area of focus for many purchasers moving forward.
- Employers have little confidence (< 20%) and low expectations that legislative efforts will produce the changes they are looking for, especially in the short term.
Recommendations for employers:
- Eliminate rebates and encourage full transparency on drug prices from PBMs, specialty pharmacies, and pharmaceutical manufacturers.
- Implement integrated site-of-care solutions for specialty medications to reduce waste and costs.
- Hold PBMs accountable for building cost saving strategies into drug formularies.
- Support collaboration and information sharing across employers and coalitions.
- Push for federal regulation of the pharmaceutical industry.
- Help employers identify relevant value comparison tools for pharmacy (e.g., use of value frameworks and tools).
- Recommend independent third-party audits for both PBM and medical drug management.
The Employer Roundtables on Drug Management report can be found here. The National Alliance acknowledges support by way of funding from Genentech, National Pharmaceutical Council and Pfizer.
“Coalitions can lead efforts in their regional markets that empower their members to ask the right questions and progressively put effective strategies in place to achieve the value they are seeking to improve patient-entered outcomes,” said Margaret Rehayem, National Alliance director of initiatives and programs and project lead.
Participating coalitions:
- Central Penn Business Group on Health
- Economic Alliance for Michigan
- Employers’ Forum of Indiana
- HealthCare 21 Business Coalition
- Houston Business Coalition on Health
- Midwest Business Group on Health
- Nevada Business Group on Health
- Pittsburgh Business Group on Health
- Rhode Island Business Group on Health
In 2020, these coalitions will work on several activities with their members to move their efforts forward in the areas of contracting, benefit design and formulary management. The National Alliance will share updates on the progress on its Pharmacy & Medical Drug Initiative page.
About National Alliance
The National Alliance of Healthcare Purchaser Coalitions is the only nonprofit, purchaser-led organization with a national and regional structure dedicated to driving health and healthcare value across the country. Our members represent more than 12,000 employers/purchasers and 45 million Americans spending over $300 billion annually on healthcare. To learn more, visit nationalalliancehealth.org, connect with us on Twitter and LinkedIn.
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