The prescription drug train went full speed ahead in 2014 and is not losing steam. A new report from the International Foundation of Employee Benefit Plans asked employers how they are managing prescription drug costs, and responses revealed that, among other expense-saving methods, 18% of organizations are setting limits for specialty and biotech drugs.

We’ve noticed a slight uptick in organizations placing limits on specialty and biotech drugs since we last surveyed our members in 2014. At that time, 15% placed limits. The estimated price tag for treating a patient with a specialty drug is high: For some chronic conditions, a year of treatment with a specialty drug can exceed $100,000. In many cases, specialty drugs represent only about 1% of all prescriptions but account for one-quarter to one-third of total drug spend.

[Related: Overview of Prescription Drugs—One-Hour E-Learning Course]

The most popular cost-controlling methods for organizations are tiered pricing and a mail-order drug service, with 89% and 82% of employers currently implementing these initiatives. As for drug formulary lists, 71% of organizations have this tool in place, and 63% are using a pharmacy benefit manager (PBM).

Employee Benefits Survey 2016 Results
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Other techniques include:

  • Step therapy/therapeutic substitution—46%
  • Prior authorization/utilization management—38%
  • Mandated use of generic drugs when available—37%
  • Preferred provider networks—35%
  • Drug card program—28%
  • Preferential pricing agreements (negotiated with pharmacies/manufacturers)—18%
  • Discontinued or limited coverage of lifestyle drugs—17%
  • On-site or near-site pharmacy—16%
  • Coverage of select over-the-counter drugs—15%
  • Collective purchasing groups—14%
  • Reference-based pricing—6%.

Employers are finding it necessary to vigilantly watch prescription drug prices. They are striving to keep costs controlled by trying new approaches like using five or more tiers for cost sharing, where the highest tier is for the highest-priced drugs—usually specialty drugs. Moving forward, employers will continue exploring new cost-saving measures like referenced-based pricing.

Anne Killian
Communications Associate at the International Foundation

Anne Patterson

Communications Associate at the International Foundation

Favorite Foundation service/product: The innovative member survey efforts and results from the research team.

Benefits-related topics that interest her most: Health care, nontraditional wellness initiatives, employee benefit communication.

Personal Insight: It’s all about balance with Anne. She loves to run and enjoys a good culinary adventure. She’ll jump at the chance to travel or to spend fun times with family and friends, but she’ll also take time to catch her breath with an occasional Netflix binge or diving into a classic novel.

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