Nine Tools to Control Prescription Drug Costs

Pharmacy benefit managers, or PBMs, have nine basic tools to control the cost of prescription drugs:

1. Pharmacy payments. PBMs use their clout to negotiate volume discounts with certain pharmacies, and then steer plan members to these pharmacies.

2. Generic substitutions. Generic drugs usually cost much less than their branded equivalents. PBMs use several strategies to encourage plan members to use generic substitutions. These include structuring a formulary to pay a higher percentage of a generic drug’s cost and structuring the purchase to encourage plan members to accept generic substitutions.

3. Rebates. PBMs often negotiate rebates from drug manufacturers. Whether they share rebates with their employer clients is something you might want to ask.

4. Copayments. Most plans require members to pay a small, fixed amount, such as $20, each time they fill a prescription. Some plans waive copayments for people who opt to take a generic prescription for a chronic condition.

5. Coinsurance. Some plans require members to pay a percentage, or coinsurance, of the total cost of their prescription. Some use coinsurance tiers to encourage use of generic or less-expensive medications, by requiring a smaller coinsurance percentage for generic drugs or drugs that meet certain efficacy standards.

6. Formularies. A formulary is a list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. PBMs usually evaluate the drugs they include on a formulary for efficacy and cost effectiveness.

7. Disease management. This integrated care approach to managing illness includes screenings, check-ups, monitoring and coordinating treatment, and patient education. It can improve quality of life while reducing healthcare costs for people with chronic conditions by preventing or minimizing the effects of a disease.

8. Mail order fulfillment. Mail order fulfillment of refills can save money.

9. Drug utilization review. Utilization review can have two parts: systems screen members’ prescription drug claims to identify problems such as therapeutic duplication, drug/disease contraindications, incorrect dosage or duration of treatment, drug allergy and clinical misuse or abuse. The second phase (retrospective drug utilization review) involves ongoing and periodic examination of claims data to identify patterns of fraud, abuse, gross overuse or medically unnecessary care.

For more information on pharmacy benefit managers or structuring your benefit plans to reduce prescription drug costs, please contact us.

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