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By JOHN ADLER, national practice leader for TRICAST Inc., an audit, quality assurance, process improvement and consulting firm located in Milwaukee

(Editor's note: This is Part 2 in a two-part article. Read Part 1 here. In this part, we resume with the discussion on how to determine if mail order or retail is the best pharmacy path to take.)

To effectively evaluate whether this is occurring with your pharmacy benefits manager, you must find a firm that can load your claims and identify overlaps in drug usage in each therapeutic category. Consultants and analysts typically look for gaps in therapy that point to member noncompliance, but rarely do they look for and identify overlapping therapies that are also costing the plan unnecessary dollars.

Once you understand the generic contract pricing terms and how effectively the CDUR edits "talk" to each other, you are better positioned to examine whether mail order is more cost effective than retail. There are many commonly understood evaluation aspects to mail order and retail that are already industry standards. Armed with your new knowledge, you can now evaluate these other aspects.

Mail order can, and should be, more cost-effective. According to the Lewin Report, mail order is projected to save up to $85 billion over the next 10 years. Member convenience and plan cost savings have combined to make mail order the fastest-growing channel for prescription drugs.According to IMS Health, mail service nearly doubled between 2002 and 2006, from $24.8 billion to $42.2 billion.

EMERGING ANALYTICAL TOOLS CAPTURE TOTAL COST

PBMs and consultants have developed methods to determine total net cost using complex analytics for both drug and channel mix. By factoring in formulary compliance, generic substitution and other aspects of the drug transaction, true net cost calculations help plan sponsors design the best benefits plan for their plan members.

As the PBM market has matured, contract pricing differentials between PBMs have become smaller and smaller. To fully understand true cost, plan sponsors need to employ analytics that move their decision process from a spreadsheet. In the past, plan sponsors focused largely on price-related analysis, including AWP discounts, rebates and administrative fees.While these are important variables, they create a narrow view of the total cost.

The spreadsheet has become a far less effective measure of cost for plan sponsors, as it paints only a partial picture of the cost of drug benefits. What a spreadsheet tells you in January and what a final bill tells you the following December may be entirely different.

INFLUENCING CHANGE THROUGH COMMUNICATION

Effective plan design and sound decisions based on contract pricing analysis are the foundations for savings in a pharmacy benefits plan. But, of equal importance, getting plan members to make better choices can mean the difference between a good plan and a great plan.

Today, Americans are filling more drugs than ever, spending $275 billion a year on prescription medicines. Your plan members (consumers) play a vital role when it comes to the effectiveness of sponsor-initiated changes in pharmacy benefits.

Your PBM should have effective communication strategies that encourage consumers to become more involved in their healthcare decisions. By delivering tailored messages that contain clear cost information and language, these communications can help consumers change their behavior and understand the long-term impact of their drug selection decisions.

EMPOWERING CONSUMERS, MORE THAN HIGH DEDUCTIBLES

For the past few years, consumer-directed healthcare has been the next great solution in reducing overall healthcare costs. The success of CDHC is predicated on the theory that engaging consumers more directly in the cost of their healthcare decisions will compel them to be more conscientious health care spenders.

Armed with only partial information, consumers do not always make the most cost-effective decisions, particularly when it comes to prescription drugs. Thanks to extensive direct-to-consumer advertising by the pharmaceutical industry, consumers often request prescriptions for costly branded drugs when the generic equivalent is available and just as clinically effective. This brand-focused consumer mindset contributes to the rising cost of prescription drug coverage and is further fueled by incomplete information. If consumers are to become engaged in cost-cutting measures, they need to think of cost-effective solutions and not focus on branded drugs.

Fortunately, consumer behavior can be changed. Today, a revolution is taking place in the scientific understanding of human behavior as it relates to personal health decisions. In addition, academics in diverse fields such as behavioral economics, social psychology and cognitive linguistics are making new inroads into understanding the basis for decision-making and action.Proven theories and tools that can change behavior already exist, many of which have direct and immediate application to healthcare in general, and to pharmacy benefits in particular.

Some PBMs are applying behavioral research to help them effectively change individuals' prescription drug decisions. For example, in 2006, Express Scripts developed a communications platform for plan members that used personally tailored messages about the potential savings available from switching to generic Zocor when the brand-name Zocor went off patent. As a result of this well-timed and carefully directed message, consumers switched to generics at a rate that was 12 percent higher than the industry norm, saving plan sponsors and their members more than $600 million.

LEADING CONSUMERS TO BETTER HEALTH AND VALUE

PricewaterhouseCoopers projects that using a PBM provider will save employers, families and Medicare eligible seniors $1.3 trillion in prescription drug costs over the next decade. It is smart business to use your PBM to create communication that empowers and encourages your plan members to become more involved in their healthcare decisions and make informed, intelligent choices about their prescription medications.

By focusing on total net cost, you can understand and analyze member data, anticipate future costs and help change patients' behavior throughout the plan year. This creates a comprehensive risk management approach that will consistently result in lower annual overall drug trend. It is also a more effective approach than reacting to noncompliance or repeated high-cost-brand drug utilization at the end of each year.

Through effective management of drug mix and an advanced understanding of human behavior, your PBM can help you deliver health and value--one consumer at a time.

May 1, 2009

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