The Employer's Guide Blog for Overseeing PBMs

The Definition of Oversee: to watch over and direct (an undertaking, a group of workers, etc.) in order to ensure a satisfactory outcome or performance.

5 New Ways to Cut Employer Prescription Drug Costs

As prescription drug costs continue to increase, plan sponsors are looking for ways to cut said costs such as reducing spouse and dependent coverage.  While total health care is predicted to rise 5.3%, to $11,507 per employee in 2012, the increase is slowing.

More recently, employers have been increasing employee premiums, although this tactic can only be pushed so until diminishing returns begins to rear its ugly head [decreased employee retention]. Also, if healthy employees opt out of coverage self-insured employers might lose money.  That is why most companies keep premium increases in line with their cost increase.

Among other changes to improve prescription drug costs employers should consider these options for 2013 and beyond:

  • The adoption of account-based health plans, which include health savings accounts and health reimbursement accounts.  The higher deductibles in these plans shifts more of the cost to employees.  In many cases, the only costs are attributed solely to prescription drugs.
  • Some companies, 38%, will reduce spouse and dependent coverage, while 29% will use spousal waivers or surcharges. As employees have to pay more to cover family members it may be more economical for the husband to be under one plan and the wife under another.
  • Limit company reimbursements for prescription drugs to only generic and specialty medications.  While brand medications help successfully treat many diseases, their generic counterparts prove to be therapeutically equivalent where efficacy is the primary concern. Some might say generics don’t work and in this case my suggestion is too try another. A different manufacturer’s product will do the job in many cases.
  • Offer telemedicine consultations next year.  It is cheaper to contact a doctor by phone, e-mail and Skype rather than go to an office.  And an employee doesn’t have to leave the workplace.  It’s most often used for acute ailments such as flu and allergies.  It is not considered as a substitute to a doctor’s visit.  When a prescription is required the doctor may simply forward an e-script to the employee’s pharmacy of choice.
  • Eliminate prescription drug coverage all together and instead pay for access to some sort of discount program or online pharmacy. Web sites like may negotiate significant savings over chain drug stores and discount cards.  Employers could potentially eliminate huge mark-ups, administrative fees and other hidden costs that tend to be significant.  Obviously, PPACA guidelines will have to be considered in this scenario.

Most employers we surveyed, 90%, are committed to offering health care benefits.  They know it’s needed to attract and retain the best employees.  Still that leaves 10% whom are not committed.  If just one multi-national corporation stops offering health benefits then that will trigger other employers to follow suit even though most “say” they are committed to offering it.

Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

Leave a Reply