For employers, the decision of whether to carve out the
pharmacy benefit to a PBM for all employees or integrate the
pharmacy benefit with the medical benefits of each employee's
health plan is an ongoing issue. The decision is a hard one,
especially when the employer is already contracted with
multiple health plans. The current trend, though, seems to
favor carving out the pharmacy benefit.
However, integrating the pharmacy benefit with the medical
benefit should result in better management across disease
states and less conflict over silo management issues since the
pharmacy and medical benefits are managed by the same entity.
In addition, the annual costs to the employer are capped under
a premium structure so the employer is not at risk for cost
On the other hand, self-insuring and carving out the
prescription drug benefit ensures that all employees have the
same benefit design and formulary structure so that there are
no complaints about copayment levels being higher for
different employees taking the same drug or employees not
being able to get a particular drug under a specific health
plan. However, there are a number of pitfalls and potential
risks. The employer is at risk for the costs and may find
prescription benefit trends rates climbing at a much higher
rate than anticipated. In addition, certain areas of therapy,
such as self-administered injectables, may be left out
inadvertently, with neither the medical nor pharmacy benefits
providing coverage. Conversely, these agents can end up being
paid for twice, once under the medical premium and again
through pharmacy claims.
Despite the risks, the trend over the past several years
has been for employers to carve out the prescription drug
benefit. This trend may be accelerating, with some health
plans now reporting as few as 80% of their members having both
medical and pharmacy benefits managed through the plan,
whereas in the 1990s health plans reported more than 90% of
enrollees having prescription benefits integrated with the
I believe the pharmacy and medical benefits should be
managed together rather than be managed by separate companies
because of the potential for better coordination of health
care services and in order to evaluate cost issues from a
systems perspective. It appears, however, that managed care
has not done a good job of convincing employers that keeping
the prescription drug benefit integrated is really of value.
Few, if any, health plans routinely include a pharmacist in
their sales presentations touting the benefits of an
integrated prescription program or explaining how the drug
utilization review programs and/or disease management programs
in place will improve employee health. Even more rare seems to
be data reported from the health plan back to the employer on
how having both pharmacy and medical coverage managed together
has improved health outcomes and reduced overall health care
costs for their employees.
In the meantime, the PBM industry is doing an excellent job
of convincing employers of the benefits of carving out the
prescription drug benefit, including standardizing the benefit
across all employees, producing reports that show cost savings
from prescriptions that were changed or not filled,
implementing customized rather than standard benefit designs,
and perhaps most important, highlighting the ability to bypass
state-mandated health plan benefits or processes by
self-insuring because of Employee Retirement Income Security
Act (ERISA) exemptions.
Several states have imposed laws or regulations on the
provision of the health plan pharmacy benefit that may
actually expand the level of coverage beyond what an employer
intends to pay for and the health plan wants to provide. These
state requirements may not need to be followed under ERISA
exemptions if an employer chooses to self-insure and provide
employee benefits directly. These requirements may include
limits on how often products can be removed from formulary;
mandated coverage of certain drug classes such as dietary
supplements, mental health, and family planning; limits on
copayment levels; and the inability to remove prescription
drug classes from the benefit when some agents within the
class become available OTC. These types of provisions, when
legislated or otherwise mandated, can make the health plan's
prescription drug benefit inflexible, more difficult to manage
from a cost perspective, and noncompetitive compared with what
can be offered through a PBM on a self-insured basis.
Faced again with double-digit increases in health care
costs and premiums, employers want solutions. As health plans
become further burdened with legislative and regulatory
mandates, PBMs seem to be stepping up to the plate to offer
solutions to the problem of rising prescription drug costs.
Unless health plans can provide more effective cost control
and do a better job of convincing employers of the advantages
of an integrated program, managed care pharmacists working for
health plans may start to find they have fewer and fewer
members with pharmacy benefit coverage to manage. It also
means that the benefits of integrated care and the real value
of the prescription drug benefit and disease management
services as far as improving care and costs on the medical
side will not be realized.
Dr Reissman is president of Rxperts, Inc, a managed care consulting firm in Irvine, Calif. You can visit the Rxperts Web site at http://www.rxperts.net/.
Drug Benefit Trends 16(1):15, 18, 2004. ©
2004 Cliggott Publishing, Division of CMP Healthcare
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