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Drug Formulary Education

Group Health Insurance Company Indianapolis Drug Formulary Tips

Drug Formulary is an approved list of covered drugs, based on effectiveness and cost.

Group Health Insurance plans, are seeing employees, impacted monthly. This is creating frustration for Human Resources, potential employee embarrassment, and financial hardship.

Here is what is happening:

On the group health plan, there is a traditional prescription drug co pay plan. Maybe it’s a 4th tier or it could be a complicated 6 tier that no one can really explain. The employee is filling a prescribed drug that is a 2nd tier copay. Let’s say that co pay is $40, without any warning that employee goes to fill that prescription and now it costs them $80. The group insurance company or the pharmacy benefit manager, changed that tier based on cost, effectiveness and if there are other lower costing alternatives.

Behind the scenes, there is a lot of moving parts on how these drug formularies are created.

  1. There is the clinical review process. The group health plan/PBM has a clinical review committee, their job is to study the data from clinical trials.
  2. The outcome committee, where they study the drugs impact in real life.
  3. The actuary committee, they study the drug costs, market trends and potential cost impacts.
  4. The value assessment committee, where they look at ingredients cost and negotiate with the manufactures. Then assess the total cost of care.

Every Insurance company or pharmacy benefit manager, will state that financial cost is always second in their evaluation.  The goal of any drug list lowers costs, while maintaining choice.

This is how a drug formulary is created.

In the past, a new drug formulary would be formed, all the employees who are impacted, would be notified, along with their medical providers. This process would allow HR to study the changes before they go into effect.

Back to the employee impacted during the middle of the year. Why is this happening? The group insurance company/PBM may have negotiated with the manufacture. The results could have led to that drug being moved to a higher cost share for the employee. If there are 3 brand name drugs that have equal outcomes for treatment. The insurance company may go to the manufactures and negotiate a deal. Which manufacture will discount their cost? That drug ends up on the drug list at a lower cost share while the others are moved to higher cost share or even removed from the list. Another possible cause is the drug is manufactured by only one company, that company has decided to increase the cost, then the insurance company decides to move the cost share.

These changes are happening with little to no communication to carrier representation, brokers, HR and finally the covered members. The employee may call the insurance company for explanation, but customer service reps have little training on these complex issues. They can communicate what they are seeing in the computer system when the change occurred.

The employee or family member may not know or have drug alternatives. The employee now goes to HR for help. The first thing that may be asked, what is the drug? This can lead to the employee being embarrassed about the condition for which the drug is treating.

Top Impacted Pharmaceutical Classes

  • ADHD
  • Allergies
  • Diabetes
  • Gastrointestinal
  • High Cholesterol
  • Oral Contraceptives
  • Repertory
  • Thyroid

These are the categories that will impact most group health plans. If there is an over the counter (OTC) available, there is a good chance that drug will no longer be covered on the drug formulary.

Specialty drugs are of huge concern because of their costs. The drug formularies are starting to address how and where the specialty drugs are being administered. These drugs are now having to go through stricter review process to be administer in an outpatient setting (hospital). The drug formulary may force some of these medications to be administered in lower level of care facilities. (Doctor’s Office) The insurance company will determine the appropriate setting.

The reason these changes are happening is because of the alarming rise of drug costs. This is happening to small group, level funded, large group, administration service only (ASO)/Self-Funded health insurance vehicles. It’s currently projecting that prescription drugs will represent 30+% of the total medical trend.

Some insurance companies are allowing ASO/Self-Funded groups to decide what changes they want to put into place. Fully Insured group plans, most carriers are making these changes as mandatory. The cost savings may be minor compared to the overall medical spending, but they are savings.

Contact our Group Health Insurance Indianapolis Company

How does a company communicate/educate their employees on these changes?

If the changes are happening faster than the carriers can communicate, it may be time to think outside of the industry standards. Here at Nefouse & Associates, Inc. we have been working on possible solutions. If you want to change the way you think about how to engage your employees, we have a potential solution.