Fewer Employers Plan To Continue Offering Pharmacy Benefits To Medicare-Eligible Participants

The percentage of U.S. employers that intend to continue offering prescription drug plans to Medicare-eligible participants has declined, according to research from Buck Consultants. Currently, 48 percent of respondents offer prescription drug plans to this group; of them, only 55 percent intend to continue this benefit.

“Employers have options for controlling prescription drug costs for Medicare-eligible participants,” said Paul Burns, principal at Buck Consultants. “For example, since Retiree Drug Subsidy payments are no longer tax-exempt and do not keep pace with rising drug costs, some employers are considering moving to an Employer-Group Waiver Plan to take advantage of additional subsidies available as a result of the Patient Protection and Affordable Care Act (ACA).”

Nearly all respondents (99 percent) provide active employees with prescription drug coverage, an increase from 96 percent in 2011, Buck found.

Pharmacy benefit managers. The survey shows an increase in the percentage of employers that contract third-party pharmacy benefit managers (PBMs) to process and pay prescription drug claims, signaling that many employers turn to PBMs to access better drug prices. Sixty-one percent of employers now use PBMs, compared to 57 percent in 2011 and 47 percent in 2009. The majority (68 percent) cite “pricing competitiveness” as an extremely important PBM service.

Prescription drug costs. The majority (71 percent) of survey respondents spends 16 percent or more of their total health care benefits cost on pharmacy benefits. Eighty-seven percent reported affordable pharmacy benefits as having a high impact on containing health care costs over the long run. This indicates that employers believe appropriate prescription drug utilization can substitute for more expensive medical services.

“Pharmacy benefit costs continue to increase and, on average, currently represent more than 15 percent of employers’ total health care costs,” explained Burns. “If not managed effectively, prescription drugs can represent a constant financial drain on company resources and undermine the return on investment of a plan sponsor’s entire health care benefits program.”

ACA requirements. The survey asked organizations how they are responding to some of the pharmacy-specific requirements within the ACA. Of the two major categories of health benefit plans under ACA—grandfathered (i.e., plans in existence on March 23, 2010, meeting certain requirements) and nongrandfathered (subject to a larger set of requirements)—only 26 percent of survey respondents report being grandfathered. Of those grandfathered plans, 42 percent plan to keep this status long-term, beyond 2014.

Survey respondents were almost evenly divided among the three listed approaches to comply with the ACA mandate of offering contraceptive products at no cost to plan participants:
• Cover only contraceptives that are generics and brands without generic equivalent at $0 copayment, and cover others at the brand drug copayment level (27 percent);
• Cover only generic contraceptives at $0 copayment, and cover others at the brand drug copayment level unless deemed medically necessary (25 percent); and
• Cover all prescription contraceptives at $0 copayment (25 percent).

The majority of survey respondents provide coverage of immunizations under the medical benefit only, with approximately 20 percent offering coverage under both the medical and pharmacy benefit.

Specialty drugs. Specialty medications, used to treat chronic catastrophic illnesses such as multiple sclerosis and an array of cancers, are typically used by only 1 percent or less of covered employees, but represent 20 percent or more of pharmacy plan costs. These specialty medications can cost upwards of $75,000 or more per year, per course of treatment. Despite their cost, more than 30 percent of respondents did not know the portion of overall drug spend attributed to specialty medications.

Sixty-seven percent of respondents use utilization management programs and 55 percent use step therapy protocols to manage specialty drug costs, up from 45 percent and 34 percent, respectively, in the prior survey. This indicates that more plan sponsors recognized the need to manage these therapies whenever possible.

For more information, visit https://www.buckconsultants.com.