benefit trends: prescription drug cost-containment strategies.

 
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Benefits practitioners have grown accustomed to headlines addressing the escalating costs of prescription drugs. A recently released congressional report stated that the prices of commonly prescribed brand-name drugs have risen at a rate nearly ten times the annual rate of inflation over the past five years.

The 2018 Employee Benefits Survey provides benchmarking data on the methods used to combat these escalating costs, including cost-sharing initiatives, limits by drug type, drug access controls, and purchasing and administration initiatives. Nearly all (97.6%) responding organizations to the survey offer prescription drug benefits, either as part of their health plan (83.1%) or through a separate plan (14.5%).

Cost-Sharing Initiatives

Responding organizations use a number of cost-sharing initiatives to ease the burden of rapidly escalating costs. Tiered cost-sharing plans are common, offered by 92% of responding organizations. Three-tiered systems, offered by one-half (50%) of responding organizations, typically have one cost-sharing level for generic drugs, a higher level for preferred brand-name drugs and an even higher level for nonpreferred brand-name drugs. It's common for survey respondents to have four (35.3%) or even five (6.7%) tiers for prescription drug cost sharing.

Coverage/Limits by Drug Type

Survey respondents also employ a diverse range of strategies to limit the use of certain drug types. More than seven in ten responding organizations (70.9%) use a drug formulary. A formulary is a list of medications covered by the plan and typically includes drugs that are considered the most effective and economical. One-half of respondents use step therapy (50%), which requires a beneficiary to use the most cost-effective treatment before proceeding to those that are more expensive or are riskier to use.

To reduce plan costs, two in five responding organizations (39.4%) promote the use of generic drugs via financial incentives. More than one in three plans (36.3%) take this concept a step further and mandate the use of generic options. This practice is more common among multiemployer plan respondents. More than one in five responding organizations (20.9%) place specific limits on specialty and biotech drugs. Specialty drugs are high-cost medications that treat complex and rare medical conditions and include biotech drugs or biologics, which are produced using living organisms such as yeast, bacteria or human cells. A similar...

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