The New Drug War: Employers vs Prescription Drugs

Employers rank prescription drugs as their second most influential driver of health care costs. In fact, 71 percent of U.S. employers spent 16 percent or more of their total health care budget on pharmacy benefits.

What good news there is, appears to be short lived. In 2013, prescription drug sales actually dropped by 0.7 percent. Drug expenditures were expected to rebound by 3–5 percent in 2014. In reality, total prescription drug spending rose by 13 percent—the biggest increase since 2003.

That’s because drug manufacturers have found a new focus for boosting mega-profits. Sales of blockbuster drugs have collapsed in recent years due to lower-priced generic versions. So drug companies are turning to treatments for smaller populations suffering from more complex diseases. The development of these specialty drugs, along with vaccines, are driving the expected increase in costs.

Medication madness: The high cost of cures

According to Scientific American, it costs approximately $5 billion to develop a new drug. This of course has a significant impact on pricing. For instance, Solvaldi, the new specialty drug for hepatitis C, costs $84,000 for a course of treatment or $1,000 a pill. That’s considerably lower than a liver transplant, but extraordinarily expensive compared to most prescription drugs. Spending on hep C drugs alone rose 743 percent in 2014.

What’s more, specialty drugs are on the rise. In 1990, there were 10 specialty drugs on the market. In 2012, over 900 such products were in development. Specialty drugs currently account for about 17 percent of the average employer’s overall pharmacy spend, but are estimated to make up 40 percent by 2020.

Despite the high—and possibly getting higher—costs of prescription drugs in our country, there are concrete things that employers can do to help encourage appropriate use of prescription drugs. And reduce their impact on the cost of health care benefits.

What you can do

Consider your particular population when you review different pharmacy benefit designs. Using a tiered benefit structure to encourage the use of regular disease maintenance drugs has been shown be effective. These tiers can also promote the use of generic drugs or therapeutic equivalents instead of high-price, brand-name drugs. Mail order can be another cost savings when employees are able to order a 3-month supply of these essential drugs for the cost share of a two-month supply.

Ask your health carrier or pharmacy benefits manager what they do to promote medication adherence. Kaiser Permanente’s (formerly Group Health) comprehensive outreach includes reminders for labs (to check on drug effects), online prescription ordering, and medication reviews during and after hospital discharge. At Kaiser Permanente medical offices, primary care teams include a clinical pharmacist. This is particularly invaluable in helping patients who have multiple conditions and need to manage a complicated drug regimen.

Take a prudent approach to specialty prescription drugs

Has your company been impacted yet by the soaring costs of specialty drugs? It’s only a matter of time, so consider which specialty pharmacies your employees might access.

Kaiser Permanente has one of the largest pharmacy operations in the state of Washington, so it’s no surprise that we developed a specialty pharmacy to support our members. To ensure that patients receive maximum benefit from these therapies, our program has specially trained pharmacists, a meticulous pre- and post-dispensing protocol, and regular follow-up calls with patients to monitor adherence and efficacy. With the high cost of specialty drugs, it’s often wise to evaluate the medication after a trial period. We have follow-up calls with prescribing doctors if concerns arise at any time during the course of treatment. We can even help if your employee needs to connect with financial assistance for specialty drug cost shares.


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All plans offered and underwritten by Kaiser Foundation Health Plan of Washington or Kaiser Foundation Health Plan of Washington Options, Inc.