Drug Costs, Regulation are Top of Mind of Mind for Employers

Rising plan costs driven by specialty drugs are a top concern for those who make decisions about drug benefits, according to a recent survey conducted by RxBenefits. In fact, 93% of employers considered switching benefit providers in the last year. Smaller employers were more likely to consider switching, according to the survey, in which 600 key decision-makers in employee benefits, insurance, and human resources provided their opinions about drug benefits.

This is largely driven by the uptick in trends in the specialty market, Nathan White, chief client officer of RxBenefits, said in a webinar hosted by the company. Specialty drug use and spending are rising in both the pharmacy and medical benefit. More than 160 medications are available that each have the potential to top $250,000 annually, RxBenefits finds. Spending for autoimmune disorders, oncology, HIV, and multiple sclerosis patients will continue to grow in the next five years.

Michael Kleinrock

Spending is rising higher than most of the last decade driven by inline drugs, transformative new launches and less impact of patent expirations, according to Michael Kleinrock, lead research director at IQVIA Institute for Human Data Science. He said products in the middle of their lifecycle such as the cancer drugs Keytruda (pembrolizumab) and Darzalex (daratumumab) are still commanding higher prices.

“Price growth generally starts to slow as a drug matures,” he said during the webinar. “We haven’t been seeing that for some of the really good drugs that are seven to nine years old.”

At the same time, patient out-of-pocket costs are rising more slowly than the rest of healthcare because of drug manufacturer copay assistance. Copay assistance bought down patient costs by almost $19 billion in 2022 and nearly $80 billion over the last five years.

But he also pointed out consumers facing high costs are more likely to not refill prescriptions. In fact, in 2022, 94 million people, or 10% of all people starting new prescriptions, abandoned their medications after 14 days. “These are often newer, branded medications for severe disease, and they might be complex patients so you might really not want them to be abandon that prescription.”

Related: Alex Jung: It’s time to Think Differently about Specialty Drugs

Additionally, 90% of employers in the RxBenefits survey are somewhat or very concerned about the impact of future regulations on pharmacy benefit design. There are multiple federal and state efforts to address high drug costs or pharmacy related issues. They focus on transparency of negotiated rates, spread pricing, ERISA issues, federal oversight and utilization management issues.

Wes Hill

At the state level, new regulations that will take effect in January 2024 will be impactful for employers and PBMs, Wes Hill, J.D., director, compliance and legal operations at RxBenefits, said during the webinar. “This is a sweeping reform of Florida PBM law,” he said.

Florida SB 1550, the Prescription Drug Reform Act, gives the state authority to investigate PBMs; requires registration of PBMs (what is the law calls a “certificate of authority”; prohibits a PBM from forcing a patient to undergo step therapy; requires reporting of financial statements, appeals and denials of claims; and prohibits PBMs from restricting pharmacists from telling patients about cheaper alternatives.

Hill, however, said there is still uncertainty around the Florida law and ERISA implications. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law designed to

govern how employers provide benefit plans to employees and sometimes takes precedence over state laws. A 2020 U.S. Supreme Court decision, Rutledge v Pharmaceutical Care Management Association, determined Arkansas law regarding PBMs was not preempted by ERISA, meaning that the state could regulate health plan contractors.