Consumers are first line of defense in rising drug costs

Dan Ruggeri is a partner with Employee Benefit Design.

Many recent news articles have focused on the higher costs of prescription drugs. Ten years ago, prescription medications accounted for approximately 10 percent of health care costs. Today, the cost of prescription drugs accounts for almost 20 percent of total health care costs. In addition, expenses for prescription mediations are forecasted to again rise at a double-digit rate in 2004. This rapid rise can be partially attributed to the emergence of new and extraordinary drugs that can dramatically improve the quality of life and, in many cases, extend it.

However, there is growing sentiment that the pharmacy benefit managers that have taken over the processing of prescription drug benefits for many insurers and self-insured businesses are a big part of the problem.

Charges are commonplace that pharmacy benefit managers have financial incentives to encourage use of high-cost drugs where cost-effective alternatives exist. This has led to government investigations, lawsuits and calls for transparency the disclosure of all behind-the-scenes deals entered into by pharmacy benefit managers.

In response, the next generation of pharmacy benefit managers has begun to emerge. These pharmacy benefit managers open their books to clients and offer to pass through any savings they generate by negotiating with drug makers. They put themselves on the same side of the table as employers by eliminating any possibility of being influenced by a drug manufacturer's rebate for the use of a higher cost drug than is necessary.

Nevertheless, any effort to contain the rising cost of prescription medicine must start with the patient.

To help contain costs, patients need to become better consumers of prescription drugs. Many employees carry drug cards that require them to pay a fixed-dollar copayment for a given prescription drug, regardless of how much a drug costs. As a result, few individuals covered under such plans know the true cost of the drug prescribed or have an incentive to shop for a better price.

Drug cards may have a financial incentive to use a generic drug (i.e. a $10 copayment for a generic drug versus a $25 copayment for a brand-name drug), but few plans are designed to encourage patients to look for the best price available on a generic drug. The price for a generic drug may vary by 1,000 percent or more between different drug makers in this highly competitive branch of the pharmaceutical industry.

Benefit packages that encourage patients to become smart shoppers are an essential part of our approach to the problem of escalating drug costs.

Physicians also are targets in the drug makers' marketing efforts to reduce sensitivity to drug price. Typically, drug companies have their representatives deliver free samples to physicians to be given out to their patients. As you might expect, there is no free lunch. These samples include only the company's highest cost drugs, not generic drugs. Generic drugs are never made available as free samples since their price is much more competitive. The drug makers who provide the samples hope that the doctor will prescribe the same drug to the patient once it has been given away as a sample. Unfortunately, this is often what happens, and the prescription is written for a much higher cost drug than is necessary.

To become better consumers, patients need to start asking more questions. That means they must be educated to only get prescription drugs they truly need rather than requesting drugs they have seen advertised. These drugs are almost always the most expensive available.

In fact, a savvy consumer could make sure that he or she even needs a drug in the first place. The patient should ask whether there are alternatives to a prescription drug. Diet and exercise can oftentimes prevent the need for prescription medications, and over-the-counter medications should always be tried first.

Some excellent drugs in heavily used categories have recently been approved for over-the-counter sale and many more are soon to follow. For example, over-the-counter drugs such as Claritin and PrilosecOTC cost 80 percent less now than they did very recently as prescription medicines. Patients should ask their doctors if over-the-counter medications, would be a good first choice option. If not, then the next step would be a generic drug or a lower cost brand-name drug.

Another great cost-saving opportunity is pill splitting. Often, there is little or no cost difference between a 10 mg and a 20 mg pill of a given medication. Many drugs are already scored in the middle to accommodate this process. Medicare patients have been doing this for years. For example, a patient can cut their monthly cost of Lipitor by 30 percent through pill splitting. This process saves money for both the employee and employer.

Finally, if you don't have any other choice, you can always ask your doctor for more free samples.

These are examples of the type of activities that can be encouraged with the right pharmacy benefit manager, benefit incentives and patient education. We feel that a plan with the right components can generate prescription drug savings of up to 35 percent and help gain long-term control over the most inflationary portion of most health benefit plans.