Bad prescription

Prescription drugs were once considered a small piece of overall health care costs. But with double-digit annual increases over the past few years, prescription drugs are now viewed as a major contributing factor to health care cost increases.

Not surprisingly, many employers are considering steps to mitigate costs. Among the factors driving higher prescription drug costs:

* Plan design, such as co-pays and coinsurance, not keeping pace with prescription drug cost increases

* Research advances, fueling new, more expensive drugs

* Advertising aimed directly at the consumer, and an increasing demand for higher-priced drugs

* An aging work force — more workers are relying on prescription drugs to treat a growing number of age-related medical conditions

Employers should avoid short-term solutions that could result in long-term losses, says Barbara Hawes, a pharmacist and national pharmacy practice leader at benefit consultant firm Towers Perrin.

“Such solutions may decrease pharmacy costs in the short term, but significantly increase medical costs over the long term,” she says.

“Simply cutting costs without knowing what type of effect it will have on your employee population is a prescription for disaster,” says Alan Spiro, a physician who heads Towers Perrin’s clinical consulting services. “Efforts to cut prescription drug costs need to be carefully evaluated to avoid increasing long-term medical costs.”

Hawes says the first thing employers should do is analyze their company’s pharmacy data.

“This will help them understand the medical profile of their employee population,” she says.

Then employers should consider one or more of the following actions:

* Introduce prescription drug plan design changes, such as coinsurance, that will increase employees’ awareness of drug costs and motivate them to opt for less expensive generic drugs.

* Initiate Web-based components of consumer-driven health plans that encourage consumerism and provide employees with information and decision support such as health information and disease management tools, health risk assessments and drug efficacy and pricing information.

* Work aggressively with pharmacy benefit managers to ensure the best contracting, pricing, due diligence auditing and quarterly monitoring of program cost components.

* Counter prescription drug advertising by giving employees the unbiased information they need to make prudent, cost-effective decisions about the prescription drugs they use.

* Consider tailoring formularies to better meet the needs of the employee population. How to reach: Towers Perrin,