Generics: a life-saver in your healthcare costs

The provision of good healthcare benefits represents a huge ongoing cost to companies today. But, with nearly 70 brand-name drugs set to become available as generic drugs, companies could realize huge savings in their pharmacy costs. HRM caught up with Glen Stettin, Vice President of Plan Management Products, Medco Health Solutions, Inc. to find out more about how intelligent pharmacy benefits management could be a lifesaver.

HRM. How important is it to tailor your solutions to your clients and how do you go about doing this?
GS. In order to maximize savings while maintaining a high quality, comprehensive benefit, you have to tailor the solution to the client and the unique needs of its beneficiaries. Flexibility is critical. We therefore tailor our own solutions using data-driven analytical tools and use integrated pharmacy and medical claims date to develop an overall healthcare solution.

Medco also tailors member-focused tools to drive consumerism and smart pharmacy choices.

HRM. I understand you help to sharpen your clients’ pharmacy benefit management (PBM) knowledge and skills. How do you do this and why is it important?
GS. We are a partner in our client’s benefit plan and, while we make recommendations about plan design, the final decisions about the design belong to the client. To make good decisions, the client must have a sharp understanding not only of pharmacy benefits management, but also about the latest trends in the pharmaceutical industry.

Medco has a score of programs to sharpen its clients’ knowledge and keep them on the cutting edge of pharmacy benefits, from Medco’s Annual Drug Trend report and national symposium, which takes an in-depth look at trends past, present and future, to day-long best practices workshops that explore new ways to manage the benefit. We use technology that provides hands-on access to client specific data analysis and reporting, like our award-winning client website, which offers immediate access to up-to-date information and experience reports, and ExpertAdvisor, a desk-top portal that gives our clients access to real-time claims information so they can do quick analysis and modeling.

We also conduct frequent face-to-face meetings to review objectives and formulate viable strategies, and quarterly performance and annual review meetings to assess progress and map out future management strategies.

HRM. So how are you helping to reduce the cost of drugs to your clients?
GS. The two most effective ways to reduce pharmacy costs are increasing the use of generic drugs (when clinically appropriate) and increasing the use of mail-order pharmacy for chronic medications.

Within the next five years, nearly 70 brand-name drugs, including 19 blockbusters such as Zocor Zoloft and Ambien, collectively accounting for more than US$45 billion in US sales, are anticipated to become available as generics. This represents a huge opportunity for our clients to reduce their pharmacy costs. What’s more, for every 2.5 percentage point increase in generic substitution rate (GSR), our clients experience a 0.5 percent decrease in costs. For example, for a client with 100,000 covered lives, a 2.7 point increase in GSR would reduce costs by US$500,000 a year.

Using mail-order pharmacy can have just as much impact. Not only is the cost to fill a prescription lower, but mail promotes other cost-saving activities, like improving generic substitution rates. Mail outperforms retail in terms of generic substitution by 2.7 percent and, as mentioned above, that 2.7 percent translates into huge savings.

Medco’s formulary management is focused on generic alternatives and the lowest net cost within each therapeutic class, and we guide clients to align plan design incentives with necessary patient education and desired results. We also use integrated medical and Rx data to drive drug utilization review and patient care programs.

Effective management across retail pharmacy, mail order pharmacy, and specialty pharmacy help to drive usage in most appropriate and cost-effective channels, and our targeted education efforts and easy-to-use on-line information helps change physician prescribing behavior and patient consumption behavior.

HRM. What role does technology play in your delivery of products and services?
GS. Medco is a pioneer of pharmacy innovation and technology because technology offers new ways to improve safety and reduce costs, and we are always looking for every opportunity to leverage technology to make the management of pharmacy benefits safer and more cost-effective.

Technology enables the safest and most efficient dispensing through Medco’s automated mail-order pharmacy. In fact, studies have shown our automated pharmacies are 23 times more accurate than the average retail pharmacy.

In addition, Medco’s web-based tools and information, and its efforts to promote e-prescribing, help to educate the patient about appropriate, cost-effective drug treatment alternatives before visiting the physician, allows patient specific information to be placed in the hands of the physician before prescribing a drug, and allows effective point of sale messaging at all pharmacy channels. This provides the pharmacist with useful information to guide a patient to more appropriate, cost-effective alternatives.

HRM. How is the prescription of generics helping companies to keep down the costs of healthcare benefits?
GS. PBMs have the responsibility to manage pharmacy trend within the overall context of quality healthcare and total healthcare costs, so it is important to balance utilization and cost, and to be careful not to reduce utilization of essential medications that can adversely impact other medical costs.

According to a study in the Journal of the American Pharmaceutical Association, medication-related issues accounted for nearly US$121 billion in hospital costs in 2000, so ensuring the safe, appropriate use of medication is key to keeping healthcare costs down. The use of integrated medical and Rx data is important here and will become an essential requirement in managing patient care and overall healthcare expenditures.

Medco’s clinical programs and its integrated data program, RationalMed, monitor for potential drug issues, such as drug-drug or drug-disease interactions, and alert physicians when such issues arise. In 2005, RationalMed identified 1.5 million drug safety issues. In addition to improving patient safety, RationalMed generates significant savings for payors; In one year, RationalMed typically delivers up to two percent in total pharmacy savings and up to three percent in total hospital savings by identifying, intervening on and correcting prescribing errors.

Glen Stettin on market trends in pharmacy benefits management
Prescription drugs costs are the fastest growing costs in the healthcare industry today, yet they present the best opportunity to save on the total healthcare bill. Benefit providers now realize that opportunity and understand that pharmacy benefit managers, with their size, scale and clinical expertise, are in the best position to maximize the savings available, while still providing a comprehensive benefit for the beneficiary.

Specifically, Medco recognizes a number of trends in pharmacy benefits management that will have a profound impact on both our company and the healthcare industry as a whole. The most important of these are:

Employers, struggling with the costs of providing healthcare benefits will demand more innovation – Medco exercises many strategies to keep pharmaceutical costs manageable for its clients, from encouraging use of generics through its Generics First generic drug sampling program, to encouraging the use of lower cost delivery channels, such as Medco’s mail-order pharmacy. In addition, our clinical management programs offer the flexibility to implement a program that meet the client’s needs.

Managing the explosive growth in Specialty Pharmacy drug costs Medco’s comprehensive approach to specialty pharmaceuticals reflects its belief that as the number of specialty products continues to grow, and the conditions they treat affect broader populations, payers will need to be proactive, clinically driven and be consistent in their approach to managing these drugs and supporting the patients who need to use them. Medco provided payers with complete control over their specialty drug spend resulting in reduced ingredient and administrative costs while maintaining the highest levels of clinical care.

Advances in technology will enable the healthcare industry to improve the quality and efficiency of care – The best-managed plans use technology to address unsafe, ineffective, and otherwise inappropriate use. Medco foresees interconnected information systems that facilitate the sharing of patient-specific information between providers, patients and clients, in a manner that protects patient confidentiality, while enabling more informed and appropriate healthcare decisions. The company has an established track record integrating medical claims, laboratory data and other information with pharmaceutical claims that includes approximately 20 million lives in its database today. Medical claims integration allows the implementation of Medco’s novel programs, like RationalMed – a health and safety program designed to reduce the near term risk of hospitalization induced by drug treatment related events.

We also believe that consumerism will become a more potent force in the marketplace over the next five years, and that the internet will play a vital role in communicating plan options and the status of a member’s various accounts. Medco provides novel online approaches for the modeling of these new benefit designs since it works today with a majority of the leading consumer-driven health plan companies.

Consumer-driven healthcare (CDH) will continue to gain momentum as a benefit design option – CDH is based on the principle that members are empowered to make better decisions about their healthcare when equipped with the right tools and when given appropriate incentives for helping control costs. Medco administers the prescription care portion of some of the leading CDH plans for several years, serving roughly 50 percent of the market.

As Vice President of Plan Management Products at Medco, one of the nation’s leading pharmacy benefit managers, Dr Stettin leads the Plan Management group, a product development and management team dedicated to helping Medco’s clients better understand and manage their prescription drug plans. Stettin’s team provides healthcare payers with products and services that include healthcare analytic tools and services, and programs for engaging members their physicians and pharmacists to effect safer, more effective and more affordable care.