Is Your Rx Benefit Optimized?
Optimization of your pharmaceutical utilization rates is always necessary to achieve maximum cost saving. Prescription utilization rate and unit cost are the drivers of total pharmaceutical expenditure. Unfortunately, utilization is difficult to manage as it requires sophisticated, multi-focal programs. The management of pharmaceutical utilization is particularly challenging because it is driven at the level of the prescriber or patient and consists of multiple factors such as membership demographics and behavior modification.
Unit cost is a less complicated area to affect since the dependent variables can be clearly identified and readily changed. The key dependent variables related to unit cost are brand drug formulary selection, brand vs. generic utilization rate, size of prescription (retail vs. mail order), and their corresponding reimbursement.
Selected formulary brand drugs drive rebates but even more importantly, they are used to establish your average brand cost per prescription. Maximizing rebates is important but overall they represent a small percentage when compared to total expenditure. When possible the addition of brand drugs to formulary must be carefully modeled to assure the impact is not detrimental to the sponsor. In many cases forces outside of the control of the organization such as market drivers and state or federal regulations may dictate addition of certain brand drugs to the formulary.
Cost of brand vs. generic drugs varies significantly (cost ratio range from 1:7 to 1:12). Variability in the brand to generic cost ratio is determined by line of business, formulary selection, and other factors. Cadre Rx works closely with our clients to keep their generic utilization rate at the highest level possible. We help our clients build effective contract language and tools to monitor their generic utilization.
Mail Order Utilization
Mail order reimbursement rates may appear beneficial compared to retail but this may not necessarily be the case. PBMs encourage the use of mail order services on the premise that it will result in more cost effective pharmaceutical purchases. They promote mail order services as a cost reduction methodology by lowering payment of dispensing fees and brand prescription reimbursement rates. While this may seem logical, over-promoting the use of mail order services may significantly increase plan costs. However, mail order business is highly profitable for PBMs that own or have a financial relationship with mail order pharmacies.
Mail order services may be required by market forces but evaluating mail order claims cost effectiveness and design of these programs is critical.