I Want a New Drug Plan

Companies hoping to curb prescription-drug charges are looking at a host of new cost-control measures.

Towers Perrin, meanwhile, is coordinating another employer collaborative that is seeking price transparency and full pass-through of rebates from drug manufacturers. Fontanetta says the group, which consists of about 30 employers, has negotiated agreements with Medco Health Solutions, a large PBM, in which Medco will be paid by the employers on a fee basis. In turn, Medco will pass along the drug rebates it receives from manufacturers to the employers. Tim Wentworth, Medco group president for national accounts, points out that this approach isn’t for everybody. Some employer plans, he says, still prefer to share the rebates rather than pay an administrative fee.

A Dose of Data

Experts say any strategy for controlling prescription-drug costs requires an understanding of the company’s usage data. “Really take a look at where your costs are coming from,” advises The Segal Co.’s Brandle. Employers need to know the drug categories and specific drugs that drive cost increases.

At SRA, analysis of usage data has played a critical role in containing both prescription-drug and other health-care costs. Overall, according to Denison, the company’s health-care cost increases have been below the national average in recent years.

As it happens, SRA has in-house data-mining capabilities that it can apply to its medical-claims data without identifying information about individuals. Grubbs and Denison attend quarterly meetings with, among others, CFO Stephen Hughes and COO David Kriegman to review trends revealed through this process and determine whether the drug-benefit plan design can be improved. For example, Denison explains, when the company learned that one of the top 25 drugs used by employees is for lowering cholesterol, it developed a voluntary health-promotion campaign to educate workers about lowering cholesterol, eating right, and exercising (see “Belt-tightening“).

Because SRA’s HR and finance staffs have been working closely together on a benefit-plan structure for a number of years, says Grubbs, their viewpoints have influenced each other. He says the finance team has become much more sensitive to how employees view plan-design changes, while he credits the HR team with having developed a better appreciation for the financial analysis of benefits decisions. As a result, says Grubbs, “at the end of the day, we end up with something better.”

Martha E. Mangelsdorf is a freelance business writer in Boston.

Rx for Curbing Pharmacy Costs


A typical pharmacy-benefit plan design these days might include three or four tiers of set co-payment levels. But with a co-insurance model, a company defines the percentage of the cost an employee will typically pay for a given type of drug. According to a recent survey by Hewitt Associates, 45 percent of employers are now offering a co-insurance option, up from about 20 percent during the past several years.

Set Employer Contributions For Certain Conditions.

For some classes of commonly used drugs in which there is a wide price differential among various drugs that are all within established medical-treatment guidelines—such as those to lower cholesterol—employers may offer to reimburse up to a set amount per day for an employee’s prescription. With such a plan model, employees who use one of the more inexpensive medications may find that all of their costs are covered, while an employee whose physician prescribes a costlier drug option would face out-of-pocket costs.

Step Therapy.

Employees and their doctors are required to start with more inexpensive treatments for certain conditions. “If something that’s simple and cheap can take care of you, then they won’t pay for something that’s less simple and more expensive,” explains Gary Claxton, director of the Healthcare Marketplace Project at the Kaiser Family Foundation.

Fixed Benefit.

Starting in July 2003, Humana, a Louisville-based health insurer, offered its employees the option of a pharmacy benefit that divides drugs into four classes based on how likely the drug is to offset other medical expenses, explains vice president of pharmacy and clinical integration William Fleming. Then, instead of fixing the employee’s contribution through a co-payment, Humana contributes a fixed amount for each prescription that varies with the class of the drug. For all but the drugs in the lowest tier of reimbursement, which includes those that treat hair loss and sexual dysfunction, the company caps an employee’s out-of-pocket costs per prescription.

Consumer-Driven Plans.

The trend toward consumer-driven health-care plans, in the form of health savings accounts and health reimbursement arrangements, may also curb drug costs. Prescription drugs are one of the areas where such plans can have the greatest impact on consumer behavior.—M.M.


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