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How Can Employers Reduce Prescription Drug Spending?

Increased spending on prescription drugs is straining employers’ wallets. As such, employers are looking for ways to manage long-term costs and optimize their purchasing options – especially when it comes to specialty pharmacy products.


In 2019, a little less than

of employers' dispensed medications were specialty.

Yet specialty drugs accounted for up to

of client drug spending.


Though the majority of prescriptions dispensed are generic, brand and specialty drugs represent an increasing share of total Rx costs.

% of total Rx costs:


80.7% of dispensed prescriptions are generic


85.8% of dispensed prescriptions are generic


87.0% of dispensed prescriptions are generic

Note: 2020 figures are based on Aon analysis of Q1 and Q2 data. Figures are rounded to one decimal place and may sum to more than 100%.



Four strategies can help employers manage costs.


Evaluate Clinical Data

Traditional evaluations often only look at the discount provided by specialty pharmacies rather than the rebate generated.

New clinical evaluations, however, examine the number of patients who can actually be helped based on clinical data.

For instance, Aon’s Specialty Pharmacy Monitor is a proprietary tool that provides a deep analysis of how effectively pharmacy benefit managers (PBMs) are monitoring specialty drug spending.

Looking closely at how drugs are approved and how contracts with drug manufacturers are negotiated could be helpful when evaluating PBMs and could encourage lower drug spending for employers.

Consider an evaluation for new drugs that treat rheumatoid arthritis:

PBM A: Traditional evaluation

Reviews per year: 301

Rebate: 25%

Clinical requirement: Medical attestation

Approval rate: 85%

Paid claims per year post-approval: 256




Total net cost/year for those approved:


PBM B: New clinical evaluation

Reviews per year: 301

Rebate: 15%

Clinical requirements: National provider number for rheumatologist; trial and failure of traditional disease modifying anti-rheumatic drugs for at least three consecutive months

Approval rate: 60%

Paid claims per year post-approval: 181

Total net cost/year for those approved:



A traditional evaluation method could have cost the plan nearly $558,000 more for one drug category.



Join a Coalition

Pharmacy coalitions are used by employers of all sizes, and joining one is one of the easiest ways to address rising pharma costs. Coalitions can lower unit costs per prescription through group-leveraged buying power.

They also provide transparency around what is and isn't included in a guarantee – these details can have material impact on deal value.

Employers typically allocate 25% of their spending on average to specialty drugs, but all it takes is one or two patients to shift spending to 50% at the individual employer level.


Increase competitive edge

  • Coalition contracts have tighter controls and disclosures around maximum variability costs compared with that of PBMs that might change generic pricing from year to year.
  • Coalition contracts steer clear of misleading optics that make deals appear better than they are.

Apply the latest thinking and innovation

  • Pharmacy consulting teams conduct competitive bids every three years.
  • Teams can get annual market checks that provide additional value beyond the negotiated financial escalation clauses that are built into each PBM contract.


Explore Net-Pricing Models

Employers can choose between traditional spread pricing and more transparent arrangements whereby PBMs pass through discounts and dispensing fees pharmacies charge to the plan sponsor.


Current model:

Includes primary discounts and dispensing fees, typically by brand, generic, and specialty by the dispensing pharmacy.

Has manufacturer payment guarantee with a minimum pass-through of 100%. Some of the models in the marketplace today remove those primary discounts and generally have only the ingredient costs-per-adjusted-script guarantee.

Net pricing model:

Adds guarantees, including the primary brand discount for employers.

Includes market coalition oering, which has the secondary brand discount guarantee (network discount plus the value of manufacturer payments at the point of sale).

Includes an ingredient cost-per-adjusted-script guarantee that overlays nonspecialty and specialty products, as well as a manufacturer payment pass-through of 100%.


Regardless of the pricing option, employers should ensure:

  • An understanding of the contract, especially whether the headline rates actually represent how pricing is reconciled.
  • Transparency into PBM data and exactly how drug prices are calculated.
  • Awareness of any price osetting and whether a company has full audit rights and disclosures of all negotiated financial terms and conditions


Conduct an Audit

Employers likely need to conduct an audit, on their own or with a vendor, to see if their PBM is following their contracts.

Fraud, waste and abuse continue to impede contracts. While there is no way to eliminate them, employers can minimize damage by conducting an audit.

In our experience, most audits reveal issues that PBMs can address:

The client didn't receive what they expected financially, despite PBM reporting.
Potential benefit coding error occured, such as Dispense as Written code penalties.
Groups were not appropriately mapped to the correct benefit designs.
Inappropriate clinical decision-making caused a single drug to unnecessarily cost hundred of thousands of dollars annually.


As prescription drug spending increases, employers can manage costs by undertaking one of these four strategies and exercising due diligence in validating their current pricing arrangements.