Tips for Lowering Your Prescription Drug Prices at the Pharmacy

Prescription drug costs are rising, putting significant pressure on employer-sponsored health plans. Many employers are grappling with these escalating expenses, having to raise premiums or cut some benefits to manage financial strain.

AARP Public Policy Institute’s report found that some of the most popular brand-name prescription drugs that Medicare Part D covers have tripled since the medications came on the market. Also, prescription drug costs for 943 commonly used drugs increased faster than the rate of general inflation every year from 2006 until 2020.

With these rising prices, it has become increasingly challenging for employers to keep up with the financial burden of healthcare costs.

10 Ways Employers Can Save Money on Prescription Drug Prices

Employers are looking for ways to reduce prescription drug expenses and maintain their employees’ health needs. In this article, we’ll explore various ways employers can help lower prescription drug costs and offer practical strategies to reduce prescription drug prices without having to cut corners or benefits.

1. Negotiate with Pharmacy Benefit Managers

Pharmacy Benefit Managers (PBMs) play a crucial role in managing prescription drug benefits for employers. They can be responsible for managing the prescription drug benefits on behalf of:

• Health insurers
• Medicare part D drug plans
• Large employers
• Other payers

Working with a broker that can effectively negotiate with PBMs can significantly impact your plans pharmacy spend.  Some of the key strategies in PBM negotiations include:

Eliminate spread pricing.
Spread pricing occurs when PBMs charge employers more for a drug than they reimburse pharmacies, pocketing the difference. By eliminating spread pricing, employers can reduce costs.

Negotiate lower drug prices and rebates.
Work with PBMs to negotiate lower drug prices and higher rebates on medications.

Review PBM fees and costs.
Scrutinize PBM contracts for hidden fees and administrative costs. Transparency in these fees can reveal potential areas for cost savings.

Evaluate PBM performance metrics.
Assess PBM performance metrics regularly to ensure your PBM delivers value and effectively manages drug costs. Metrics can include cost savings, adherence rates, and formulary management.

Explore alternative PBM models.
Consider alternative PBM models, such as transparent PBMs or those offering pass-through pricing, where all drug rebates and discounts are passed directly to the employer.

2. Carve Out Pharmacy Benefits

Following a “carve-out” pharmacy plan is when you separate your pharmacy benefits from medical benefits. Since all of the major medical carriers own PBMs, incentives are often misaligned and are not in the plan sponsor’s best interest.

Carving out pharmacy to an independent PBM can help minimize that risk. Carve-outs also allow for specialized pharmacy benefits management, focusing on cost containment and optimizing drug utilization.

3. Evaluate Your Plan Design

Not all benefits plans are equal, and they should be regularly evaluated to identify opportunities for cost savings. All plan structures and coverage limits should be reviewed annually to ensure they align with current employee needs and utilization rates. This practice allows employers to optimize their benefits and helps employees better understand the benefits they receive.

4. Implement Tiered Formularies

Healthcare plans often bundle a list of authorized and covered prescription drugs called a formulary. These formularies can be tiered, categorizing drugs into different levels, each with its copayment or coinsurance amount. This approach encourages:

• Cost-effective choices: Higher tiers include more expensive drugs, while lower tiers feature generics and preferred brand-name drugs.
• Patient savings: Employees who use drugs from lower tiers can benefit from lower out-of-pocket costs, making it easier for them to adhere to their prescriptions.

5. Encourage Generic Alternatives

Generic drugs can offer the same effectiveness as other brand-name drugs but at a lower cost. Employers that encourage using generic drug alternatives over their name-brand counterparts will see cost savings, but it will take some work.

Many people still believe the myth that generic drugs are not as effective as name brands, so it is important to ensure your employees receive information to better understand the value of generic utilization. This can be accomplished during annual open enrollment meetings as well as throughout the year.

6. Educate Employees About Medication Adherence

Medication adherence is when a patient correctly takes their medication as prescribed by their healthcare provider. When patients are “not adherent,” it is the opposite.

They may fail to get prescriptions filled, do not take the medication on time, not understand the directions, or sometimes stop treatment altogether. Patients should always follow the medication guidelines for their prescribed medications. The correct medical use provides effective treatment and could prevent costly future complications. To ensure that employees are using their medication correctly, employers can:

• Provide resources: Offer resources and tools to help employees understand the importance of sticking to their medication regimen.
• Implement programs: Develop adherence programs, including reminders, educational sessions, and support services.

7. Use Mail Order, Specialty, and International Pharmacies

Technology has provided a shift in how medicine can be delivered. While you can still pick up your prescriptions at the local pharmacy, there are options to have them delivered right to your door. Employers can offer these alternative methods to retrieve prescription drugs, giving their employees options to reduce costs and conveniently access necessary medications.

• Mail-order pharmacies: Online locations allow employees to order a 90-day supply of their medications, often at a reduced rate compared to a monthly supply at a local retail pharmacy.
• Specialty pharmacies: A specialty pharmacy is an alternative for those who need high-cost or complex medications. These pharmacies provide access to specialized drugs and additional services, such as medication management and counseling, which can help ensure better adherence and health outcomes.
• International pharmacies: These pharmacies sometimes offer lower prices on certain medications, especially for significantly expensive drugs in the United States. While this option requires careful consideration of legal and safety issues, it can be a viable solution for reducing costs on select prescriptions.

8. Analyze Prescription Data

Employee healthcare plans should not just be “set it and forget it.” Employers should check in and analyze plans and take an active approach to reducing healthcare costs. They can do this by regularly analyzing prescription data. This can help employers identify the following:

• Trends: Analyzing prescription data allows employers to identify current drug usage trends. This would help identify the most commonly prescribed medications or some fast-growing areas of drug spending. With this information, employers can pinpoint areas where costs could escalate, giving them time to step in and take a proactive approach to managing finances.
• Opportunities: Beyond simply spotting trends, prescription data can reveal opportunities for cost savings. For instance, the data might show that employees are frequently prescribed brand-name drugs when equivalent generics are available. With the data, you can promote generics and encourage the switch to lower-cost alternatives, significantly reducing drug spending.

9. Optimize Patient Assistance Programs

Pharmaceutical manufacturers offer patient assistance programs (PAPs) to provide eligible patients access to brand-name medications at little or no cost. The PAPs aim to help employees reduce the expenses of high-priced medicines. To ensure that employees can fully benefit from these programs, employers should take several proactive steps:

• Promote awareness: One of the most significant barriers to using PAPs is a lack of awareness among employees. Employers should promote these programs through business communication channels so employees are aware of the benefits.
• Facilitate access: Navigating the application process for PAPs is challenging and can be incredibly daunting for employees already managing complex health conditions. Employers can help by offering support services to guide employees through the process. This could include providing a dedicated benefits coordinator or partnering with a third-party service specializing in PAP enrollment.

10. Promote Preventive Care and Care Coordination

Healthy employees are happy employees! Investing in preventive care and effective care coordination for all employees can reduce overall drug costs. By focusing on proactive health management, employers can create a healthier workforce. Some tips include:

• Regular check-ups: Encouraging employees to attend regular check-ups can lead to early detection of potential health issues, allowing for timely intervention before they escalate into more serious and costly conditions.
• Care coordination: Coordinating care among providers ensures more effective management of chronic conditions, potentially reducing the need for expensive drugs.
• Health education and wellness programs: Educating employees about workplace wellness and healthy lifestyle choices, such as proper nutrition, stress management and regular exercise, can prevent the development of conditions that require long-term medication.

How Do High Prescription Drug Prices Impact Employer Plan Spend?

High prescription drug prices can lead to significant financial burdens for employers. Increased drug costs contribute to higher overall healthcare expenses, impact the affordability of employer-sponsored health plans, and potentially lead to higher premiums and out-of-pocket costs for employees.

Why Are Prescription Drug Prices So High?

Prescription drug prices have been a growing concern for employers, employees, and policymakers alike. The cost of medications in the United States is among the highest in the world, and several factors contribute to these steep prices:

• Research and development costs: The substantial investment required for drug development and clinical trials drives up costs.
• Patents and market exclusivity: Drug patents allow manufacturers to set high prices without having competition.
• Government regulations: Regulatory requirements for drug approval and safety add to costs.
• Health insurance coverage: The structure of insurance coverage and cost-sharing arrangements influences drug prices.
• The structure of the US healthcare system: Complex supply chains and lack of transparency can lead to higher drug prices.
• Economic factors: Market dynamics, such as supply and demand, also impact drug pricing.

What Factors Influence the Cost of Prescription Drugs?

The rise in prescription drug costs is not the result of one single cause but the outcome of various issues disrupting the costs together. These six factors are some of the most powerful drivers behind the increase in prescription drug prices, and they have shaped current medication affordability:

Research and Development Costs

The substantial investment required for drug development and clinical trials drives up costs.

Patents and Market Exclusivity

Drug patents allow manufacturers to set high prices without having competition.

Government Regulations

Regulatory requirements for drug approval and safety add to costs.

Health Insurance Coverage

The structure of insurance coverage and cost-sharing arrangements influences drug prices.

The Structure of the Healthcare System

Complex supply chains and lack of transparency can lead to higher drug prices.

Economic Factors

Market dynamics, such as supply and demand, also impact drug pricing.

What Legislation is Being Proposed to Control Prescription Drug Prices?

The Inflation Reduction Act is a significant piece of legislation to reduce healthcare costs. One of the act’s key provisions is the long-awaited allowance for Medicare to negotiate directly with pharmaceutical companies for lower drug prices. This act also defines a cap on out-of-pocket costs for seniors, ensuring that no one on Medicare will have to pay more than $2,000 annually for prescription drugs starting in 2025.

There has also been emphasis on increasing transparency in drug pricing as pharmaceutical companies are pushed to disclose the costs associated with R&D and marketing, aiming to expose and reduce excessive price markups contributing to high drug costs.

Are There Other Ways to Save Money on Prescription Drugs?

In addition to the commonly discussed methods above, several other strategies can help employers and individuals save money on medications. These approaches often involve leveraging alternative resources and exploring innovative solutions.

• Adopting value-based contracts: Paying for drugs based on their effectiveness rather than volume.
• Use digital health tools: Leveraging apps and platforms to manage medications and track adherence.
• Engaging in formulary management: Regularly updating formularies to include cost-effective drugs and removing less effective ones.

Save Money on Your Pharmacy Plan Spend with W3

Managing rising prescription drug costs is challenging, but with W3, you can effectively reduce your pharmacy plan expenses while maintaining quality care for your employees. To learn more about how we help our clients save money on pharmacy spend, contact us today.