Saturday, April 28, 2007

The Big Lie

I ran across this explanation last week from the Kaiser Foundation on pharmacy trend and am reprinting it in full below to expose its true nature as pure cow dung.

Daily Health Policy Report

Prescription Drugs | Prescription Drug Spending Growth Rate Expected To Increase, Report Finds
[Apr 26, 2007]

Prescription drug costs increased at a slower rate in 2006 than in 2005, but the growth rate is projected to increase in 2008 and 2009 because of fewer generic drug releases and higher spending on specialty drugs, according to Express Scripts' annual drug trend report, the St. Louis Post-Dispatch reports. The report, released on Wednesday at the company's annual Outcomes Conference in St. Louis, examines data from its three million members to estimate national prescription drug costs. Express Scripts found that drug prices rose 8.2% in 2006, compared with 9% in 2005. The report projected that prescription drug spending would increase at higher rates in 2008 and beyond, according to the Post-Dispatch. Express Scripts attributes the future higher growth rates to fewer blockbuster drugs losing patent protection in 2008 and 2009. In 2006, several blockbuster drugs went off patent and lower drug spending resulted from patients switching to generics. In addition, because companies have launched aggressive campaigns to encourage patients to use generic drugs, much of the costs savings already have been realized, according to Tim Simpson, a principal at Mercer Human Resource Consulting. The report also found that certain drugs had higher levels of cost growth in 2006, including medications to treat diabetes, which experienced a 15.5% growth -- the second year of double-digit increases. Express Scripts expects the costs of diabetes medications to continue to grow at double-digit rates for the next four years, according to Julayna Meyer, vice president of trend management for the company. Spending on specialty medications -- high-cost, often injectable drugs -- is experiencing the fastest growth rate. Spending on those drugs is expected to reach $99 million by 2010, nearly double the $54 million spent in 2006. One in four dollars of prescription drug spending will go toward specialty drugs by 2010, Express Scripts predicts. Express Scripts CEO George Paz said employers could use the same cost-control measures on specialty drugs as are used on traditional drugs to limit spending (Feldstein, St. Louis Post-Dispatch, 4/26).

On the surface you get the distinct impression that there is absolutely nothing which can be done to mitigate rising drug costs and for corroboration we have evidence from Express Scripts' annual drug trend report as well as from Tim Simpson, a principal at Mercer Human Resource Consulting.
Since no big drugs are moving from brand to generic in 2007 we all just have to suck it up and take it. What is worse we are told is that by 2010 specialty drugs will account for $1 out of every $4 spent on prescription drugs. Well BOHICA! Think of employers across America struggling to manage their health care spend while standing up, because the pain when they sit is too great. What an utter load of excrement. There is quite a bit employers can do to whip this problem.

  • The truth of the matter is that employers with a drug spend of at least $250,000 annually can adopt a plan design which encourages members to request the low cost in class generic because if they do the co-pay is zero.
  • You need a PBM with a bullet-proof process to move your population into the low cost generic in therapeutic class.
  • You need to negotiate the right to audit claims to make sure you are not subsidizing a huge generic mark-up like those I mentioned here.
  • You need to understand plan design can change behavior which can reduce cost and higher admin fees for a truly transparent PBM are more than offset by lower claims costs as I wrote about in Lowering Rx Co-pays Produces Big Savings.
  • You need to internalize that project driven consultants are transactionally oriented and in many cases may be using the same PBM RFP Template in Word and doing a find & replace all for your companies name and emailing it to CareMark, Express Scripts and MEDCO.
  • If you let your PBM set your formulary you might not sit comfortably for some time.
  • If your experience relative to pharmacy trend is reminiscent of Bill Murray's Groundhog's Day Movie you may need a new PBM or a new consultant or both.
The big lie IMHO is that some PBM's and Consultants enrich themselves while purportedly acting in the best interest of the employers which pay their bills. Unfortunately, the application of standardized project plans and workflows coupled with the insatiable quest for billable hours at transactionally driven consulting firms produces this behavior. Throw in overworked analysts skilled at data mining but lacking in specialized pharmacy experience familiarity or real world experience interacting with employees--you see consulting firms do not do enrollment meetings, they have call center and online web enrollment personnel for the transactional work that does not pay $500 per hour--and there you have it. Finally, if you ever really solved the prescription drug trend problem where would new revenue for PBM's or all the new projects for consultants come from?

At a deeper level, astute HR and Benefits personnel may want to ask whether you can ever obtain solutions to employee benefit cost problems from employees at a consulting firm. In the US market for professional services, the best professionals are principal owners not employees and this is true of attorneys, physicians, geologists, engineers, bankers and employee benefit consultants. As owners they can focus on working for their customers not on growing their departments fee revenue by 20% annually to meet Wall Street's earnings expectations.

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