It takes a full arsenal of economic and clinical tools to manage the rate of increase in prescription drug expenditures. Fully-insured and self-insured plans alike are adding economic incentives to curb costs while helping their members reduce out-of-pocket expenses and become more treatment adherent.

The Public Employee Benefits Alliance (PEBA) is a group purchasing organization for employee benefits for political subdivisions in the State of Texas.There are 20,000 lives enrolled in drug benefit programs offered by PEBA. The pharmacy benefit manager is CVS Caremark. One PEBA member, the TML Intergovernmental Employee Benefits Pool (TML IEBP), added several plan design tools in fiscal year 2008 as listed in Table 49 to help control costs. The value-tiered copay amounts are $0 for 34-day supply and $9 for 90-day supply when prescriptions are filled at a preferred network retail pharmacy.

“Our generic dispensing rate increased from 61% to 64.5%,” said Susan Smith, administrator of the PEBA purchasing cooperative. “Member cost share decreased from 29.6% to 25.6% which helps our members become more compliant with their treatment plans.” PEBA’s employers also are experiencing changes in the top 25 drugs by net cost (a proxy for drug mix) that confirms purchasing patterns are more cost effective which assists in promoting member adherence to treatment regimens.

“Although our prescription utilization has increased by 8.6%, our medical costs have dropped 1.6%,” Smith reports. “The zero dollar copay for generics has been a catalyst for improved consumer education, transitioning to personal health engagement, and effective treatment plan compliance. Our members are becoming more adherent to their drug therapy and more engaged in their own health and wellness.”

Based in Boise, Idaho, Boise Inc. (NYSE: BZ) manufactures packaging products and paper — from corrugated cartons to newsprint for the office and home. The self-insured employer implemented a new four-tier formulary for its 4,000 employees in 2007. The pharmacy benefit manager is Express Scripts, Inc.

“We implemented a new preferred drug list with more generic selections in therapeutic classes to allow employees to select lower cost drugs but preserve their choice to use more expensive brand-name agents if they elected to do so,” said Sally Wyman, senior benefits analyst of HR Services for Boise. These drug benefit plan changes were implemented for salaried employees along with a new high deductible health care program design and a Health Reimbursement Account (HRA). “Boise has a philosophy of consumerism and wants to give individuals more control and choices to manage their total health care needs” said Wyman.

The cost share amounts are:

• Tier I Generics: Greater of dollar copayment ($5 for retail/$10 for mail) or 20% of prescription price
• Tier II Preferred Brands: Greater of dollar copayment ($10 for retail/$20 for mail) or 30% of prescription price
• Tier III Nonpreferred Drugs: 75% of prescription price
• Tier IV Noncovered Drugs: 100% of prescription price

Tier IV includes prescription drugs for which there are over-the-counter therapeutic alternatives including proton-pump inhibitors for treating acid reflux and nonsedating antihistamine drugs for allergies. Any prescriptions in Tiers III and IV do not apply to the plan’s annual out-of-pocket maximum of $1,000 per individual or $2,000 per family.

“Boise realized a per member per month negative trend of 10 points,” said Wyman. “We also had an overall 10.4% reduction in health costs. Boise has continued to see negative trends in the pharmacy program,” she added.

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