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A survey of multiemployer health plans shows a heightened interest in innovative strategies to get the most out of prescription drug plans.

BUildingABetter PRESCRIPTION PLAN by | Frank Gentilella

Benefits Magazine v 48 no 4 Apr 2011 pp 26-30

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Just a few years ago, providing the broadest pre-scription coverage was the norm for multiem-ployer health and welfare funds. But the high cost of coverage and financial challenges in recent years have made it increasingly more difficult to

provide high-quality benefits to members. Plan sponsors are shifting their focus to controlling costs by improving health outcomes through enhanced care.

More funds are looking to pharmacy benefit managers (PBMs) to provide a comprehensive system that houses a pa-tient’s full medical history in one location. This 360-degree view of the patient allows monitoring of medication compli-ance and ensures that treatment meets the correct protocols of care—keeping patients safe while saving money.

A recent Medco Health Solutions Inc. report1 evaluated the state of mind of more than 50 midsized to large multi-employer funds, collecting their insights and strategies to controlling costs through aggressive plan management and innovative programs aimed at improving member health outcomes.

KeepingCostsUnderControlFor the ninth year in a row, the number of Americans

under the age of 65 covered by employer-sponsored health insurance has declined to nearly 59%. Taft-Hartley plan members are no strangers to this notion. Members often ac-crue benefits by the number of hours they work or dollars they earn. Many young union members who are out of work or with insufficient hours are forced to opt out of coverage. Those left to take advantage of coverage could be as young as aged 40 and are faced with the increasing likelihood of the physical and financial challenges of chronic and complex conditions.

Rather than drop coverage, plan sponsors that have previ-ously steered away from using strict clinical rules or chang-

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ing plan designs have recently been trending toward making the changes.

In addition to chronic and com-plex conditions of an aging workforce, the influence of direct-to-consumer advertising for brand-name drugs is also considered a major factor in driv-ing costs, according to nearly half of the plan sponsors in the survey. Forty percent of sponsors agree that the in-creased availability and use of high-cost specialty drugs is a strong cost driver. Nearly 30% believe that their members aren’t paying close enough attention to their personal health, re-sulting in poor health outcomes and higher medical costs.

Within the retiree population, these challenges become even greater. To combat these issues, plan sponsors in-tend to adopt more assertive drug cost-management tools. Although member disruption will become an issue, plan sponsors hope to ease the transition and keep members educated through broad communications campaigns. Many have found that providing com-munications months in advance of a change is helpful, as members are given

ample time to prepare. Building an ef-fective plan by working closely with members is essential in controlling costs.

Building an Effective Pharmacy Benefit Plan

Specialty

Accounting for 14.7% of drug spending in 2009, specialty drugs treat a broad range of illnesses including rheumatoid arthritis, cancer and mul-tiple sclerosis, and often require special handling and patient monitoring. De-spite the growing use of these medica-tions, only half of plan sponsors cur-rently use the programs they perceive to be the most effective at controlling costs because of concerns about mem-ber disruption. However, with the ap-propriate member communications in place, member concerns can be limited and these programs can be effectively executed.

Multiemployer plans are seeking out support. Sixty-seven percent of plan sponsors look to PBMs with specialty pharmacies to administer specialty drugs. The sponsors associated PBM programs with higher member safety and better clinical management, which can lead to improved adherence and lower medical costs. In fact, one Taft-Hartley fund found that after integrat-ing members into a PBM’s specialty pharmacy model, its member satisfac-tion and therapy compliance increased while medical costs decreased.

Generics

Capitalizing on the savings oppor-tunities generic drugs provide is a key strategy sponsors should consider. Ge-neric drugs provide significant savings

when compared to their brand-name counterparts—typically costing 30% to 80% less—while providing the same clinical benefit. Not only do generics save members money, but plan spon-sors can reap the savings as well. In 2009, generic drugs saved the nation’s health care system $139.6 billion, and over $53 billion worth of brand-name drugs are expected to lose patent pro-tection by the end of 2012.2

Plan sponsors already see the value of generics with nearly all survey re-spondents (96%) agreeing that generic drugs provide significant cost savings opportunities for their organizations. However, over one-third believe they have not taken full advantage of gener-ics. Education on the value and efficacy of generics is still needed; nearly half of respondents indicated that their mem-bers are not convinced that generics are safe alternatives to brand-name drugs.

Member communications that em-phasize plan design and limitations and focus on the safety and cost advantages of using generic and plan-preferred drugs will continue to be heavily used to minimize potential member disrup-tions. Plan sponsors will increasingly focus on using specific programs out-lined below to generate greater accep-tance and utilization of generics:

• Step-therapy programs to en-courage the use of lower cost drugs will jump from 56% to 78%.

• Generics copayment waiver pro-grams to encourage the use of generic drugs wil l increase sharply from 32% to 55%.

Channel Management

Similar to recognizing the need to implement generic drug programs,

learn more >>EducationPrescription DrugsSpecialty Pharmacy and Biotechnology Medication CoverageFor more information, visit www.ifebp.org/elearning.

From the BookstorePharmacy Benefits: Plan Design and ManagementF. Randy Vogenberg. International Foundation. 2011.For more information, visit www.ifebp.org/books.asp?6962.

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plan sponsors will also focus on implementing programs to encourage the use of mail-order pharmacies. Mail order is considered by 94% of respondents to be the most convenient channel to receive longer term prescriptions, and 86% think that mail-order pharmacies provide significant cost savings for their organization. However, 37% of labor plan sponsors think they have not done enough to maximize the benefits. Many are considering the following programs to boost mail enrollment:

• Automatic mail-order enrollment increases mail-order utilization by automatically enrolling members in mail programs and requiring them to opt out in order to use retail pharmacies. These programs are expected to increase fivefold, from 4% to 18%, over the next few years.

• Plan sponsors will use member communications to try to minimize disruptions caused by the more restrictive mail programs, as well as to illustrate the cost advan-tages of mail order.

Broader Pharmacy StrategyTo improve member health and safety outcomes and

lower the total cost of care, plan sponsors will be embrac-ing programs outside the traditional pharmacy care model. Programs will include disease management for chronic conditions, wellness programs to foster productive health behaviors, and integrated data initiatives to identify at-risk members.

In addition, a new area of pharmacy care is receiving a lot of attention. Pharmacogenomics is a branch of per-sonalized medicine that examines how genetic variations influence a patient’s response to medications. Genetic test-ing can help predict how effective specific drug treatments will be for an individual or if a medication might result in severe side effects. It can also help prescribers more accu-rately determine the correct drug dose, which in turn can lower drug costs and prevent adverse drug events. While plan sponsors have been hesitant to adopt pharmacoge-nomic testing, more than a quarter are considering cover-ing it within the next two years, viewing it as an important component in a health plan.

Today, about 10% of drug labels approved by the Food and Drug Administration (FDA) include information on gene and drug response; that number is expected to grow substantially in the coming years. Research confirms the

value of these tests. A recent study found that hospitalization rates for patients taking warfarin, a commonly used blood thinner, were reduced by nearly 30% when patients took a genetic test to discover how they metabolize the drug.3 That makes it easier for the physician to prescribe the right dose. Two other commonly used drugs with genetic tests avail-able include the breast cancer drug tamoxifen and the widely used antiplatelet medication clopidogrel, also known by its brand name, Plavix®.

Besides having concerns about cost and privacy, patients, physicians and plan sponsors may be hesitant to adopt these innovative programs because of lack of understanding about how the testing works. Recent research finds that awareness and education play a pivotal role in genetic testing adoption.4 When both physicians and patients are informed about ge-netic testing options with the cost of testing covered by the prescription drug benefit plan, the adoption of genetic test-ing is substantially increased.

Retiree CoverageThe challenges of changing plans to overcome cost driv-

ers are amplified for retiree plans. Despite the pressures to reduce costs, none of the multiemployer plan sponsors that characterized themselves as “economically concerned” in-tends to drop coverage. Half of respondents indicate that understanding the various retiree options is a challenge for

Frank Gentilella is vice president and general manager of the national labor group at Medco Health Solutions Inc. Before joining Medco in 1999, he was the

executive director of account management at CareWise Inc. and senior manager, health care publishing, for McGraw-Hill Inc. Gentilella holds a B.S. degree from Trenton State College. He serves on the International Foundation’s Health Care Management and Coalition Committee. Gentilella can be reached at laborgroup@Medco.com.

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their organization, especially in the context of health care reform.

Plan sponsors will look to PBMs for guidance, support and counsel in optimizing their retiree strategy. The Centers for Medicare and Medicaid Services (CMS) provides a quality and performance rating for available prescription drug plans (PDPs) that will support plan sponsors in the decision-making process. Plan spon-sors should consider using a national plan with the highest quality rating of five stars. Each retiree prescription benefit plan is unique, and health care reform regulations can impact retiree and Medicare Part D plans in differ-ent ways. Plan sponsors must evaluate the best options from an informed and individual perspective.

Health care reform will also de-termine certain strategies plan spon-sors may execute. With the elimina-tion of the retiree drug subsidy (RDS) tax advantage under health care re-form, an employer group waiver plan (EGWP) might be a viable option to use to keep costs down. EGWPs are enhanced PDPs that offer plan spon-sors opportunities to lower plan liabili-

ties, while maintaining a plan design that is similar to their RDS plan— important if planned benefit design changes threaten a plan sponsor’s ability to meet actuarial equivalence for RDS.

However, none of the respondents is seeking to implement an EGWP de-spite the flexibility it would provide to reduce plan liabilities while continuing an RDS planlike design. Twelve percent will consider offering a PDP and sub-sidize coverage through premium con-tributions. EGWPs are required to pro-vide medication therapy management programs to better manage members’ chronic conditions, drug utilization re-view programs to ensure members are managing drugs properly, and ongoing communication to educate members in making smart, cost-effective choices.

By 2020, the Medicare Part D donut hole—the coverage gap between what Medicare pays and the catastrophic coverage threshold, during which the member pays 100% of the cost of drugs—will be eliminated. After that, Part D enrollees will pay only 25% of the cost of both brand and generic drugs. As of January 1, 2011, a benefi-ciary who reaches the donut hole will

receive a 50% discount on brand-name medications, lessening the financial burdens of this phase of coverage. In addition, this year Part D enrollees are eligible to receive a 7% discount for ge-neric Part D drugs (93% copay), as well as certain diabetic supplies and prena-tal vitamins.

Moving ForwardParticipants in multiemployer plans

tend to have a high level of loyalty to their health plan coverage and expect it to continue over time. Due to economic conditions and the impact of prescrip-tion coverage on overall health care costs, plan sponsors are increasingly seeking ways to manage these expens-es, while continuing to provide qual-ity benefits. Over the next few years, many plans are expected to shift their approach to pharmacy benefit plans—keeping the focus on controlling costs by implementing the most effective, assertive strategies to improve overall member health.

Endnotes 1. Medco Health Solutions Inc., Rx Intelli-

gence™: Findings from a National Peer Study of Labor Benefit Managers.

2. U.S. drug spending estimates are based on IMS Health data for 2008 and 2009. Brand drug expirations are based on expected patent expira-tion dates current as of April 2010. Changes may occur due to litigation, patent changes, etc.

3. Robert Epstein, M.D. et al. “Warfarin Geno-typing Reduces Hospitalization Rates.” Presentation March 16, 2010 to the American College of Cardi-ology’s 59th annual scientific session. Accessed on December 16, 2010 at www.medcoresearchinstitute .com/community/pharmacogenomics/warfarin.

4. C. L. Sanders et al. “Putting Knowledge Into Practice: Well Informed Physicians Are Twice as Likely to Order or Recommend Phar-macogenomic Testing.” Accessed December 16, 2010 at www.medcoresearchinstitute.com/docs/DOC-1243.

takeaways >>•  Plan sponsors say they intend to adopt stronger drug cost-management tools.

•  Although they see the advantage of encouraging the use of generic drugs, many plan sponsors still aren’t doing so. Many think participants aren’t convinced generics are a safe alternative to brand-name drugs.

•  Patients, physicians and plan sponsors often don’t understand the use of genetic testing to determine whether a drug will be effective for an individual, making them reluctant to adopt it.

•  An employer group waiver plan (EGWP) might be a viable option to use to keep retiree drug costs down.