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Pharmacy Preparedness: 5 Best Practices for a Changing World

Author Kellee Lemcke

The COVID-19 pandemic has had a significant impact on the healthcare landscape and has heightened employers’ focus on a number of issues, including their investments in pharmaceuticals. Much of the pharmacy conversation prior to the spread of COVID-19 was centered on the projected growth rate in pharmaceutical expenses (Figure 1).

Projected Growth Rates in National Health and Outpatient Prescription Drug Expenditures

Figure 1

Specialty medications were a particular concern, as projections showed they could amount to 50% of expenses. While fewer members require these drugs, they come at a much higher cost. Many employers were already bracing for these increases based on outpatient prescription drugs data. Amid the current uncertainty — healthcare concerns and new business priorities brought upon by the pandemic — organizations are seeking solutions in many areas, including additional ways to manage pharmacy costs.

Here, we provide an overview of best practices for managing pharmacy costs in today’s environment.  

Quick Takeaways

  • Pharmacy (outpatient prescription) cost is projected to align with national healthcare expenditures and even surpass them in the future.
  • Specialty medications make up the bulk of the expense, currently around 50 percent of costs.
  • COVID-19 has increased utilization of certain medications, including respiratory medication and mental health-related drugs.

 

Stay Informed: Analyze Information Received from Pharmacy Benefit Managers (PBM)

During uncertain times, healthcare needs and priorities can change quickly. It’s important to stay up-to-date regarding clinical and financial information to help mitigate spending and ensure proper access to medications. In addition to medications directly related to COVID-19 and related respiratory issues, mental health treatment is extremely important during this pandemic and the associated economic challenges. Data has already shown a significant increase in mental health prescription utilization as well as respiratory drugs (Figure 2).

PBMs should regularly share this type of information, and companies should analyze the data to identify the options that best advance their pharmacy benefits strategy. Employers often work with experts to evaluate information from PBMs to ensure they aren’t overspending on services that don’t provide any value. That level of analysis can ensure PBM data aligns with the employer’s strategy and investment.

Utilization Increase for Mental Health Medication

Figure 2

 

Review Current Contracts

Employers should have a deep understanding of their current PBM contracts, particularly items that can be affected by the pandemic, such as a force majeure clause or the impact of membership or utilization changes. Knowing and being able to project the impact of these contractual items is necessary for employers to be prepared and budget appropriately. Discounts and rebates, for instance, could be adjusted depending upon the action of the PBM and the contractual requirements. 

Be sure to analyze changes being made to contracts to ensure they are allowed.

Competition among PBMs is intense. A well-defined PBM renewal process that includes a request for proposal for PBM services and mid-contract market checks represents an important negotiating tool to manage the cost and care of medications. PBM vendors are actively seeking to win and renew business, so that process introduces an opportunity for contractual concessions and pricing improvements. Now more than ever, making sure contracts are competitive is essential.

 

Stay Ahead of Trends to Manage Costs

The current environment serves as an impetus to review any and all savings opportunities that are available through the PBM, including clinical program offerings. Organizations can review these opportunities in conjunction with their own pharmacy data and any COVID-related reporting the PBM may provide to understand trends, associated costs, savings and improvements in care.

Trend data is also valuable when conducting regular market checks and benchmarking exercises. Market benchmarking can help ensure the plan is getting the best pricing. Coupled with evaluating contractual guarantees, these strategies can help employers manage costs.

 

Review Networks and Coalition Opportunities 

Reevaluating the current network configuration — and distribution channels — can help uncover sources of value. Organizations can leverage retail networks that may have more aggressive pricing or explore narrow networks that may come with improved pricing without sacrificing access. Coalitions represent a great opportunity to reduce costs through aggressively negotiated pricing and best-in-class contractual terms. 

Not all coalitions are created equal and they should be well-researched, but joining one can be a viable and cost-reducing option for many employers. 

 

Conduct an Audit

In times of change and uncertainty, audits are more important than ever. Many PBMs recommended quick updates in early March 2020, particularly around certain criteria, quantity limits and prior authorizations. It’s important to review these changes and to ensure that the benefit reverts back to the earlier state. An audit also supports a due diligence review of the terms in place overall. A review of 2020 from a benefit and contractual perspective may be even more complex than in a regular year, but organizations can glean important insights and often financial savings from the audit.

 

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Employers were already seeking strategies to address rising pharmacy costs before COVID-19 spread rapidly. Finding solutions becomes even more important against the backdrop of the pandemic and its health and economic impacts. Indeed, these best practices can help employers manage costs while ensuring that the health and safety of employees and their families takes priority.