The post below is a guest blog from Steve Byrd who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.
A key trend among medical plans lately has been the move away from traditional pharmacy tiers. In the traditional model, generics — regardless of cost — reside under the least expensive copay tiers on your medical plan. In contrast, brand- name medications reside under the higher, more expensive copay tiers. For many years this model was the norm, and most consumers became very familiar with it. However, continued pressure to reduce cost has forced insurers to re-evaluate this traditional view. It is expected by some, that by the year 2024, pharmacy costs will equal half of our overall medical costs.
Many brand name medications are coming off of their patents, creating opportunity for generics to evolve. Traditionally, these generics have offered great savings over their brand name counterparts. However, many of generics are now entering the market at prices much higher than historical levels, creating new pressure on insurers to hold down costs.
In response to these increasing costs, insurers are re-evaluating their pharmacy tiering. Generic medications are being treated no differently than brand name medications; These drugs are being tiered based on their overall cost regardless of their designation as a brand or generic medication. Pharmacy pricing changes are catching many people off-guard. They don’t understand why their generic medication, which used to be offered in a more affordable tier on, might now be Tier 3 or Tier 4 on their carrier’s formulary. Consumers are having to work even harder to understand their carrier’s pharmacy benefits. They are having more direct conversations with their providers and pharmacists to try to minimize their out-of-pocket costs, which are increasing with no end in sight.
If insurance carriers are going to be able to offer competitive priced medical plans, gaining better control over rising pharmacy costs is critical. Pharmacy expenses account for a significant portion the average person’s overall medical expenses, and both consumers and carriers are feeling the pain. One insurance carrier is even suing its Pharmacy Benefit Manager for $3 billion over questioned pharmacy charges.
Fortunately for consumers, there are many new Rx tools popping up that can help members navigate their benefits. Goodrx.com and healthiestyou.com are good examples. A recent Consumer Reports article provides additional guidance on ways consumers can save on pharmacy costs. Consumers also need to evaluate options at their local pharmacies, as they can often find some of the higher priced generics offered at lower costs through a local pharmacy’s prescription plan.
As healthcare spending continues to increase, and pharmacy costs continue to become a larger portion of the cost, more pressure will be applied towards controlling pharmaceutical costs. Consumers will continue to see changes to their pharmacy benefits and their carriers designated carrier’s prescription formulary.