As health care costs continue to rise, many employers struggle to provide their employees with health coverage at an affordable price. Prescription drug benefits are a highly utilized component of health coverage and a significant cost driver for employers. Prescription drug coverage is typically administered by a pharmacy benefit manager (PBM) and includes generic drugs, brand-name drugs and specialty drugs, such as biologics and biosimilar drugs.
A report from Segal, a benefits and HR consulting firm, found that the projected cost trend for prescription drug benefits for 2023 is almost 10%, which exceeds all other health benefit cost trend estimates for the year. This cost increase is attributable to a variety of factors, including price inflation for prescription drugs, the introduction of costly new drug therapies and the increased use of specialty biologic drugs. It can be difficult for an employer to understand the specific factors driving its prescription drug costs due to a lack of transparency in the prescription drug market.
To address rising prescription drug prices, plan designs for prescription drug benefits have become increasingly complex. Most prescription drug benefits have multiple tiers of coverage with different cost-sharing requirements (deductibles, coinsurance and copayments) at each level. Health plans also commonly use medical management techniques to help control costs, such as prior authorization, step therapy and mandatory generic substitution.
Employers seeking to lower their prescription drug spending should start off by educating their employees on how to maximize their benefits and lower their out-of-pocket drug costs. By explaining the importance of using generic drugs when they are available, comparison shopping for the best price and finding manufacturers’ coupons, employers can encourage employees to become better health care consumers.
This guide to prescription drug benefits outlines common plan designs for these benefits, including the use of formularies and coverage tiers. It also summarizes different strategies employers can use to control their prescription drug costs.
Overview
When employees understand their coverage options, it can help lower costs, lead to better health outcomes and improve satisfaction with the employer’s benefits package. This guide can help employers understand how their prescription drug benefits work to make informed decisions and help employees understand their coverage:
- Pharmacy Benefit Manager
- Prescription Drug Formulary
- Prescription Drug Tiers
- Types of Drugs
- Medical Management Programs
There are some strategies employers can implement to help deliver cost-effective prescription drug coverage for their employees. This guide provides important strategies that employers should consider, including:
- Evaluate Plan Design
- Select the Right PBM
- Help Employees Become Better Consumers
- Prioritize Preventive Care and Wellness
The appendix of this guide features valuable information about prescription drug benefits, including infographics and FDA resources. Speak with Parrott Benefit Group if you have any questions about these resources:
- Helping Employees Control Prescription Drug Spending
- Tips for Selecting the Right PBM
- The Impact of Rising Prescription Drug Costs – Infographic
- 10 Ways to Reduce Your Prescription Drug Costs – Infographic
- FDA Resource: Generic Drug Facts Handout
- FDA Resource: Facts About Generic Drugs – Infographic
This guide is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2023 Zywave, Inc. All rights reserved.
