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Generics Helping Employers Slim Pharmacy Costs

Hoping to keep pace with current costs, more than 75 percent of the 508 employers surveyed by Mercer encourage members to use generics and mail-order plans.

March 25, 2008
Related Topics: Stress Management, Benefit Design and Communication, Latest News
U.S. employers have adopted a range of options in their benefit plans to moderate rising pharmacy costs, mainly through promoting the use of generic drugs, a survey concludes.

In 2007, prescription drug costs climbed an average of 9.3 percent among employers with 500 or more employees, while overall medical costs rose 5.1 percent, according to the recent survey by consulting firm Mercer. By comparison, a 2000 survey revealed that drug benefit costs increased an average of 18.3 percent and health benefit costs rose 6.6 percent.

Hoping to keep pace with the current trend, more than 75 percent of the 508 employers surveyed by Mercer encourage members to use generics and mail-order plans. They also are looking at ways to improve drug therapy compliance to help control total health plan spending.

“Our survey indicates that many employers have achieved as high a level of member cost-share as they deem appropriate—for now—and are exploring other ways to manage costs,” Lisa Zeitel, senior consultant and co-leader of Mercer’s managed pharmacy business, said in a statement. “This presents new challenges, especially in the management of highly expensive specialty drugs.”

According to the survey, most employers use tiered co-payments for their prescription drug benefit. The most common arrangement is a three-tier structure, with increasing co-payments for generic, formulary brand-name and nonformulary brand-name drugs.

The survey found that more than one-fifth of all large employers and nearly half of those with 20,000 or more employees require coinsurance for one or more drug categories. Coinsurance, Mercer says, offers greater price transparency and allows employers to share costs consistently with employees.

To help boost the use of generic drugs, nearly 50 percent of companies surveyed require members to pay the difference between the cost of a name-brand drug and the generic version, in addition to imposing a generic co-pay, if they request a brand drug that has a generic equivalent. This is often referred to as a “dispensed as written” penalty.

Another pharmacy benefit trend among employers is using incentives to make sure employees take their maintenance drugs as directed. Some employers are providing financial incentives such as lowering or waiving drug co-pays and coinsurance for specific drug therapies to treat chronic conditions such as diabetes or high blood pressure, the survey found. However, the survey also shows this is an emerging trend that is use by only 6 percent of employers that responded.

Filed byBusiness Insurance, a sister publication of Workforce Management. To comment, e-mail

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