One in two Americans rely on their employers to provide health care benefits for themselves and their families. And with health care costs continuing to rise — health care spending by private businesses grew by six percent in 2016 alone — many organizations are finding that the primary driver of these increases is pharmacy costs.
In fact, drug costs rose by nearly 10 percent in 2015 — more than twice the rate of medical costs in other areas, such as hospital and nursing home care. To help keep costs in check, employers turn to pharmacy benefit managers (PBMs) to provide comprehensive prescription drug coverage and other patient-focused programs and tools to ensure their employees can get the medications they need at a more affordable price. According to a survey of more than 250 organizations, in 2009 only 47 percent of employers chose to use a PBM. As drug list prices continued to rise, by 2013 that number had grown to 61 percent.
Put simply, employers recognize it is good business to ensure sustainable, affordable access to prescription drug coverage for their employees. To help achieve that, they choose to partner with PBMs to negotiate on their behalf, and provide expertise to help keep costs under control while improving health outcomes for their employees. Like any other business decision, employers seek partnerships with PBMs for a simple reason: the partnerships deliver results.
First, the PBM is expected to deliver real cost savings by managing prescription drug spending. Through data-driven negotiations with drug companies, PBMs leverage their scale and purchasing power to drive deep discounts on the list price of prescription drugs set by the drug makers. While list prices for drugs grew by more than 12 percent in 2015, that same year, increases in average net prices for PBM clients were held to just under three percent.
Second, employers expect PBMs to provide access to effective medications at the most affordable price. PBMs accomplish this in part by using clinical expertise to identify generic alternatives that achieve the same health outcomes for a lower price. With generics accounting for 89 percent of prescriptions filled in 2015, but only 27 percent of drug costs, that represents a savings of $227 billion across the U.S. health care system in just one year.
One in two Americans live with a chronic condition, such as diabetes or hypertension, that often requires taking multiple medications on an ongoing basis. Research has shown that half of Americans don’t take their medications as prescribed, resulting in higher overall health care costs for the employer and their employees due to lack of medication adherence. For these reasons, employers turn to their PBMs’ patient-focused tools and programs to help their employees manage chronic conditions through programs like one-on-one counseling and medication management.
Finally, employers demand full visibility, not only into total cost savings promised and whether they are being delivered, but also into the fine details of how these savings are realized. Employers are active participants in the process, and maintain the right to audit their PBMs at any time.
Employers who partner with PBMs are sophisticated organizations that expect PBMs to innovate and deliver real value on their behalf every day. In fact, every dollar invested in a PBM service returns six dollars in savings for employers and their employees.
When every dollar matters, employers are finding that partnering with PBMs is a smart investment and the right choice for their organizations.
Meghan Scott is Executive Director of the Coalition for Affordable Prescription Drugs (CAPD), which brings together a broad-based group of employers, unions, health systems, public sector employees and retirees, pharmacy benefit managers, and other stakeholders who are working to be part of the prescription for affordable health.