9 Trends 2012 - Express Scripts

9 L E A D IN G T R E ND S

IN Rx PLAN MANAGEMENT FI N DI NGS FROM A NATIONAL PEER STU DY 2012 EDITION

To our clients and friends: I am pleased to present the 2012 edition of 9 Leading Trends in Rx Plan Management: Findings from a National Peer Study. This marks the fifth time that we have commissioned an independent national survey on pharmacy benefit management. Once again, we have learned a great deal from you and your peers, and we’re excited to share the insights with you. This year’s survey was conducted in a time of transition. The private sector was struggling to recover from the recent economic shocks while government budgets were under increased pressure across the country. The earliest stages of healthcare reform were put into place and important changes to Medicare Part D were being implemented. We were eager to see how you and your peers were responding. What do you see as the greatest cost drivers, and what are you doing to address them? Have you considered different types of coverage for retirees or current members? How has your strategy changed? The 2012 survey reflects a great diversity of opinion. We polled 318 plan sponsors, representing employer, government, union, and nonprofit organizations. The plans they manage range from under 500 lives to over 50,000. There were areas of nearly universal agreement. Virtually all are concerned with the rising cost of healthcare in general, and pharmacy care in particular. They share common concerns about the need to engage members to improve health behaviors. They remain deeply committed to providing a quality benefit. At Express Scripts, we’re doing all we can to help. Our innovative solutions will deliver even more value for you and your clients. We can help overcome complex challenges by delivering better adherence, improved health outcomes, less waste, and lower costs. Building upon a strong clinical foundation, we are applying our understanding of the behavioral sciences to make it easier for people to choose better health. Challenging times call for smarter solutions. We encourage you to speak to your account or sales representative to learn more about how Express Scripts can help you or your clients improve health outcomes, reduce total healthcare costs, and provide the best patient experience. Until then, we hope this study provides you with valuable insight that you can use to benchmark your decisions against those of your peers. Sincerely,

Timothy C. Wentworth President, Sales & Account Management Express Scripts

How are your peers addressing key challenges? What are the implications for your plan?

9 LEADING TRENDS IN RX PLAN MANAGEMENT

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2012 EDITION

During the fourth quarter of 2011, we commissioned

our fifth independent national study on prescription benefit management trends. The nine leading trends that emerged from this effort offer insight into the thinking of benefit plan managers at organizations with 500 to 50,000+ plan members. By comparing how plan sponsors are responding to current market dynamics, you will be able to make more informed decisions about which opportunities will best serve you or your clients. In this year’s study, 318 plan managers from leading corporations, as well as nonprofit, labor, and public sector groups, answered detailed questions designed to: > Determine trends in prescription benefit philosophy

Your peers remain deeply committed to providing a quality benefit.

> Identify current and future approaches to controlling prescription costs > Understand the perceived impact of healthcare reform > Assess perceptions regarding specialty medications, mail order, generics, integrated data, and wellness management > Identify trends in coverage for Medicare-eligible retirees > Comprehend any shifts in priorities as plan sponsors continue to evaluate their options

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EXECUTIVE SUMMARY This year’s study revealed a number of important trends During the five years that we have fielded the National Peer Study of Plan Sponsors, major healthcare reform legislation has been passed and the American economy has weathered historically volatile times. An unprecedented wave of blockbuster medications has come off patent and another unprecedented wave of specialty drugs has come on the market. Operating in an increasingly complex environment, plan sponsors have been hard-pressed to preserve a quality benefit in the face of significant financial pressure. As a result, there has been a pronounced and enduring shift in benefit philosophy. The number and nature of programs focused on cost reduction have increased. And most recently, there has been a major expansion of efforts to positively influence member health and healthcare purchasing behaviors.

“Balancing cost with care” is the prevailing benefit philosophy The overriding story of the past five years is the migration of prescription benefit philosophy from “providing the broadest coverage” to “balancing cost with care.” Over that span, providing the broadest coverage has fallen from 57 to 14 percent, while balancing cost and coverage has risen from 41 to 78 percent. This year’s study marks the first time that every type and size of prescription plan sponsor cited the cost/care balance as its prevailing philosophy. For the first time, a slight majority of unions (52 percent) joined for-profit companies (82 percent), public sector (78 percent), and nonprofit organizations (81 percent) in choosing balancing cost with care. Also worthy of note, plan sponsors appear to be as committed as ever to providing their members with a prescription benefit. Only 2 percent reported the ability to continue providing a prescription benefit as their major plan challenge.

Plan sponsors report that the pharmacy benefit represents

21%

of overall healthcare costs, fairly consistent with the 22 percent in our previous survey.

Increasing attention on improving member health behaviors Plan sponsors are in overwhelming agreement that the health behaviors of their members have had a significant impact on the rising cost of healthcare. By more than a three-to-one margin, sponsors believe that a reduction in behavior-driven conditions (e.g., obesity and smoking) would make a greater contribution to cost-control efforts than any other single measure. Adherence to doctors’ orders came in a strong second. Overall, influences attributed to member behaviors were seen as having three times the impact on costs as healthcare reform, new medications, biosimilars, and electronic medical records combined. This concern with health behaviors is reflected in the programs that plan sponsors intend to implement in the coming years. For the first time in the history of our survey, wellness programs were cited as the most effective measure to control overall

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2012 EDITION

healthcare costs, garnering 25 percent of the first-place mentions in a field of 11 strategies. The intended use of wellness programs in the next two years is 23 percent higher than current use, the single highest increase of any measure intended to control overall healthcare costs.

Nearly all cost-control strategies are seeing increased usage While measures to reduce costs by improving health behaviors are likely to see increased usage, so is virtually every other strategy. Deeply concerned over the rising cost of prescription care, an increasing number of plan sponsors are adopting an aggressive approach to cost control. In our recent survey, we listed 16 cost-control measures. Eight of them are currently employed by at least half the respondents. The intended use for all 16 measures polled higher than the current use, with one notable exception. At 89 percent current usage, “increasing use of generics and plan-preferred drugs” topped the list. If action follows intent, expect to see notable increases in value-based plan designs and integrated pharmacy/medical data programs, and a far greater focus on programs designed to reduce waste, fraud, and abuse.

“Compared to 2010, concerns about the affordability of prescription drug benefits are driven more by member behavior and less by rising costs.”

The same all-out effort to control traditional drug costs applies to specialty pharmacy, perhaps with even greater urgency. Every measure to control costs is seeing increased usage, with step therapy, utilization management, days’ supply rules, and preferred specialty pharmacies all now used by a majority of respondents. As with traditional pharmacy, every cost-control measure polled in the survey is expected to see increased usage over the next two years.

Healthcare reform impacts retiree coverage most From our daily contacts with prescription plan managers, we understand that an extraordinary amount of time and effort goes into understanding the implications of recent healthcare reform legislation and making the needed adjustments. It was somewhat surprising that these efforts were not more dramatically reflected in our recent survey. Only 5 percent of respondents felt that healthcare reform was their top concern in managing a prescription plan, for example, and only 5 percent thought that the establishment of state healthcare exchanges would be the leading influence on healthcare costs in the next two years. Less than half of all plan sponsors (42 percent) have completed an analysis of alternate coverage for current members created by the healthcare reform legislation. As many of the main tenets of the legislation will be phased in over the next decade, it will be interesting to see how these attitudes evolve.

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Providing prescription coverage for retirees is another story altogether. Driven by the elimination of a tax advantage for Retiree Drug Subsidy plans, there is likely to be a major shift in how organizations cover their Medicare-eligible retirees. While every alternative strategy is seeing increased consideration, indications are that Employer Group Waiver Plans (EGWPs) will see a substantial increase, and they may even become the most popular form of coverage by the time we field our next survey.

Looking ahead While plan sponsors are still clearly concerned about the rising cost of both medical and prescription care, they remain deeply committed to providing benefits to current members and retirees. Only a handful of organizations have given serious consideration to moving current members on to healthcare exchanges. “Honoring commitments to retirees” remains the number one consideration in the design of retiree benefits. Short of discontinuing coverage altogether, however, most plan sponsors are looking at an increasing number of strategies to control costs. In the coming years, we are likely to see an increase in the use of more aggressive clinical management programs, and almost certain to see more efforts to engage members to help them make better health decisions. We expect to see a sharp increase in the number of wellness programs and an expansion of online tools designed to provide members with the information they need to make more informed decisions at the point of care. As always, the National Peer Study revealed a wide spectrum of concerns, opinions, and strategies among respondents. Clear areas of agreement also emerged. Plan sponsors remain as committed as ever to providing their members with a quality prescription benefit, and they see their members as the principal partners in controlling the cost of that benefit. If they are to be successful in achieving their intended cost/care balance, it will be because they were able to engage their members as productive participants in the effort.

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METHODOLOGY This study on pharmacy benefit management was conducted during the fourth quarter of 2011. The Web-based survey, fielded by the Healthcare Division of Haldy McIntosh and Associates, was completed by 318 individuals with pharmacy benefit decision-making responsibilities—such as benefit managers and benefit directors. Only one interview was obtained per organization. Interviews were obtained using our customer and prospect database.

Demographic profile of participating organizations Completed interviews

U.S. employment

Under 5,000

5,000–14,999

15,000–24,999

25,000+

Corporate

57%

53%

55%

61%

67%

Public sector

15%

14%

15%

12%

22%

Union group

8%

9%

11%

0%

9%

Nonprofit

20%

24%

18%

27%

2%

Total respondents

318

166

65

33

54

Haldy McIntosh & Associates provides marketing research and consulting services. The firm designs and conducts qualitative and quantitative assessments while primarily servicing healthcare-related markets. Media, Pennsylvania. 7

Member health decisions now the #1 cost issue

Plan sponsors look to online tools and mobile apps to lower costs

Healthcare reform raises questions about future coverage options

EGWPs may soon outnumber RDS plans

CDH plans gaining momentum . . . again!

Concerned that poor health and adherence behaviors are driving up costs, plan sponsors are investing in more ways to help members make healthier decisions.

While the vast majority of respondents use member communications, few consider them among the most effective tools, though there is renewed hope in new media.

Though it clearly has been a major area of focus, few plan sponsors believe that the “impact of healthcare reform” is among their most serious challenges.

With the pending loss of the Retiree Drug Subsidy tax advantage, plan sponsors are looking to Employee Group Waiver Plans and other ways to live up to retiree commitments.

Shaking off slow growth, Consumer Directed Health plan enrollment doubles as organizations look for ways to encourage member self-reliance.

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2012 EDITION

Mail strategies growing and delivering results

Comprehensive management key to mitigating specialty trend

Drug coupons raise cost concerns

Plan sponsors embrace data-driven pharmacy care

Citing huge cost and compliance advantages, plan sponsors have increased use of every channel management strategy, particularly the most aggressive ones.

The ability to manage specialty costs through comprehensive clinical programs makes a PBM the preferred partner.

Respondents believe that co-payment coupons and other pharmaceutical marketing programs reduce generic utilization and raise costs.

Organizations recognize the benefit of using integrated data and incorporating research and evidence-based medicine to improve pharmacy care and help contain costs.

2 3 4 5 6 7 8 9 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 9

Member health decisions now the # 1 cost issue Concerned that poor health and adherence behaviors are driving up costs, plan sponsors are investing in more ways to help members make healthier decisions.

TRUTH BEHIND THE TREND A retrospective review of pharmacy and medical claims revealed that in the 12 months after a heart attack, 32.4 percent of patients were not fully compliant with prescribed statins. Healthcare costs for the adherent group were $904 less than for the least adherent group.1

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2012 EDITION

Three-quarters of plan sponsors believe that the greatest

influence on rising healthcare costs is behavior-driven. Conditions related to obesity and smoking, followed by members’ willingness to comply with doctors’ orders and take their medications as prescribed, are the leading reasons why healthcare costs are hard to control. Every other factor that could influence healthcare costs—including medical breakthroughs, healthcare reform, e-prescribing, and the use of electronic medical records—paled in comparison to the influence of poor decision making. The concerns with member health behaviors have rekindled an interest in wellness programs. Wellness initiatives were cited as the single most effective measure to control overall healthcare costs, garnering 25 percent of the responses in a field of ten choices. While only 58 percent report that they currently use a wellness plan (and only 26 percent of union respondents), 81 percent say they intend to offer one in the next two years. This represents the greatest increase in current-to-intended use of any cost-control strategy. Should these intents turn into action, the use of wellness programs would return to levels closer to those recorded five years ago, when 76 percent of respondents indicated that they had a wellness program. Integrated pharmacy/medical data is likely to play an increasing role in identifying members at risk, and coordinating efforts with disease management and wellness vendors. At least three-quarters of respondents say they intend to employ integrated data programs to support these initiatives within the next two years.

Wellness programs across the wellness spectrum Successful wellness programs need to address the full spectrum of wellness, from the fit to at-risk to chronically ill. By focusing on prevention, a major employer recently announced that it had substantially reduced overall healthcare costs. The employer’s data showed that when obese members became non-obese, their healthcare costs went down 2.3 percent. When a non-obese person remained healthy over time, his or her healthcare costs reduced exponentially to -9.9 percent.2

The carrot or the stick? Plan sponsors say that financial incentives have worked better than penalties as a way to influence member behavior. A notable exception, union groups are twice as likely as nonprofit and government respondents to use disincentives. Strategies that have worked to influence member behavior Offering financial incentives for participation

47%

Using penalties or disincentives to discourage certain behaviors (e.g., higher premiums for smokers)

18%

Offering financial incentives for preferred outcomes (e.g., weight loss)

11%

Other

10%

None/have not used any

9%

Offering nonfinancial incentives (giveaways or recognition) for participation

6%

1. Pittman DG, Chen W, Bowlin S, Foody J. “Statin adherence, subsequent health care costs and utilization”. American Journal of Cardiology. 2011. 107:1662-1666. 2. Employee Benefit News. Experts present 7 steps for employers to reduce health costs. Available at http://ebn.benefitnews.com/news/johnson-perdue-roi-wellness-worksite-2721911-1.html. Accessed 3/2/12.

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Plan sponsors look to online tools and mobile apps to lower costs While the vast majority of respondents use member communications, few consider them among the most effective tools, though there is new hope for new media.

TRUTH BEHIND THE TREND Traditionally, about 3 percent of the members targeted in a direct-mail campaign take the requested action. By targeting members through a HealthStage® segmentation strategy—a proprietary algorithm that identifies where patients are in their medication therapy life cycle—we have demonstrated mail and generic conversion rates of better than 10 percent.3

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2012 EDITION

Of all the measures used to promote the cost-effective use of

prescription medications, member communications have consistently remained the most popular. In each of the surveys that we have fielded, about 9 out of 10 plan sponsors say they use member communications to encourage generics usage, and about 8 out of 10 say they have communications programs to encourage use of the mail channel. Cost share that favors generics and mail is the only other measure that is used as extensively. Despite the broad adoption of member communication programs, few plan sponsors consider them to be among their most effective tools. Only 3 percent of plan sponsors believe that member communications are among the most effective strategies to encourage use of mail and generics. This may be why 44 percent of sponsors cite “the ability to engage members to participate in measures that reduce costs” as one of the two greatest challenges in managing their benefit.

Going mobile Seventy percent of respondents report that they currently use online tools or mobile apps to help members make more cost-effective healthcare decisions, with 84 percent saying they are likely to use such tools in the next two years.

Perhaps recognizing that traditional communications are not effective enough, respondents have rapidly adopted new media tools that provide members with more personalized health and healthcare purchasing information closer to the point of decision. Seventy percent report that they currently use online tools or mobile apps to help members make more cost-effective healthcare decisions, with 84 percent saying they are likely to use such tools in the next two years. While new technologies by themselves cannot create more robust patient-provider partnerships, ingenuity, thoughtful design, and a commitment to creating tools that help patients take charge of their health can enable a more personalized approach, which could be a game changer.

Comparison of usage and perceived effectiveness for generics and mail-order strategies Generics strategy

Currently use

Intend to use/ next two years

Believe to be most effective

Member communications

89%

92%

3%

Member pays the difference (penalty for using brand drug when generic is available)

68%

78%

34%

Mail-order strategy

Currently use



81%

Intend to use/ next two years 87%

3%

Mail incentive programs (Member pays more at retail after set number of fills)

55%

69%

45%

3. Medco legacy data, 2011.

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Healthcare reform raises questions about future coverage options Though it clearly has been a major area of focus, few plan sponsors believe that the “impact of healthcare reform” is among their most serious challenges.

TRUTH BEHIND THE TREND Since our last survey, 2.3 million young adults have been added to their parents’ healthcare insurance plans as a result of healthcare reform legislation. 4

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2012 EDITION

In this first plan survey since enactment of the Patient Protection

and Affordable Care Act (PPACA), we expected issues related to healthcare reform to dominate the agenda. While these issues were clearly a concern for many plan managers,5 relatively few consider them to be among the current principal challenges of managing their prescription plan. Only 5 percent of respondents consider the impact of healthcare reform to be their greatest challenge, with another 8 percent considering it to be their second greatest challenge. Our survey indicates that healthcare reform is not likely to fundamentally change how, and whether, plan sponsors cover their current members. In fact, only 42 percent of plan sponsors report that they have completed a formal analysis of alternate healthcare coverage approaches. These tend to be the largest organizations (with 25,000+ members), 63 percent of whom have looked at the alternatives. Smaller plans may not have the resources or time to dedicate to this analysis. Those who have completed such a review are far more likely to consider an alternative coverage rather than drop coverage altogether. Only 22 percent reported that dropping coverage was an option they even considered.

Waiting on healthcare exchanges Only 5 percent of plan sponsors believe that healthcare exchanges will have the greatest influence in controlling their overall healthcare costs in the next two years. Many employers may wait to see how the exchanges work (or don’t work) in 2014 before reevaluating their options.

Plan sponsors continue to evaluate a range of alternate provider/payment strategies, with larger employers showing them greater consideration. Tiered or narrower networks (i.e., where providers are placed into different cost-share structures or the network includes a smaller number of providers) topped the list, with 41 percent of all plan sponsors who have conducted a review, and 78 percent of the largest employers. This preference could be due to the familiarity of tiered payment structures among plan managers and members. Alternative healthcare approaches considered*

All plan sponsors

With 25,000+ employees

Moving from defined benefit to some other alternative

38%

59%

Using health insurance exchange

33%

59%

Dropping coverage outright

22%

29%

Alternative provider/payment strategies considered*

All plan sponsors

With 25,000+ employees

Tiered or narrower network

41%

78%

Performance-based reimbursement

25%

54%

Direct contracting with provider systems

19%

39%

*By percentage of those who have conducted an analysis

4. Kaiser Family Foundation. Available at http://www.kff.org/insurance/092311nr.cfm. Accessed 3/13/12. 5. Darling, Helen. Healthcare Reform: Perspectives from Large Employers, Health Affairs. 2010. 29, no. 6: 1220-1224.

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EGWPs may soon outnumber RDS plans With the pending loss of the tax advantage for the Retiree Drug Subsidy (RDS), plan sponsors are looking to Employer Group Waiver Plans (EGWPs) and other ways to live up to retiree commitments.

TRUTH BEHIND THE TREND In 2011, EGWP membership grew 17 percent to 2.8 million while RDS membership declined 7 percent to 6.2 million. 6

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2012 EDITION

While the impact of healthcare reform on coverage for active members

has been minimal, it is already having a pronounced effect on retiree coverage strategies. The recent legislation eliminates a key tax advantage for RDS plans in 2013, effectively raising costs for taxable entities. As an apparent result, there has been a dramatic shift away from RDS plans. While 78 percent of all sponsors say they currently cover retirees through an RDS plan, only 53 percent say they intend to keep them. Among for-profit sponsors, 83 percent currently have RDS plans. Only 45 percent plan to retain them. While plan sponsor interest in RDS is declining, alternative benefit solutions are seeing increased consideration. Interest in EGWPs has seen, by far, the greatest increase. While only 10 percent currently provide coverage through an EGWP, 53 percent of all plan sponsors are considering it, including 59 percent of the for-profits. About half (47 percent) of these respondents say they would use a Commercial Wrap to enhance coverage in an EGWP, with the other half (49 percent) undecided.

Commitment to retirees holding steady Plan sponsors covering Medicare-eligible retirees:

45%

Covering non-Medicareeligible retirees:

54%

Twenty-eight percent of plan sponsors are considering transferring members to a Prescription Drug Plan (PDP) and subsidizing coverage (up from the 8 percent that currently do so). With multiple options being considered, many plan sponsors express confusion about their retiree benefit options, with 46 percent saying that understanding them is a major challenge. The driving force behind their strategic planning, however, is clear. “Honoring commitments to retirees” is cited as the most influential factor for choosing a retiree drug plan solution (32 percent), followed by the “need for cost reduction for retiree benefits” (22 percent), perhaps providing insight as to why EGWPs have garnered such interest. Prescription coverage strategies for Medicare-eligible retirees All plan sponsors

For-profit organizations

Current

78%

83%

Considering

53%

45%

Current

10%

7%

Considering

53%

59%

Current

8%

10%

Considering

28%

41%

Remain primary and apply for RDS

Offer coverage through EGWP

Transition to PDP and subsidize coverage

6. Office of the Actuary, Centers for Medicare & Medicaid Services. March 8, 2012.

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CDH plans gaining momentum . . . again! Shaking off slow growth, Consumer Directed Healthcare (CDH) plan enrollment doubles as organizations look for ways to encourage member self-reliance.

TRUTH BEHIND THE TREND 23 percent of firms providing health benefits offer a High-Deductible Health Plan with Savings Option, up from 15 percent in 2010.7

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2012 EDITION

Among the nine trends included in our last report was that CDH

plan growth was fairly flat. While plan sponsors saw CDH as a valuable tool to educate members about the true cost of their care, they noted that members were reluctant to enroll in the plans. There has been a dramatic reversal in the intervening period, particularly among smaller employers.

According to the Kaiser Family Foundation 2011 Employer Health Benefit Survey and the 2012 Mercer National Survey of Employer-sponsored plans, CDH plans have recaptured the momentum of their early days. The share of covered workers enrolled in high deductible plans with a savings option doubled from 8 percent in 2009 to 17 percent in 2011.7 The Mercer survey found that employers with more than 500 employees had a sharp increase in CDH plan offerings, from 23 percent in 2010 to 32 percent in 2011.8 We experienced this change firsthand with 40 percent growth in CDH plan enrollment in 2011. Our annual customer survey noted that overall satisfaction with CDH plans continues to be greater than 90 percent, and that one in three clients will offer a CDH plan in the future.9

The recent growth in CDH plans may well be part of the larger effort to engage members in making better health and healthcare purchasing decisions. In our survey, plan sponsors ranked CDH second on the list of measures that are most effective in controlling overall healthcare costs, ranking it only behind wellness programs. (Wellness received 25 percent of the first-place votes compared to 15 percent for CDH). By asking members to bear more of the cost up front, they become more savvy consumers of healthcare, making more cost-effective decisions and prudent judgments on their healthcare. According to the Mercer study, utilization of both medical and pharmacy does tend to go down in a CDH plan compared to prior years under PPO-type coverage. In 2011, HSA-based CDH plans cost nearly 20 percent less than other medical plan types—$7,787 per employee compared to $9,385.8 They also found that some employers see these plans as integral to strategies to improve workforce health. It is also possible that some employers may see CDH plans as a way to avoid the “Cadillac tax” that the healthcare reform law (PPACA) will levy on companies deemed to have health plan benefits that are considered overly rich.

Employers considering promoting enrollment in a CDH plan should consider including: Member outreach: Employ tools that proactively engage members when clinical opportunities to improve outcomes exist. Benefit coaching: Coaches can alert members to cost savings. For example, we send CDH plan members a letter advising them of their potential savings opportunities, then a Benefit Specialist calls to review them with the member. Results demonstrate that 85 percent more members take action with phone outreach vs. letters alone.10 Ongoing education and support: Plans must help members understand their CDH plan benefits so that they can optimize their benefits and reduce unnecessary expense. Engaging members to improve their health via multichannel, multimedia educational communications is essential.

As costs rise and the focus on consumer accountability and quality sharpens, CDH plans are poised to grow at a faster rate over the next few years. The greatest increases are expected with large, self-insured employers that are looking to mitigate costs while still offering a comprehensive benefit program that empowers members to control more of their healthcare spending.

7. Kaiser Family Foundation, Employer Health Benefits 2011 Annual Survey. Available at: http://ehbs.kff.org/pdf/8226.pdf). Accessed 2/3/12. 8. Mercer. Employers accelerate efforts to bring health benefit costs under control. Available at: http://www.mercer.com/press-releases/1434885. Accessed 3/2/12. 9. Medco legacy data, 2011. 10. Medco legacy data, 2011.

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Mail strategies growing and delivering results Citing huge cost and compliance advantages, plan sponsors have increased use of every channel-management strategy, particularly the most aggressive.

TRUTH BEHIND THE TREND Our mail-order pharmacy generic substitution rates average 5 percent higher than retail pharmacies in the first six months of a drug’s generic availability. This generates approximately 1 to 2 percent in additional plan cost savings on new patent expirations.11

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2012 EDITION

In each of our five national peer surveys, at least nine out of ten respondents

agreed that the mail channel has clear cost and convenience advantages over the retail channel. In more recent years, sponsors are increasingly likely to include clinical advantages on the list, and they are far more willing to implement more aggressive mail programs. The mail channel is perceived to have an advantage over retail in maximizing use of generics (55 to 9 percent), improving adherence (41 to 21 percent), reviewing prescriptions (41 to 23 percent), and dispensing safely (35 to 7 percent). With such a broad spectrum of cost and care advantages, it comes as no surprise that plan sponsors are aggressively promoting the mail channel, using every tool at their disposal. Compared to our first study six years ago, every strategy used to increase mail penetration has increased in usage by plan sponsors of every type and size. Over the past six years, cost share that favors mail has drifted up from 81 percent utilization to 85 percent. Copay waivers have grown from 32 percent utilization to 35 percent. Mail incentive programs (asking members to pay a higher cost share at retail after a set number of fills) have risen from 39 to 55 percent. Moving forward, the greatest percentage increase is in programs where members are auto-enrolled in mail and must choose to opt out. While only 4 percent of respondents use such programs now, 23 percent intend to initiate them within two years.

Keys to a successful mail program: > Align incentives so plan and participant achieve savings when members move to the mail pharmacy > Use a variety of member communications and outreach activities to ensure patients know about their mail benefit and how to get started > Offer services that help make the mail program easy to use and appealing to members, such as automatic refills > Measure results

In a recent follow-up survey of patients using mail order who had received telephonic counseling from a specialist pharmacist, 81 percent said that the counseling had a clinical impact (up from 74 percent last year). Seventy-three percent learned something new, while 67 percent agreed that they will do something different to manage their condition (up from 56 percent last year). Overall, 97 percent were extremely or very satisfied with their overall counseling experience.12 Strategies used to increase mail utilization

Currently use

Intend to use/ next two years


Cost share that favors mail

85%

85%

25%


81%

87%

3%

Higher cost share at retail after set number of fills

55%

69%

45%

Co-payment waivers

35%

59%

11%

Auto-enrollment in mail program

4%

23%

12%

11. Medco legacy data, 2011. 12. Medco legacy data, 2011.

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Comprehensive management key to mitigating specialty trend The ability to manage specialty costs through comprehensive clinical programs makes PBMs the preferred partner.

TRUTH BEHIND THE TREND Over 50 percent of specialty spend goes unnoticed under the medical benefit.13 Many plans are unaware of how to place controls on medical specialty spend or have not devised a plan to control trend on medically adjudicated drugs.

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2012 EDITION

In the 2012 national peer survey, 36 percent of plan sponsors cited “the rising

utilization and cost of specialty medications” as the greatest concern in managing their prescription plan. Another 38 percent cited “overall drug costs.” Since most of the increase in overall drug cost is being driven by specialty spend, it may well be that these two concerns are different expressions of the same idea. As a general rule, the larger the plan, the greater the concern with the rising cost of specialty medications. Fifty-eight percent of plan sponsors with over 25,000 members cite rising specialty costs as their greatest concern, compared to just 24 percent of those with fewer than 5,000 members. The larger organizations are also implementing more aggressive strategies to control those costs. Seventy-eight percent of the largest plan sponsors have added preferred and step-therapy rules, compared to 61 percent of the smallest. Eighty-seven percent of large organizations employ utilization management programs, versus 52 percent of smaller ones. This may likely be because the use of utilization management tends to increase as payers become more familiar with a specialty category.14 While equally expensive, less familiar categories may go undermonitored. Effective clinical protocols avert specialty waste, mitigate trend, and provide better quality of care. While there are differences in the strategies currently used, plan sponsors of every type and size are in near universal agreement on two points: 1. They intend to increase usage of every named cost-control strategy over current levels. (See chart below.)

Effective specialty management in action Two recently approved drugs for hepatitis C (boceprevir and telaprevir) have costs that could exceed $90,000.15 Since about 20 percent of patients are not candidates for the drugs, appropriate pretreatment screening is required. If treatment is prescribed, monitoring is necessary to ensure that the right patient gets the right drugs for the right duration. Drug therapy can last up to 48 weeks, but many patients could need less, depending on their response to treatment. With therapy management services to ensure appropriate use and monitoring, plan sponsors could realize potential savings of up to $60,000 per patient.16

2. They believe that a PBM with comprehensive services (specialty and nonspecialty) is better equipped to manage the cost and usage of specialty

drugs, regardless of whether they are billed under the pharmacy or medical benefit. PBMs are preferred to specialty-only vendors 75 percent to 6 percent, and they’re seen as superior in providing consistency of coverage/therapy and visibility, as well as promoting adherence and safety.

Strategies used to control specialty drug trend Currently use

Preferred and step-therapy rules Utilization management Days’ supply rules Require preferred pharmacies Move specialty medications from medical to pharmacy benefit Medical benefit management Biosimilar member incentives Copay waivers to encourage use of preferred pharmacy

69% 63% 63% 58% 40%

Intend to use/ next two years 82% 80% 79% 74% 59%

Believe to be most effective 3% 20% 5% 8% 5%

13% 7% 6%

41% 37% 34%

3% 15% 18%

13. EMD Serano Specialty Digest™, 7th edition, 2011. 14. Health Plan and Employer Group Specialty Drug Management Strategies, January 26, 2012. The Zitter Group, Syndicated Research, 2012. 15. Medco legacy data, 2011. 16. Medco legacy data, 2011. 23

Drug coupons raise cost concerns Respondents believe that co-payment coupons and other pharmaceutical marketing programs reduce generic utilization.

TRUTH BEHIND THE TREND There are currently over 340 copay coupon programs, an increase of 260 percent in just two years.17 None of these apply to Medicare or Medicaid. The Centers for Medicare & Medicaid Services (CMS) considers a co-payment coupon to be an illegal kickback and has banned them from federal health programs.

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Plan sponsors have long felt that pharmaceutical advertising suppresses

generic utilization rates and increases costs. In our 2010 Peer Survey, 49 percent of plan sponsors cited the influence of direct-to-consumer advertising as the leading driver of rising drug costs. This year, a new front has opened in the marketing battle: drug manufacturer co-payment coupons. According to a recent report by the Pharmaceutical Management Care Association, co-payment coupon programs will increase ten-year prescription drug costs by $32 billion for employers, unions, and other plan sponsors if current trends continue.17 As competition from generics intensifies, drug coupons may offer a chance for manufacturers to build brand loyalty that lasts beyond patent expirations. Some employers and health plans believe that coupon programs enrich manufacturers by driving patients toward more expensive drugs.18 Critics characterize the strategy as a campaign to maximize profits from aging blockbusters.19 Despite their considerable potential impact, only 54 percent of plan sponsors surveyed reported that they are familiar with copay coupon programs (74 percent of those managing plans with 25,000+ members). These programs are typically designed to increase the use of brand medications by offering patients a discount coupon. By subsidizing most or all of the typical member’s cost share, the coupon effectively eliminates the member’s financial incentive to choose generics and places an undue cost burden on the plan sponsor. Those who are familiar with copay coupon programs view them as serious potential cost drivers. Sixty-one percent of plan sponsors believe that copay coupons constitute an area of growing concern, and 65 percent believe they will increase their costs. Beyond some reduction in member out-of-pocket costs, sponsors see little member benefit in the programs. Only 25 percent, for example, believe that the programs have the potential to improve adherence. Agreement with statements regarding drug copay coupons Drug coupons . . .

Agree

Disagree

Don’t know

Benefit manufacturers by providing incentives to afford brand drugs

86%

12%

2%

82%

16%

2%

Benefit members by lowering out-of-pocket costs

70%

25%

5%

Benefit members by improving adherence

65%

25%

29%

6%

Require better education for members regarding use

Increase plan costs

65%

Seven actions to reduce use of drug coupons: 1. Proactively educate plan members 2. Implement member-pays-thedifference (MPD) without Dispense as Written (DAW) exception 3. Implement step therapy rules 4. Increase copay tier differentials 5. Adopt a restricted or closed formulary 6. Add Summary Plan Description (SPD) language to prohibit the use of drug manufacturer coupons 7. Leverage mail-order channel

10%

17. Pharmaceutical Care Institute, How Copay Coupons Could Raise Prescription Drug Costs By $32 Billion Over the Next Decade, Available at: http://www.pcmanet.org/images/stories/uploads/2011/Nov2011/visante%20copay%20coupon%20study.pdf. Accessed 2/9/12. 18. Patton, Carol. “Coupon Overdose.” Human Resource Executive Online. Available at: http://www.hreonline.com/HRE/story.jsp?storyId=533338837&query=drug coupons. Accessed 3/12/12. 19 Edlin, Mari. “Drug Discount Cards Might Work Against Payer’s Programs.” Managed Healthcare Executive. Available at: http://managedhealthcareexecutive.modernmedicine.com/mhe/Consumers/Drug-discount-cards-might-work-againstpayers-prog/ArticleStandard/Article/detail/739102. Accessed 3/12/12.

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Plan sponsors embrace data-driven pharmacy care Organizations recognize the benefit of using integrated data and incorporating research and evidence-based medicine to improve pharmacy care and help contain costs.

TRUTH BEHIND THE TREND It takes an average of 17 years for proven discoveries to become common clinical practice.20

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Plan sponsors overwhelmingly support the application of evidence-based

medical care to pharmacy. Ninety-seven percent of sponsors stated that it was at least somewhat important to incorporate research and evidence-based medicine into pharmacy care, including the 41 percent who thought it extremely important. Coupled with support for evidence-based pharmacy care is a growing recognition that integrated data programs are needed to implement such efforts at the point of care. Over half of all respondents now incorporate integrated pharmacy data in at least four ways: to identify members at risk (63 percent), to provide better case management (57 percent), to enable coordination of care with disease management vendors (57 percent), and to allow for better decision making (56 percent). If action follows intent, integrated data will see the sharpest increase in the coordination of care with wellness vendors, nearly doubling from 33 to 69 percent. The potential to offer patients real-time data about their own chronic health conditions—data that can then be conveyed to their physicians and healthcare vendors who can enable coaching and communication when patients need it most—will translate into better overall outcomes and reduce costs. Importance of incorporating research and evidence-based medicine into pharmacy care

41%

Extremely important

42%

Very important

15%

Somewhat important

3%

Not very important

20. Balas, E. Andrew and Suzanne A. Boren. Managing Clinical Knowledge for Health Care Improvement. Yearbook of Medical Informatics National Library of Medicine, Bethesda, MD:65–70, 2000.

A framework for better care, less waste Along with promoting greater coordination of care, integrated data may also be used in activities focusing on fraud, waste, and abuse—efforts that are expecting an increase in usage from 44 percent to 67 percent over the next two years.

0%

Not at all important

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Member health decisions now the #1 cost issue

Plan sponsors look to online tools and mobile apps to lower costs

Healthcare reform raises questions about future coverage options

EGWPs may soon outnumber RDS plans

CDH plans gaining momentum . . . again!

Mail strategies growing and delivering results

Comprehensive management key to mitigating specialty trend

Drug coupons raise cost concerns

Plan sponsors embrace data-driven pharmacy care

Take advantage of these findings to help improve health and financial outcomes. For questions about this report and to learn more about what these findings may mean to your organization or clients, contact your Express Scripts account or sales representative today.

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