Growing economic inflation could impact your plan’s pharmacy benefit and your members this year. The annual inflation rate for the United States stands at a stunning 9.1% in June 2022, the largest annual increase since December 1981.
As result, your employees will have fewer dollars available to pay for their medications, even if their pharmacy insurance covers most of their medication. Your members are responsible for paying their copay or co-insurance, and there comes the rub. In the current economic environment, there may be less money to pay for gas, rent, or a nice dinner. Rising healthcare premiums impact them as well, even before a paycheck is delivered. Hard choices will be made as they look for ways to reduce spending, and medication is a top expense that many are willing to cut, even if it means putting their health in jeopardy.
Couple this with the fact that even before the current economic downturn, Americans were paying more than $1,500 per person annually for prescription drugs. We know people often go without their medications because of cost, resulting in harm to their overall health, which has a downstream impact on plan sponsors with a vicious circle of increased medical and pharmacy expenses as a result of members poorly managing their chronic conditions.
Checking the inflation forecast
The current inflation setback is not likely to improve any time soon. Forecasts call for inflation to be around for the next several months and likely longer, and some Pharmacists on our RxBenefits clinical team recall the hardships faced in the late 1970s and the years of difficult recovery. Others recall the early 2000s, when the inflation period lasted 10 years and numbers were similar to our present economic situation.
We already know how skimping on medication leads to a significant impact on healthcare overall. One study showed that lack of medication adherence is directly attributable to approximately 125,000 annual deaths and at least 10 percent of hospitalizations and can cost the American health care system between $100 billion and $289 billion a year. And that study was from 2013 – imagine the numbers nearly a decade later, and now compound them because of the current economic downturn combined with the COVID pandemic. We can expect that even more pinching of pennies will result.
How will your plan prepare for the impact?
As a provider of pharmacy benefits, you will be challenged on multiple fronts. How will you address member hardship if it comes to them choosing between filling the tank with gas to get to work or having enough money in the bank to pay for their medication? If members discontinue medications or try to make them stretch, then it’s possible your workforce will become increasingly unhealthy, leading to higher medical and pharmacy bills, absenteeism, and decreased production.
Additionally, the weight of greater health insurance costs is shouldered by the plan. In 2021, one analysis showed that covered workers contributed an average of 17 percent of the premium for single health coverage and 28 percent of the premium for family coverage. This means employers covered 83 percent of single premiums and 72 percent of family premiums last year. For self-insured employers already feeling the financial stress caused by economic inflation, those elevated healthcare costs are difficult to absorb. In fact, many providers are already faced with rising drug costs as the result of an ever-increasing pipeline of specialty medications that can exceed $250K annually.
Healthcare prices are normally set in advance, either administratively for government programs such as Medicare and Medicaid, or via contracts between providers and insurers. The key point is that many contracts are tied to the calendar year. Thus, we likely will see a lag before wage increases and other costs related to broader inflation measures are fully incorporated into healthcare prices. As insurers set premiums for next year over the coming months, a better picture will emerge of how their price negotiations with health care providers are playing out. But that doesn’t translate into a “wait-and-see” approach. Act now.
Get the independent clinical oversight your team needs
The RxBenefits clinical team can help. We provide independent clinical oversight, intervene when necessary, and are available to consult with brokers and clients about any topic related to pharmacy and the pharmacy benefit. We have the programs to not only help you optimize your pharmacy benefit but also, in many cases, help the member by aligning them with the lowest cost, clinically effective medication.
One of the ways we do that is through the RxBenefits Protect clinical management solution. Protect is an array of clinical solutions, powered by our direct connectivity, which focus on driving plans and members to the lowest cost and care outcomes.
- Our Protect clinical management solution doesn’t just drive waste and cost from the system. It also provides clinical oversight to ensure that prescriptions are appropriate and medically necessary to keep members safe and optimize health outcomes.
- Prior authorization reviews by independent licensed pharmacists identify and intercept off-label claims by ensuring compliance with FDA guidelines. This has the benefit of reducing potential adverse drug events.
- RxBenefits Protect helps eliminate prescribing errors by ensuring appropriate dosing, including making weight-based adjustments over time.
- By optimizing multi-drug therapies according to condition-specific guidelines and best practices, Protect offers an added layer of protection to avoid potential drug-to-drug interactions.
- Finally, we’re always looking for ways to save clients and members money without impacting clinical efficacy. For instance, when two 5 mg pills cost twice as much as one 10 mg pill, we will work to optimize the therapy.
The net impact of our clinical programs for clients enrolled in the Protect suite of clinical programs is in the 5-10% range annually. For a typical 1,000-member life group with $1.2M in total spend, the program provides savings, on average, of between $60K and $120K. In some cases, the savings can be lower or even higher, depending on how the plan is currently being managed from a clinical perspective.
Sources
- PharmaNews Intelligence
- How Inflation, Competition, Biosimilars Affect Prescription Drug Costs
- Is Inflation a Threat for Pharma Stocks?
- Inflation is forcing prioritization of healthcare spending — are you ready?
- The Cost of Not Taking Your Medicine
- Overall Inflation Has Not Yet Flowed Through to the Health Sector
- How Will Rising Inflation Affect the Healthcare Revenue Cycle?
- Inflation and Health Insurance: Healthcare Costs are Rising
