Increasing the Value of the Pharmacy Benefit, One Drug at a Time

Sep 15, 2014
Express Scripts drives competition among drug manufacturers, and this competition ultimately makes prescription drugs more affordable for all of us.

In nearly every U.S. industry, pricing is controlled by simple economics. When multiple products are similar, consumers vote with their wallets and flock to the lowest-priced option. This price sensitivity forces manufacturers to compete on price or bring to market truly innovative products.

Healthcare's Moral Hazard

The one industry that differs is healthcare. Patients rarely pay the full bill for the care that is provided to them, and that’s a good thing. But with the protection of health insurance comes an unfortunate moral hazard. Doctors and patients choosing a treatment are often indifferent to – if even aware of – the vast price differences among nearly identical treatments.

Without the consumer price sensitivity that exists in every other industry, healthcare costs skyrocket. Many of these expenditures are wasted on products and services that are far more expensive than alternatives that provide the same benefit at a lower price.

On average, a person uses the pharmacy benefit 11 times each year. That’s more than we visit the doctor or dentist or avail ourselves of any other healthcare service. For that same reason, the greatest opportunity to control healthcare costs is by limiting wasteful spending at the pharmacy.

PBMs are the only entities in healthcare that are financially incentivized to lower healthcare costs while improving patient health.

The Value of a PBM

That’s what pharmacy benefit managers such as Express Scripts do. We’re hired by employers, health plans, unions and government bodies to make sure they and their members get the most value from their prescription drug plan. In fact, PBMs are the only entities in healthcare that are financially incentivized to lower healthcare costs while improving patient health.

Smart Formulary Management

Today, many therapy classes have more drug choices than ever, with many prescription drugs costing more but delivering no additional health benefit. One of the ways we keep costs down for patients and payers is by managing the formulary. By being willing to exclude a handful of “me-too” products from our formulary, we have leverage to negotiate more effectively with manufacturers and ultimately achieve lower drug prices for the clients and patients we serve. Last year, we shared an in depth analysis of the value of smart formulary management.

We look at the formulary first from a clinical perspective to ensure that it provides access to safe and effective medications in all therapy classes. In doing so, we rely on an independent group of physicians who review extensive clinical data to determine which medications provide unique health benefits. Secondly, and only after the clinical requirements have been achieved, we evaluate the formulary for its cost-effectiveness. We will only exclude medications from our formulary when clinically equivalent alternatives are already covered on our formulary, and only then when those exclusions would result in significant cost savings for our clients and patients. 

Next year, out of 4,800 drugs available on the market, we will offer a formulary that excludes 66. For each one of those excluded drugs, there are clinically equivalent, lower-cost options available, including generics. By adopting this National Preferred Formulary, our plan sponsors will save more than $1 billion throughout the year. Less than a fraction of 1% of their members will be asked to use a different medication that achieves the same health outcome. If a patient has a rare clinical need that requires a specific medication that’s not on the formulary, we have provided a pathway to have the drug covered.

In the American healthcare industry – where government does not set price limits on medications and where consumers are unexposed to the full price of those medications – smart formulary management is one of the few ways to swing the balance of power from pharmaceutical manufacturers to those who pay for healthcare: employers, taxpayers and individual patients.

Express Scripts drives competition among drug manufacturers, and this competition ultimately makes prescription drugs more affordable for all of us.

comments powered by Disqus