Considerations for Optimizing Pharmacy Benefit Plans

Industry reports have shown the percentage of healthcare dollars spent on pharmacy continues to rise, jumping from 21% to 27% since 2021.¹ With even greater trends projected in the coming years, employers and plan sponsors are facing mounting pressure to manage prescription drug spend within their pharmacy benefit plans.

Providing a comprehensive pharmacy benefit plan that balances cost containment and meets patients’ needs can be challenging, but with the right partner it is achievable. Over the last 20 years, National CooperativeRx has successfully implemented strategies to manage our members’ trend, while maintaining high member and partner satisfaction. Since our inception, we have averaged an annual net cost increase of just 1.3% after rebates, and in the first 6 months of 2024, our members achieved a combined trend of negative 0.5%.

In this blog, we will explore some practices that have contributed to our success, offering employers and plan sponsors valuable insights and considerations for optimizing their pharmacy benefit plans.

Formulary and Cost Share Structure

Implementing a pharmacy benefit plan with a tiered formulary—including generic, preferred brand, non-preferred brand, and specialty tiers—enables more differentiation in cost sharing. Lower-tier drugs, like generics, are less costly and have a lower co-insurance, incentivizing patients to choose the cost-effective option. Adding more tiers can offer greater flexibility and balance between cost and preference.

Encouraging Generics

To help reduce costs, pharmacy benefit plans encourage the use of generic drugs over brand name drugs. Some plans implement dispense-as-written (DAW) penalties when a prescriber specifies a brand name drug be dispensed instead of a generic equivalent. While this may be due to patient preference, patients might not be aware of the additional costs associated with choosing the brand name over generic equivalents. Penalties may include higher copays where the patient may be required to pay the difference between the drugs in addition to their copay. Plans may also encourage generic use by adjusting how out-of-pocket payments are applied to the patient’s deductible and/or maximum-out-of-pocket limits when a DAW code is used. These measures can help steer prescribers and patients towards generic drugs, leading them towards better financial outcomes without compromising on quality or effectiveness.

Educating plan participants about the cost-effectiveness, quality, and safety of generic drugs promotes informed decision-making, which can enhance generic adoption and contribute to overall cost savings.

Specialty Management

Specialty drugs are among the most costly for plans and patients. In the first half of 2024, specialty drugs represented 1.5% of claims but accounted for 45.7% of our membership’s total costs before rebates. Compared to 2023, specialty drug trend, net of rebates, improved to -1.8% in the first half of 2024. We attribute this to our enhanced clinical management and oversight, including our specialty prior authorization program and criteria enhancements.

To further manage the financial impact of specialty drugs, plans may consider several practices, including but not limited to:

• Exclusive Specialty Pharmacies: The utilization of exclusive pharmacy providers for specialty drugs to negotiate better pricing and streamline high-cost medication management.
• Days’ Supply and Quantity Limits: Setting limits on the days’ supply and quantities of specialty drugs to prevent overuse, minimize waste, and reduce unnecessary costs.
• Step Therapy and Prior Authorizations: Implementing protocols with evidence-based guidelines to ensure that specialty drugs are used appropriately, and that less expensive alternatives are considered first. Step therapy protocols have patients begin with preferred drugs, and if initial treatment does not meet needs or is ineffective, they may progress to other alternatives. Prior authorizations are thorough reviews to ensure a medication or procedure is used for the right patient at the right time. This approach helps in reducing the likelihood of spending on less effective or unproven treatments.
• Preferred Drug Lists and Formulary: Preferred drug lists for specialty drugs steer patients away from high-cost products when lower-cost alternatives, such as biosimilars, may be available.
• True Accumulations or Copay Card Programs: Leverage non-needs based funding drug makers may provide to off-set costs.
• Site of Care Management: Directs patients to lower-cost settings for certain specialty treatments, such as infusion centers or home-based care.

Note: These practices may be limited by state regulations. The practices highlighted above should be considered on a plan-by-plan basis.

There is no one-size-fits-all approach to pharmacy benefit plans. At National CooperativeRx, we assist members in identifying the most valuable pharmacy benefit plan strategies for groups’ specific needs and tailoring plan designs to manage costs without compromising quality of care. Please contact your National CooperativeRx account representative for tailored recommendations.

Want to learn more about National CooperativeRx? Contact us here, we would be happy to set up a discussion or answer any questions you may have about how National CooperativeRx can optimize your clients’ pharmacy benefit plans.