When drug plans are designed and managed properly, there is an opportunity for a win-win scenario for all key stakeholders involved. Drug plan management does not need to be a zero-sum game, as it is often portrayed. A properly designed and managed plan that benefits everyone doesn’t happen automatically, but the process of getting there is far less complicated than many plan sponsors and advisors realize. The rewards can be significant.
A great example of a win-win scenario is the following case of a plan sponsor that recognized action needed to be taken when drug plan cost increases were threatening to result in increased cost-shifting to members and overall plan unsustainability.
The plan was originally a traditional, open design where plan members had relatively little out-of-pocket expenditure and, therefore, virtually no awareness of the need to consider plan sustainability. After a review of 24 months of the plan experience, quantifying where the plan spending was inefficient, and where money could be saved and reinvested elsewhere within the plan, a decision to modify the plan was made.
A customized, tiered plan design that covered high-cost specialty (i.e., biologic) drugs and innovative brand name products in areas such as asthma, thyroid conditions, HIV, immunosuppression and diabetes at 100% co-insurance was implemented. This was a win for brand name pharmaceutical companies because they are focused on having the market look at the larger-value picture, rather than focus solely on the price of these new therapies.
At the same time, generic penetration rates within the plan were very low under the original plan design. Thanks to the changes made with the tiered design, and the financial incentives implemented to cover generic products at 100% co-insurance, generic penetration rates increased dramatically. In an era where many generics now cost between 18% and 35% of the price of their brand equivalents, generic manufacturers are focused on increasing their market share significantly in order to grow. So plan designs like this are appealing to generic manufacturers looking for higher utilization of their products, especially at a time like this when generic prices seem to drop on a quarterly basis.
There is a place for both generics and brand drugs in all plans, and that balance was reached here in a meaningful and responsible manner. And it’s a good thing that this balance was achieved and design changes were made when they were because here is what happened within this particular plan over the last 36 months.
- Expensive specialty drug therapy spending nearly doubled to a remarkable 28.8% of plan spending in just three years. Less than 1% of claims now make up more than one-quarter of plan spending.
- More than half of the claims for expensive specialty medications are for spouses—not employees. How would the plan sponsor have justified that spend today if its plan performance was in disarray and the plan on the brink of sustainability?
- Although plan spending on specialty drugs has increased by 95% since the beginning of 2010, overall plan spending (when normalized for changes in plan population) increased by less than 5% per year thanks to the plan design modifications.
- The average cost eligible per claim with the plan increased by only 0.8% since the beginning of 2010, thanks again to plan design changes and member education.
Where would this plan be if it hadn’t made responsible, meaningful changes? How would it have absorbed a nearly 95% increase in specialty drug spending in three years? Where would the plan and its members be if it had simply shuffled more cost onto plan members and absorbed more cost onto the plan itself without an understanding of where the investment was going?
One of the biggest concerns when considering plan design change is member backlash. That didn’t happen in this case. In fact, the new plan design was a big win for both the plan sponsor and its members. Here’s why.
- Before a single plan design change was considered, the plan sponsor used its own claims data to determine the state of the plan with members and used the numbers to explain the situation the plan was in. Members understood that in order to protect the plan, and ensure its sustainability, things were going to have to change. Not being shy in sharing the details of the plan experience with employees (both union and non-union) made the process transparent and credible, and helped employees understand the need for responsible change.
- Plan members were given the ability to have a one-on-one review with a pharmacist if they felt they had a case where they needed to be on a specific product and have it covered at 100% in the event that reimbursement for their medication was changing. Nobody was left out in the cold, and members respected having that option. These changes were not intended to be punitive to members who have no other viable therapeutic option.
- Plan communication started eight months before changes were made and continue to this day so that the plan design remains top of mind and that there are no surprises.
- Over the past four years, plan member cost sharing has decreased by just over 15% when factoring in the changes in plan population. Yes, decreased.
In addition, the plan sponsor has had full support from its carrier throughout the process, which enabled the new structure to be implemented on time, and has also allowed for the required ongoing maintenance and fine-tuning of the design.
This truly was a win for everyone: manufacturers on both sides of the fence, the carrier, the plan sponsor and the members. Hard to ask for much more—especially when you think where the plan would be today if nothing had been done.
These are the views of the author and not necessarily those of Benefits Canada.