Stockbridge Resources, Inc

One national prescription drug vendor has calculated that in 1995 the average RX cost per member per year was $237.97. In 1999, the average cost was $506.72 per member per year. This is a 113% increase from 1995 to 1999. Although each employer is unique, you are most likely experiencing a similar cost increase.

The two main reasons for the increase in the Pharmacy Benefit cost are changing utilization patterns and direct to consumer advertising. Both of these are unlikely to change in the near future.

Employers have many tools and techniques available to manage their Pharmacy Benefits, however no single tool or technique provides a total solution. What you can do to offset the cost of the Pharmacy Benefit program is focus on the following areas:

- Plan design (the economic portion of the program)

- Benefit Management (the clinical focus, reviewing the appropriate use of a drug

within the clinical treatment guidelines)

Some steps taken by employers to reduce Pharmacy Benefit cost increases are:

1. Cost sharing by using multi tier co-pays. Structure the prescription co-pay with a three-tier co-pay, one for generics, one for preferred brand, and one for non-preferred brand. This will encourage use of a generic drug or a preferred brand drug.

2. Generic drug incentives provide for a range of options. This is by offering the lowest co-pay, to the cost difference between a generic drug and the brand drug, to the extreme of no coverage for a brand drug if a generic is available.

3. Formulary Management, which are drugs chosen for both quality and for cost effectiveness. A Formulary can assist by providing a comprehensive benefit yet provide coverage only for drugs on the Formulary list. Prescriptions not on the Formulary are not covered. For a less extreme approach, the incentive Formulary provides for a financial incentive to use a preferred brand through the middle tiered co-pay.

4. Utilization Management guidelines are used to identify and act during the prescription dispensing process. The new frontier of drug cost management is individualized clinical management using integrated data and information technologies to help ensure that plan participants receive optimal drug therapies.

Some of the questions an employers need to ask of themselves are:

1. Is the plan’s current cost sharing appropriate? Have co-pays been updated in the past two years.

2. Does the co-pay structure encourage cost effectiveness?

3. Does the plan allow for drugs that may be considered cosmetic, life enhancing, or discretionary?

Stockbridge Resources can help you to analyze your Pharmacy Benefit program, assist in the implementation of benefit enhancements and promote employee acceptance through communication pieces. Send us an E-mail so we can see how we can help you.