5 Steps to Reducing Your Pharmacy Costs

Originally Published in RMP Advisor, September/October 2010

by David Edman

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Pharmacy costs are like healthcare costs—they’re often out of control. And the biggest obstacle to controlling pharmacy costs and enhancing value is a fundamental resistance to change. Allaying fear and overcoming the barriers to change takes time. But when you do, you’ll find that you can rein in costs without reducing coverage, increasing co-pays, and charging employees more for their insurance.

You Don’t Need to Go It Alone
There are a number of pharmacy benefit managers (PBM) who can help your organization gain control of pharmacy costs—you’ll find some are better than others. When it comes to controlling the costs for prescription drugs, we recommend taking the following five steps:

1. Implement a Generic Drug Program

   The Generic Pharmaceutical Association reports that generic medications account for 69% of all prescriptions dispensed in the United States, but only 16% of all dollars spent on prescriptions. That’s because a brand-name drug costs, on average, 50% to 70% more than its generic counterpart. We want our clients to use generics to the greatest extent possible; however, a good generic program allows for the use of branded medications when clinically necessary.
    

2. Institute Step Therapy

   To increase the use of generics, patients can be required to first try the generic equivalent. If the generic isn’t effective or the patient has an adverse reaction, the physician can switch the patient to a name-brand medication. The key to success is changing behavior, which requires the appropriate financial incentives tied to patient decision-making.
    

3. Use Electronic Prescribing

   Electronic prescribing is yet another area for potential savings. Studies conducted by Henry Ford Health System, Brigham and Women’s Hospital, and the Institute for Health Policy in Boston show that physician use of e-prescribing increases the levels of generic utilization by 3% to 15%. As an employer, you may not have any control over physicians’ use of e-prescribing, but your carrier or third-party administrator (TPA) does. Ask them about the levels of e-prescribing by their contract doctors. If they don’t know or if the levels are inappropriately low, consider changing your carrier or TPA.
    

4. Use Mail-Order Pharmacy

   A significant portion of your healthcare expenses is for the treatment and management of chronic illnesses, such as diabetes, asthma, heart disease, and depression. Mail-order pharmacy is a key component in any cost-containment program, providing savings as high as 10%, according to a study by the Lewin Group and released by the Pharmaceutical Care Management Association.
    

5. Enhance Patient Compliance

   Consistent with the above steps, our goals are to promote personal responsibility and increase the levels of compliance with proven drug regimens. Success in managing chronic care conditions is enhanced through an effective disease-management program implemented by—or in concert with—your PBM. A recent study of patients with multiple sclerosis that was published in the American Journal of Managed Care showed that a combined disease self-management and medication therapy management program resulted in:

   • higher medication adherence
   • 33.6% reduction in relapses
   • significantly lower costs.

By managing pharmacy benefits, you can save money—often at substantial levels. This is done most effectively in concert with a highly professional PBM company that sets patient satisfaction as an equally important objective to saving money. In this way, it’s a “win-win” opportunity for employers and their employees.