At RxBenefits, we’ve been asked a lot about benefit plan design – copays, tiering, plan exclusions, and more. When deciding whether it’s time to refresh member cost share or stay the course, one of the points to consider is what’s going on in the industry.
Over the last 20 years, we have seen a major shift in brand to generic drugs. As a result, drug manufacturers have been looking for other opportunities of profitability. That has inevitably led to the growth in the specialty drug market, where manufacturers have targeted specialty drugs because they’ll have little-to-no competition. These drugs are extremely expensive, and so a stale plan design may lead to an unequal balance in member and plan cost-share.
Gone are the days where we used to see 10% cost-share across the board, where members pay 10% and plans pay 90%. Often, we’ll see specialty drug cost-shares that are less than 1% of costs borne by members. The issue with that is that the members’ choice from a financial standpoint is taken out of their hands. If they don’t realize how much some of these medications cost, you will see increased utilization over time.
Tiering Recommendations
Shifting costs over to the members through either tiering or appropriate cost-sharing arrangements, such as a different copay structure or a coinsurance structure, is highly important so that members understand the cost of their healthcare. For instance, we recommend a minimum four-tier benefit design up to a six-tier design. A four-tier design generally includes generics, preferred brands, non-preferred brands, and specialty drugs. Some plans have extended the specialty medications tier to include generic specialty, preferred specialty, and non-preferred specialty. Your clients can’t go wrong with either model.
Specialty Drug Plan Design
What’s important to remember is that specialty needs to be treated differently than everything else. Because specialty tends to be the plan’s biggest cost driver – making up anywhere between 40%-55% of most plan costs today – it is highly important to look at that first from a tiering standpoint and then set appropriate copays in place. There are programs out there to help your clients mitigate that specialty expense from a copay design standpoint. I would encourage you to evaluate for each of your clients whether or not it makes sense for them.
Traditional Drug Plan Design
Going back to the traditional medications, for this reason only, as specialty has somewhat overstayed its welcome, many manufacturers are going back to the traditional market to look at formulating expensive drugs for large disease states. An example of that is Trulicity® or Victoza® or Ozempic® – the items that can be seen on TV in direct-to-consumer advertising. Many manufacturers are now shifting their focus on these traditional disease states but pricing the drugs in the $500 to $1,000 per month range. In the traditional sense of flat copays of $20, $40, and $50 for a $500 to $1,000 drug, the member cost share does not provide the member with insight into the cost of their therapy. With the advent of new drug delivery mechanisms for these broad-based disease states, you want to ensure that your clients have an appropriate cost-sharing apparatus in place.
Evaluating the Options Annually
Making sure that the members understand their cost of care is valuable. With a co-insurance structure, members understand that they are paying a portion of that expense. However, talent acquisition is a top priority for many employer groups, and so having a robust benefit plan rooted in copays is important too.
We welcome the opportunity to talk with you and your clients, to have these discussions and see what makes sense based on their goals and objectives. It’s always good, regardless of what the copay is or what the tiering structure is, to have a conversation at least once per year to evaluate if the existing cost-sharing strategy still makes sense.
