Prescription Drug Cost-Containment Strategies

According to a recent International Foundation survey report, health care costs are expected to increase by 7% between 2022 and 2021. This increase is driven by a number of factors, including the high cost of specialty prescription drugs. In response to the cost escalation, plan sponsors are looking for ways to limit the growth of their prescription drug spending while continuing to provide high-quality coverage to their participants.

The 2022 Employee Benefits Survey from the International Foundation of Employee Benefit Plans provides benchmarking data on the methods that health care plan sponsors are using to control escalating prescription drug costs. Some of their cost-containment strategies are articulated below.

Cost-Sharing Initiatives

Respondents use a number of cost-sharing initiatives to ease the burden of rapidly escalating costs.

  • Tiered cost-sharing plans are common, offered by 93% of responding organizations. Three-tiered systems, offered by less than one-half (47%) of organizations, typically have one cost-sharing level for generic drugs, a higher level for preferred brand-name drugs and an even higher level for nonpreferred brand-name drugs.
  • It’s common for survey respondents to have four (40%) or even five (7%) tiers for prescription drug cost sharing.

Coverage/Limits by Drug Type

Survey respondents also employ a diverse range of strategies to limit the use of certain drug types.

  • About four in five (78%) organizations use a drug formulary. A formulary is a list of medications covered by the plan and typically includes drugs that are considered both the most effective and economical.
  • More than one-half (51%) of respondents use step therapy, which requires a beneficiary to use the most cost-effective treatment before proceeding to those that are more expensive or are riskier to use.
  • To reduce plan costs, one in four (27%) responding organizations promotes the use of generic drugs via financial incentives. A similar proportion (32%) takes this concept a step further and mandates the use of generic options. This practice is more common among multiemployer plan respondents.
  • About one in five responding organizations (19%) places specific limits on specialty drugs. Specialty drugs are high-cost medications that treat complex and rare medical conditions and include biotech drugs or biologics, which are produced using living organisms such as yeast, bacteria or human cells.
  • One in seven (14%) responding organizations covers select over-the-counter (OTC) drugs, which may be cheaper than similar drugs available by prescription only, as a cost-containment measure.
  • More than one in eight (13%) responding organizations utilize preferential pricing agreements, which are negotiated directly with pharmacies or with pharmacies or manufacturers.

Drug Access Controls

Responding organizations employ a range of drug access controls to combat rising plan costs.

  • A large majority offers a mail-order drug service on either an optional (69%) or mandatory basis (15%) to reduce prescription drug costs, focusing particularly on long-term drug therapies.
  • More than half (59%) use prior authorization or utilization management, while more than one in three (36%) employs preferred provider networks. In these arrangements, a preferred provider accepts predetermined fees for covered products and services, and patients receive incentives, such as smaller deductibles and other cost-sharing arrangements, to use them.
  • About one in six (17%) responding organizations has a drug card program. Drug card programs provide participants with identification cards that entitle them to receive medications at reduced prices or for free through a participating pharmacy and are more common among multiemployer plan respondents.
  • Less often, respondents offer split-fill or partial-fill strategies (8%). With this practice, patients initially receive only a portion of their prescription to encourage adherence and ensure they don’t have any severe side effects. This strategy helps plans avoid waste and is more commonly utilized by multiemployer and public sector plans.

Purchasing/Administration Initiatives

Finally, organizations utilize various prescription drug purchasing and administrative initiatives.

  • About two in three (66%) respondents contract with a PBM. PBMs manage pharmacy benefits for a plan sponsor and develop drug formularies and drug utilization reviews to reduce plan costs.
  • Fewer than one in nine (11%) responding organizations are part of a collective purchasing group. These groups use their collective power to obtain products at substantial cost savings.

Justin Held, CEBS
Senior Research Analyst at the International Foundation 

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