What You Should be Doing Now to Optimize Your Pharmacy Benefit for 2023

Justin Venneri

Justin Venneri

Starting the New Year off with good intentions and on the right foot with a solid game plan toward making personal or professional progress via New Year’s resolutions is the American way, right?

For plan sponsors and other health plan stakeholders, making a dent in the total cost of care is likely a priority for 2023. Why wouldn’t it be when rising out-of-pocket costs1, premium hikes2, and astronomical prices for newly approved drugs3 dominated fourth-quarter 2022 headlines?

The truth about drug prices...

Generic drug prices have been falling for a decade, and brand deflation is a more recent phenomenon4. So why has pharmacy spend been a primary source of cost inflation for health plans for years, rising to 30% or more of total health plan costs in some cases? Perhaps it has to do with an irrational drug price index (I.e., AWP) being the backbone of legacy pharmacy benefit manager (PBM) contracts with benefit plan sponsors.

To help think through how progress can be made, I separately asked several members of the Capital Rx leadership team - President Matt Gibbs, PharmD; Chief Growth Officer Kristin Begley, PharmD; Senior Vice President of Strategy Josh Golden; Senior Vice President of Pharmacy Sara Izadi, PharmD; and Chief Strategy Officer Joe Alexander - one question:

What are the top few suggestions you would give an employer/plan sponsor today to help them optimize their pharmacy spend in 2023?

The results are in, and given the fiduciary responsibility plan sponsors have, this list of tactical and strategic suggestions should be helpful for so long as the status quo, legacy PBM model dominates the market.

Keys to Impacting Your Pharmacy Benefit Spend

Vendor Alignment

  • Make it a priority to find aligned vendor partners (mentioned 2x). Plan sponsors must avoid/resist “race to the bottom” or “quick fix” solutions. The necessity for plan sponsors to manage their benefit budgets responsibly and sustainably is ever-growing. However, these reasonable motivations can also overwhelm a plan sponsor's senses and push toward ‘quick fix solutions’ rather than sustainable paths forward or ones that best align with their organization’s overall goals (employee retention, etc.). Plan sponsors must hold stakeholders accountable for their performance. One way to do so is with guaranteed PMPMs.
  • Ask for a copy of whatever your PBM submitted/submits on your behalf for CAA reporting. It’s your data. You’re the fiduciary. Plan sponsors will be surprised by what they see, especially the rebates that the PBM has earned on the top therapeutic classes and top 25 drugs.
  • Understand how your advisor is being paid. Plan sponsors must be good stewards of health plan assets. Understanding if an advisor may be influenced by partnership fees from a PBM or health plan vendor is a must.

Double-Check Your Contract (and Biosimilars Strategy)

  • Avoid/resist surrogate markers of value like average wholesale price (AWP) effective rate guarantees and “per rebate eligible” minimum guarantees (said differently, drown out the noise and focus on hard measures of value + alignment with your organization’s goals/needs). For all the cynicism in the market and the consolidation of market share therein, plan sponsors do have options to choose from (across both traditional and non-traditional providers): You should ask harder questions of both consultants and the PBM to ensure (i) the evaluation process parses real value, and (ii) the plan sponsor procures the necessary service commitments to realize their organization’s goals.
  • Request Rebates per Rx. Rebates are often offered on a per-brand basis, and tons of games and wordplay are involved, making evaluating these offers impossible for plan sponsors. Requesting your PBM provide per Rx rebates across all prescriptions takes away the games and makes the math simple.
  • Welcome Biosimilars. As the first major biosimilars come to market in 2023, employers must be open to substitution programs and lower rebates. Not only to manage costs, but this would help encourage the future development of additional biosimilars.
  • Check your [PBM] contract to ensure that all rebate pass-through provisions include biosimilars. PBMs will be taking in massive rebates on the Humira biosimilars in 2023 and 2024. If your contract isn’t worded correctly, the PBM gets to keep every dollar of those rebates.

Review Your Plan Design

  • Turn off auto-refill on mail order and specialty. A 150% medication possession ratio is not a “good” result… it’s wasteful, and plan sponsors pay for it.
  • Turn off Mandatory Mail/Retail 90 programs (mentioned 3x). This one is more involved than turning off auto-refill. Programs that force members to use one channel over another to fill their prescriptions only result in members having way too much medication on hand. The plan often ends up paying for medication supplied outside/in excess of what is needed for treatment.
  • Focus on specialty medication management (mentioned 3x). When 1-2% of claims drive 50%+ of costs, you’ve got to dig into this. This includes evaluating side effects and response and adherence rates. Finding and engaging the right consultant to measure the differences between trend formularies and clinical programs is essential, especially when comparing PBMs (e.g., if you’re running an RFP).
  • Understand your existing benefits, what about them is most important to your organization, and define clear goals. An employer’s pharmacy benefit plan is far from a de minimis expense/liability, but it is also far from the largest line item. Many plan sponsors/administrators have inherited plan designs, PBMs, brokers/consultants, etc., or they easily overlook cultivating a well-defined strategy (+ goals) for their plans. Plan sponsors should understand the starting point and balance it against where you want the benefits to go; evaluate the plan as an asset vs. a liability, and then work backward to procure the best partners to help meet your objectives.

Keep Your Employees Healthy & Productive

  • Take a more detailed look at the total cost of care (mentioned 3x). We’re talking about pharmacy, medical, and payroll spent. Look holistically at drug spend and medical costs. Concerning pharmacy spend, make sure you keep drugs affordable so you don’t unnecessarily drive up medical costs.
  • Consider $0 or low-cost generics. Many employers still charge $10 - $15 for generic drugs when brand copays are net $30! This is not enough to drive generic dispensing rates to an optimal percentage, which is around 92%. Employers will save money by offering lower/no-cost generics to their employees while at the same time enhancing their employees' health and the likelihood of being compliant with medications.
  • Get all your data and leverage analytics. Sara said that decisions/point solutions should be tailored to benefit your population. Plan sponsors should ask about reported outcomes.

The Cost of Pharmacy Benefits Can Be Controlled... or at Least Explained!

Get in touch if you’d like to discuss or learn more about any of the above, our validated PMPM savings, or how Capital Rx’s account management teams and JUDI®, our next-generation enterprise pharmacy platform, can help with tactical and strategic decisions.

It is possible to mitigate rising or unnecessary pharmacy benefit costs with the right partner.

We’d love to hear from you!

1 Out-of-pocket health costs spiked in 2021 (Axios; December 15, 2022)

2 Inflation Threatens to Send Health-Care Premiums Surging (1) (Bloomberg Law; October 27, 2022)

3 FDA approves world’s most expensive drug at $3.5M a dose (ALM Benefits PRO; November 28, 2022)

4 Brand-Name Drug Prices Fell for the Fifth Consecutive Year—And Plummeted After Adjusting for Inflation (Drug Channels; January 4, 2023)