October 11, 2017

in Benefits & Health

How You Can Manage Rising Drug Costs in Benefits Plans



Cost management strategies can save plan sponsors from a long headache. Tracking drug cost trends, anticipating changes, and planning solutions, can help in the overall management of benefits plans. Although the cost of drugs may not be in your control, how you respond is. Accompass outlines the four proactive management strategies available. 

Four Proactive Management Strategies

While annual prescription drug cost increases have come down from their 15% levels pre-2012, costs are still a major concern. A number of cost management strategies are readily available from insurance providers—and can make a significant positive impact in terms of controlling rising plan drug costs. These include:

1. Mandatory generic

This program limits the ingredient drug charge to that of the lowest cost alternative. If there is a generic alternative, then the generic drug will be dispensed or the plan member will be reimbursed up to the cost of the generic equivalent. This helps limit cost within a group insurance drug program. 

2. Step therapy

Step therapy reduces both drug cost and risk by starting medication with the most cost-effective drug therapy and progressing to more costly and risky therapies, only if necessary. 

3. Managed formularies

This program lists the drugs that are covered. The best managed formularies use an evidence-based review process overseen by a pharmacy and qualified clinicians and practitioners. Each drug should be assessed based on how effective and cost-effective it is versus comparable treatment options.

4. Fixed formularies

This option only covers those drugs on the market or selected by the employer at the time that the formulary is adopted. Any new drug that enters the market after implementation is not covered. 

The Strategies Plan Sponsors are Adopting

The use of tiered managed formularies has increased slightly, with one insurer reporting 15% to 25% of their clients now using a two or three-tiered managed formulary. However, most insurers still report their uptake of tiered managed formularies at 5% or less of their private payor clients.

With drugs representing such a significant portion of overall plan costs, it’s important to stay on top of cost-management developments, and to make use of the solutions available to you.


Click here to download the full free 2017 Report Fresh Perspectives on Group Benefits: The Latest Thinking From Plan Sponsors, Members, and Insurers.