Employers Battle Drug Costs
At the University of Minnesota, employees with cancer face a new rule under the health plan. If they are starting on certain expensive drugs, they get just a two-week supply, half the usual amount. Before they can get two more weeks’ worth, a nurse at the university’s pharmacy partner has to confirm they are doing well enough. The policy, called “split fill,” is designed to avoid paying for drug prescriptions that go half-unused if patients develop side effects and must stop them. It is part of a growing effort to rein in a drug bill the university says rose 8.9% last year, roughly double the rate for other health expenses. “I don’t want to penalize the patients, but what the drug companies have to realize is they put us in that box” by charging such high prices, said Stephen Schondelmeyer, a pharmacy professor who advises the administration on its benefits for nearly 39,000 employees, retirees and family members. Some of the cancer drugs cost as much as $13,500 a month. Rising drug costs are forcing tough decisions on those who foot the bill for much of American health care: employers. The pinch is most acute for the many large employers that, like the University of Minnesota, are self-insured—hiring an insurance company to administer benefits but paying the bill themselves. Employers have for years been shifting more health costs to workers, through higher premiums and deductibles. With drugs, they face a growing challenge. Specialty medications for ills such as cancer and multiple sclerosis are so pricey that despite making up only about 1% of prescription volume at the University of Minnesota, they account for 28% of its drug costs, said Kenneth Horstman, director of benefits and compensation. Pharmacy costs are about 17% of its health plan’s spending, up from less than 14% in 2013. Nationally, employers’ pharmacy costs are rising about 9.5% this year and will go up 10% in 2016, according to Aon Hewitt, a benefits consultant. The firm expects employers’ other medical costs to rise far less, 4.5% this year and 5% in 2016. “This is a tsunami,” said John Bennett, president and chief executive of Capital District Physicians’ Health Plan in Albany, N.Y., a nonprofit insurer with corporate clients. Pharmacy costs are “the single biggest driver of our medical inflation in the last few years.” In tackling them, employers are becoming more aggressive. Many have expanded requirements that doctors obtain advance approval from health-plan administrators for certain costly drugs, a practice called prior authorization. For instance, about 89% of employer health plans now mandate prior authorization for certain anti-inflammatory drugs for diseases like rheumatoid arthritis, up from 61% in 2007, according to survey by drugmaker EMD Serono Inc. Another increasingly common strategy is “step therapy,” which requires that patients be treated with lower-cost drugs before the health plan will pay for a more expensive option. This year, about 69% of employers had step-therapy rules, compared with 56% in 2011, according to the Pharmacy Benefit Management Institute, a research…