Three Plan Metrics Every Employer Should Be Monitoring

Updated: Mar 18

60% of employers report that the cost of their current pharmacy plan is unsustainable. Without requesting bids from vendors or restructuring benefit strategies, there seems to be little that employers can do to contain costs.

However, buried in the seemingly endless rows and columns of a pharmacy claims file are metrics that can significantly impact plan spend. By digging into the claims file and putting data to work, employers can understand where their money is going and, more importantly, start making improvements.

Kenneth Wener, COO, Prescription Care Management, explains, "There is data in the claims file that plan sponsors, employers may not even know are in the plan. This data may be costing the plan thousands of dollars. Understanding how much money is on the table gives employers the option to act and save."

Every plan sponsor should be identifying and monitoring these three metrics:

1. Combo Drugs

Combination, or combo, drugs are a single dose medication that contains two or more active ingredients. While manufacturers claim that combo drugs improve patient adherence because they are easier to take, a recent study reveals that affordability is a key indicator of better medication outcomes. Combo medications cost significantly more than their components, resulting in higher costs for the participant and plan.

"The cost of combo drugs, to the plan, is pretty high," Mr. Wener says, "A participant may have a $50 copay while the plan pays $1,000 for a combo drug. Alternatively, filling two component drugs individually may be a $20 participant copay and $75 plan pay. Knowing combo drug utilization can allow employers to remove them from the plan or increase patient cost-sharing to reduce plan spend."

2. DAW Codes

Dispense as written (DAW) codes are used by physicians to indicate why a specific medication was prescribed and/or dispensed. Some codes used by the physician indicate a specific medication that is medically necessary, not allowing the pharmacist to substitute a lower-cost generic. Pharmacists use other DAW codes to get a paid claim that indicates a substitution is not allowed, even if a lower-cost alternative is available.

"When DAW codes are used to force specific, high-cost drugs, it can ultimately increase the plan’s spend,” Mr. Wener suggests. "Visibility into when and what DAW choices are made helps employers understand where their dollars are going."

Examining this data allows plan sponsors to craft formularies focused on increased generic utilization.

3. No Copay Collected Claims

Monitoring claims without a copay can help employers get a better view of participant cost-sharing. If several claims are processed with no copay collected, it could indicate participant use of a manufacturer copay card. Drug manufacturers provide these cards to offset the cost of very high-cost drugs, but they may contribute to higher plan spending.

For example, if a drug costs $1,000, a participant would likely have a higher cost-share; in this case, a $250 copay. Manufacturers, realizing that the participant cost will be high, offer a $250 copay card to help the participant cover costs at the pharmacy counter.

In the example, the $1,000 medication may have a generic alternative that only costs $500 with a $50 copay. If the higher-cost drug is filled, and the participant uses the copay card, they pay nothing, while the plan covers the $750 difference. If the participant fills the less expensive alternative, they pay $50, while the plan only pays $450.

While identifying routine use of manufacturer copay cards can be difficult, it allows employers to engage their participants and encourage decisions that positively impact plan sustainability.

Monitoring these basic metrics provides a little breathing room in tight budgets as plan sponsors battle increasing drug prices and a lack of transparency. Fortunately, claims data is readily available, and with a data analysis partner like PCM, employers can take action to reduce spend.

Mr. Wener says it is all about having options. "Understanding all of these pieces of plan spend allows plan sponsors to make decisions and take actions to reduce the cost of the pharmacy plan. Digging into the data ultimately gives options to contain costs and provide better benefits to participants."

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