The Power of Formulary – Part 5 of 5: A High Level Perspective and a Summary Review

Sep 22, 2015

The series has focused on drug sustainability which may not be on a plan sponsor’s radar today. Over the past few years, many plans have been protected by legislated changes to generic drug pricing. Lower generic costs and the fact that many top brand drugs lost patent protection have created a temporary break from onerous inflation. Some insurers have been negligent in recognizing the lower inflation period as well. Plan sponsors should be aware this temporary lower pricing and savings impact have ended for the most part in April 2015.

For this reason, we recommend a professional advisor who is well-versed in this arena to lead the discussion. They can help craft the best strategy for your drug management that matches your employee and financial stewardship culture.

There are many stakeholders in the pharmacy benefit supply chain with vested interests in ‘profit’. The elements at play have less to do with drug efficacy and much to do with margins, retail access and market penetration. These are not necessarily bad things as they can be argued as necessary components in an industry that relies on billions invested in research to advance medicine and patient outcomes.

When creating benefit sustainability, plan sponsors have an important decision – Do I transfer risk and cost (eg. deductibles and coinsurance) to my employees or plan members or do I determine the best drug risk strategy that recognizes the opportunity to limit company and employee risk?

We did not delve into other risks for plan sponsors, such as stop loss premium and coverage, or the risk of being tied to an insurer indefinitely. For the employers who take the time to understand the issues, the benefits are significant. A sustainable benefit program can create a key, long-term market advantage as employers compete for the best in the workplace talent pool.

The ramifications of a large claim go far beyond the immediate and ongoing costs of high drug costs. A large claim that’s not offset by the public system could tie you to an existing insurance carrier, or limit options to change carriers in the future.

On a final note, the future of drug management will continue to evolve. Managing this risk will not end with drug formularies or public program considerations. The immediate future will see increased drug compliance and non-traditional delivery systems as possible layers in the journey to sustainability. One thing is for certain, the conversation will not end anytime soon.

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