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BCBS of Tennessee: Prescription Drugs Have Become the Single Leading Cost Driver

Drug costs accounted for 30.1 percent of what BCBS Tennessee paid out on behalf of members in their insured group plans last year. Just five years ago, this wasn’t the case. Drug costs accounted for 24.1 percent of claims costs for their commercial members in 2012 — meaning drugs have become a bigger slice of an already growing pie. What accounts for this shift? Are Tennesseans taking more drugs? That’s part of the story.

In 2012, the average member received 12 prescriptions per year, and that number grew to 15 per year in 2017. The bigger issue is cost. Drug costs are growing faster than overall medical inflation, which is in turn growing faster than the cost of consumer goods overall. First, we’ve seen a sharp increase in costs for the drugs you pick up at the pharmacy.

Source: America’s Health Insurance Plans (AHIP)
Tyrone’s Commentary:

PBMs have moved into the medical benefit to manage prescription drug utilization and spend. Despite the trend, most self-funded employers, benefits consultants and brokers spend considerably more time managing the medical benefit (that part which excludes prescription drugs) than the pharmacy benefit. Is it because medical management is a comfort zone and the shift to prescription drugs, as the leading cost driver, requires additional education? More education is a tough sell for a busy professional 50 years of age or older who already has a college degree and professional credential or two. This age group 50+ also just happens to be the demographic with the largest number of covered lives under care. Some have been desensitized to the plight of the employer or patient and care only about the almighty dollar bill. A clear indication money might be most important is when you hear a consultant, CHRO or CFO refer to a covered life as a “belly button,” for example. Whatever the reason it’s concerning to say the least. Stakeholders, including patients, want more. No scratch that….they need more. Learn how to manage pharmacy benefits like an expert. You will help prolong life or even better help save a life. 

Since 2008, brand name drug inflation has increased 15 times faster than the Consumer Price Index. If you applied the same rate of inflation to a gallon of milk, you’d be spending around $12 instead of $4 or $5. Cost growth is even more pronounced in the medical drug category, where we’re seeing inflation of around 13 percent already in 2018. In other categories of spending, like physician or hospital services, the figures range from six to eight percent.

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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.

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