Posted on in General

Drug plan design is all the rage. Everyone is jumping in to save lots of money. Here is how it works.

A consultant will analyze the group’s drug data including type, class and cost of medications.

Then, the consultant will make recommendations about how to save money.

This seems easy. If you substitute a generic drug for a brand drug you can save about 75% of the cost. Done.

If you use a pharmacy like Express Scripts with a focus on home delivery of maintenance medications, with a prescription renewal every 3 months instead of every month, then you will save money. A dispensing fee might be $10 per fill. So Express Scripts  will charge $10*4 or $40 per year. A big box pharmacy might charge $10*12 or $120 per year. More savings. And with free shipping at Express Scripts.

If you substitute a more expensive drug with a less expensive one that is felt to be a therapeutic equivalent, then you save money. However, there is some subjectivity and possible risk to this substitution.

At a recent meeting, a drug plan consultant was critical of a new more expensive drug because it contained a mix of the right and left handed molecules of an older less expensive drug.

A drug can be dextrorotary (right rotary) or levorotary (left rotatory). He implied that this more expensive mix of dextrorotary and levorotary molecules was no more effective than the original drug which was either dextro or levorotary.

However, in biology a drug can be without any function at all depending on whether it is dextrorotary or levorotary.

Consultants will also advise groups on how to structure the insurance for drug plans. This includes co-pays or payments by employees.

Here is a case study:

A 30 year old female employee had rheumatoid arthritis (RA). She earned $50,000 per year. Her drug plan design was capped at $3500 per year. She took humira for her RA. This cost her $25,000 in out of pocket expenses.  This was not a good situation for her or for her employer. She was pre-occupied with paying for the humira.

Here is a look at the economics of this case. The employer had capped her drug plan at $3500 per year to contain the group’s liability. The employer chose not to purchase catastrophic drug coverage at approximately $15 per employee per month.

This employee is likely operating at about 30% productivity. The employer is losing about 70% of her income or about $35,000 per year in lost productivity. If the employer paid $25,000 for her humira, then the employer would be $10,000 ahead of the game. So much for saving money.

So drug plans should be analyzed based on the total of the indirect costs from lost productivity (sick people are less productive) as well as the direct costs of the drugs.

That is my suggestion to drug plan design consultants when advising groups with employees who need the right medications to get and stay healthy.