Health Reform WK-EDGE Employers can reduce prescription drug costs up to 24 percent by implementing formulary changes
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Wednesday, September 25, 2019

Employers can reduce prescription drug costs up to 24 percent by implementing formulary changes

By Tulay Turan, J.D.

Removing high-priced drugs with low or no added clinical value from formularies can save costs.

Large self-insured employers and other health care plan sponsors can save 3 percent to 24 percent of outpatient pharmacy costs managed by pharmacy benefit managers (PBMs) by removing high-priced drugs with low or no added clinical value from their formularies, according to recent research from the Commonwealth Fund. The study, Reducing Wasteful Spending in Employers’ Pharmacy Benefit Plans, analyzed drug utilization data from 15 self-insured plan sponsors to estimate savings from reducing the use of drugs that cost more than their commensurate clinical value as compared to alternatives. By reducing the use of high-cost, low-value drugs, the 15 plans could save $63 million annually. This represented a 3 percent to 24 percent decrease in overall pharmacy spending, depending on a number of factors.

The study found the following:

  • A total of 868 drugs from 71 drugs groups, making up 6 percent of claims analyzed, were classified as wasteful.
  • The cost differential between the low-value drugs and the drugs that were at least as effective and less expensive ranged from 25 percent to 99.9 percent per drug.
  • Wasteful prescriptions represented 3 percent to 12 percent of total claims per plan sponsor evaluated, or 6 percent across all data, with an average savings of $413 per script.
  • Brand-name drugs made up 42 percent of wasteful prescriptions, generating an average savings of $682 per wasteful brand script.
  • Generic drugs made up 58 percent of wasteful scripts, generating an average savings of $212 per wasteful generic script.
  • Specialty drugs made up 0.1 percent of wasteful scripts, which generated an average savings of $2,221 per wasteful specialty script.

The Commonwealth Fund concluded that while these savings are "compelling," adoption may be slow, because plan sponsors make benefits decisions based on factors that might trump cost reduction. However, "better formulary management—including elimination of wasteful spending—can help plan sponsors provide their workers with access to appropriate and innovative medications at lower overall cost and ultimately improve health outcomes," the study noted.

IndustryNews: NewsStory PharmaServicesNews

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