Managing prescription drug plan spending to help control costs

Drug plan management and cost containment are major concerns for most plan sponsors. As new drugs come to the market, prices are steadily rising. For some sponsors, sustainability comes under threat.

While the cost of new specialty medications is driving much of the costs, there are other factors that are having a significant impact. Each year, billions of dollars are spent on prescription drugs. Too much of that money is being spent in ways that have no impact on the health of plan members. Express Scripts Canada estimates that a third of maintenance medication spending is due to poor pharmacy choices (excessive mark‑up and dispensing fees) and poor drug choices (not using lower‑cost alternatives when available).1

How much is your plan spending on higher-than-necessary dispensing fees? Are your plan members using brand-name drugs when an equivalent low-cost generic drug is readily available? Are your plan members taking their medication as prescribed by their physician?

Patients not taking their medications as prescribed costs the Canadian health care system approximately $4 billion each year.2 What is it costing your drug plan?

The right medication can change and even save lives, but some prescriptions may not be making a difference. In fact, up to one in every three dollars spent on chronic conditions does not improve patient health outcomes.3

One size does not fit all

There is no one-size-fits-all solution for managing costs. However, there are approaches you can take to promote smart spending. It starts with a thorough review of your plan design to ensure it still meets your needs. Does it fit your objectives for offering health benefits? How well does it complement your organization’s culture? Do you have the right programs in place to help your plan and your members?

Taking control with programs designed to promote smart spending

There are actions you can take to promote smart spending when it comes to drug choice, distribution and non‑adherence. While one single plan design change probably will not have a significant impact on your drug plan costs, implementing a combination of programs can go a long way to help manage your spending.

The ways we spend

Reducing spending begins with an understanding of how extra spending may be happening: 

  • Purchasing brand-name drugs when generics are available
  • Using a new, more expensive medication when the current medication produces the same results 
  • Using pharmacies that charge higher dispensing fees
  • Incurring multiple dispensing fees for frequent refills of maintenance drugs instead of opting for a longer day supply
  • Prescriptions that are not taken as directed, which can cause a recurrence or worsening of an illness 

Drug choice

Cut the costs associated with the use of higher-priced prescription drugs. In many cases, lower-cost alternatives exist. Consider implementing programs that impose limits without sacrificing access to medication.

Solution Description
Mandatory generic substitution Limits reimbursement of brand-name drugs to the lowest-cost generic equivalent. The member can access the brand-name drug by providing medical evidence that the generic equivalent is not appropriate.
Step therapy Limits reimbursement of more costly second-line medications used to treat chronic conditions to members who have previously tried less costly, first-line options.
Managed formulary Defines the list of drugs covered under a drug benefit plan and provides preferred coverage or limits coverage to medications that are considered most cost-effective.

Distribution

Higher-priced pharmacies and frequent dispensing intervals can drive up costs. A few simple limitations can help reduce these costs.

Solution Description
Dispensing fee caps Limits the reimbursement of the dispensing fee (the amount a pharmacy charges to dispense a drug). This simple limitation encourages members to choose pharmacies that charge reasonable fees. 
Dispensing frequency caps Limits the number of dispensing fees reimbursed for maintenance medications to encourage plan members to opt for a longer day supply when appropriate. A limit on the number of dispensing fees that are reimbursed gives members a financial incentive to discuss a more practical dispensing period with their physician and pharmacist. It will also save unnecessary trips to the pharmacy and money.
Preferred pharmacy network (PPN) A network of pharmacies where the cost for dispensing of medications (i.e., dispensing fees and pharmacy mark-ups), has been negotiated between the insurance carrier and the pharmacy. These agreements may also provide access to additional services, including disease management programs and adherence services.  
Member education tools Tools available online and mobile devices can help plan members estimate the cost of their prescription while increasing awareness. These resources encourage members to seek out pharmacies that provide better value.

Non-adherence

When plan members don’t take their medication properly, money spent on unused drugs is only part of the problem. The health ramifications could have a much larger impact on both the member and your plan. 

Solution Description
Disease management and case management Involves working with healthcare professionals who provide support and education to help plan members manage their medication and health condition.
Medication adherence These programs help plan members by involving a health professional who monitors for medication compliance. Adherence to treatment is critical to achieving an optimal therapeutic response. 

Sustainable drug plans and better health outcomes

As the pharmacy landscape evolves, taking the time to evaluate and reassess your drug plan is worthwhile and may help ensure your plan is sustainable. Plan members should continue to have access to drugs that help support their health so they may be engaged, and able to positively contribute to your workplace and the goals of your organization.

Managing your plan doesn’t have to mean restricting access to coverage or creating a bad member experience, but it should contain features that help you and your plan members get the best value for the dollars you are spending.

Due to regulations, some of the programs profiled might not be available in the province of Quebec. To learn more about plan design options and programs, contact your Manulife representative.

Stats to consider

Both plan sponsors and plan members need more support to help drug plans remain sustainable.

Plan members are willing to participate in programs that could help them manage their conditions: 

  • 84% reported that they would like to know more about their health condition and how to treat it 
  • 64% would be open to meeting with a health care coach to help manage their health condition4

To learn more about the Canadian pharmacy landscape, visit manulifebalance.ca