For the first time in more than 50 years, spending on prescription drugs actually dropped in 2012. Even with this good news, spending is projected to increase over the next several years, highlighting the need to promote greater use of tools pioneered by pharmacy benefit managers (PBMs) that reduce costs and expand access to prescription drugs for public and private sector programs.
As Congress seeks ways to reduce the deficit, these tools — including pharmacy networks, home delivery, utilization management (such as step therapy and prior authorization), and formularies — help make prescription drug benefits more affordable and reduce drug benefit costs by 35 percent, or nearly $2 trillion over the next decade.
Congress has acted before to make drugs affordable through Medicare Part D, where research, cited by the Centers for Medicare & Medicaid Services, shows that strong Part D plan negotiations have been a key driver in the benefit now being more than 40 percent less costly than initially estimated.
As policymakers seek solutions to reduce prescription drug costs, there are options available that can accomplish this goal without restricting access. These include:
• Greater use of preferred and limited pharmacy networks to generate savings. Today, there are more drugstores in the U.S. than McDonald’s, Burger Kings, Pizza Huts, Wendy’s, Taco Bells, Kentucky Fried Chickens, Domino’s pizzas, and Dunkin’ Donuts combined, creating a highly competitive environment. Greater use of preferred and limited pharmacy networks could save payers an additional $115 billion over the next 10 years and achieve the savings while meeting Medicare’s pharmacy access standards.
• Modernize Medicaid pharmacy. A new report estimates that upgrading drug benefits in Medicaid could save the federal government and states $74.4 billion without cutting either benefits or enrollees. Most state Medicaid programs make surprisingly little use of the tools Medicare, unions and employers rely on to curb wasteful spending. By transitioning to a more efficient PBM approach, New York’s Medicaid program saved an estimated $425 million in 2012.
• Encourage chronic care pharmacy and home delivery. Home delivery is popular with patients because it offers less expensive 90-day prescriptions and is more convenient than driving to the drugstore. With mail-service pharmacies, patients can get private counseling over the phone from trained pharmacists seven days a week, 24 hours a day. In a letter to United States Postmaster General, 88 members of the U.S. House touted the value of mail-service pharmacies, saying that “home delivery is the most cost effective way of filling prescriptions for TRICARE beneficiaries, and saves Medicare and Medicaid money as well.” Currently, beneficiaries in private sector retiree plans use home delivery four times more often than those in Part D plans because Medicare places restrictions on home delivery benefit options.
• Expedite the approval of biogenerics. As the number and costs of expensive biologic drugs drastically increases, so does the urgency to begin the approval pathway for biogenerics as quickly as possible. Reducing the number of years a drug company has “exclusivity” or monopoly-pricing power would increase competition and lower costs for payers and consumers. The president’s budget proposes to “accelerate access to affordable generic biologics by modifying the length of exclusivity on brand name biologics. Beginning in 2014, this proposal would award brand biologic manufacturers seven years of exclusivity, rather than 12 years under current law, and prohibit additional periods of exclusivity for brand biologics due to minor changes in product formulations, a practice often referred to as ‘evergreening.’” According to the budget, these changes would result in $3 billion in savings for Medicare and Medicaid.
To lower health care costs, we need a competitive, flexible environment that fosters the ability of large and small payers to use key tools that improve quality, reduce costs and expand access. PBMs are part of the solution, and we’re looking forward to working with policymakers on new ways to achieve these goals.
Mark Merritt is president and CEO of the Pharmaceutical Care Management Association.