Pharmaceutical prices are increasing at alarming rates in the United States. According to National Health Expenditure data, Americans spent $333 billion in 2017 on prescription drugs, up from $236 billion in 2007 — a 40+ percent increase, far outpacing inflation.
Similarly, a report issued by the Blue Cross Blue Shield Association reveals that “single-source drugs,” that is, medicines with no generic alternative, are rising at an average annual rate of 25 percent. Moreover, these medicines now make up roughly 63 percent of total drug spending — even though they comprise less than 10 percent of total prescriptions filled!
Why is this happening? Clearly, there are well-documented cases where drug companies’ greed has taken the concept of supply-and-demand to the extreme. Recent media exposés have shined spotlights on such egregious acts as a 600% increase in the retail price of Epi-pens and a 400% increase for various diabetic medications. It’s even been seen with far less critical remedies such as the dry-eye medication Restasis — whose parent company, Allergan, was recently sued following allegations that it used bundled rebates to preserve its market share.
However, the benefit of these brand-name drugs is apparent when one considers HIV drugs that have recently turned an AIDS death sentence into a manageable condition for many, or the metastatic cancer drug that has kept former President Jimmy Carter alive several years beyond his initial diagnosis. Such research and development costs are clearly palatable and beneficial in these scenarios.
As individuals, there is little we can do to solve these big-picture, systemic issues; however, as consumers and advocates, we can educate ourselves on the choices we have available to us – and that can shift the cost curve in the long-run, while providing short-term relief to our families and finances.
Remember the “Generic-Only” Rx plans? These drug riders were popular several years ago because they provided a small co-pay for generic drugs, but no coverage for brand name drugs. They allowed many businesses to offer a “low” copay plan alternative. The Affordable Care Act (ACA) eliminated “generic only” plans requiring carriers to cover all tiers of drugs. It is not a coincidence that since the ACA went into effect, brand name drugs prices have increased at an exponential rate.
To keep premiums down, some new health plans have Rx riders that cover only a percentage of brand name medications. An example would be a $10 copay for Tier 1, $35 Copay for Tier 2, and 50% Coinsurance for Tier 3; or you might choose an even leaner drug rider such as a $15 Tier 1 copay, 40% Tier 2 coinsurance, and 50% Tier 3 coinsurance. The out-of-pocket (coinsurance) costs for Tier 2 and 3 drugs may increase substantially with a plan like this. Copays and coinsurance exist to influence subscriber behavior. The emergence of the urgent care center is due, in part, to how copays for emergency room visits are structured. This pattern is likely to repeat with coinsurance plans for Tier 3 drugs: employees will look for alternatives.
So, as an employer, are you forced to shift the burden of these prescription increases onto your staff? No — you can give them a choice! Employers can offer multiple plans, so that employees can pick one that best suits their particular circumstances. Worried about how this might burden your human resources staff? Rest assured — your benefits consultant will educate your employees, including showing them how they can use coupons to reach their out-of-pocket maximum faster.
There is usually some fear and uncertainty with choosing a health plan. We are often asked, “What if I have a prescription with no generic alternative?” Humira, for example, has no generic alternative — and its retail price is about $6,000 per month. Given a choice, an employee likely won’t choose a plan with a percentage-based prescription rider if they have to use an expensive drug such as this; however, if he/she did, the maximum out-of-pocket expenses anyone is required pay in 2019 is $7,900. And yes, $7,900 is a lot of money, but it’s more manageable than the true cost of a drug (which in the Humira example would be $72,000 per year).
So help your employees take control of their healthcare costs. Giving them Rx options can help them not only decrease their share of the premium, but on a macroeconomic level, it may reduce the prices of prescriptions in the long-run.
Dan Botsford, Benefits Consultant
If you’re interested in learning more about this topic, or the services we provide, contact Dan here or email us at info@bondbenefits.com.