Hyperinflation Watch Removing the Bad Apples from the Equation

Over the past year, we’ve witnessed a stunning rise in the cost of brand name pharmaceuticals – due, in part, to hyperinflation. In the first half of 2019 alone, more than 3,400 drugs listed for new, often significantly higher, prices.

January 09, 2020

Over the past year, we’ve witnessed a stunning rise in the cost of brand name pharmaceuticals – due, in part, to hyperinflation. In the first half of 2019 alone, more than 3,400 drugs listed for new, often significantly higher, prices. This number is up by 17% when compared to the same time period in 2018 and the average price increase is 10.5% - 5X the rate of general inflation.1

Some Pharmacy Benefit Managers (PBMs) have implemented strategies to identify hyperinflationary drugs on formulary and remove them. Culprit products typically are

  • of a different strength or formulation;
  • repeats of the same drug at the same strength but by a different manufacturer; or
  • new-to-market with significantly higher price tags.

Employers rely heavily on their PBM partners to help them stay ahead of market changes and construct high-value formularies to ensure that members are taking the right drug, at the right time, and for the right price. That’s why proactive monitoring and removal of low-value drugs from formulary is so critical, especially when they can be replaced with alternatives of equal, and sometimes higher, efficacy.

Nevertheless, employers have grown increasingly frustrated by 1) the lag time that exists between when an outlier is flagged and ultimately removed from coverage (for some PBMs, 3 months) and 2) the fact that these egregiously expensive and unnecessary drugs gain formulary placement to begin with.

Example

One employer member of the Business Group recently discovered that an employee was prescribed a generic muscle relaxant costing $4,500 per 250 mg prescription while a $30 alternative exists for a 500 mg therapy, which can be split, for a total cost of $15, or a savings of $4,485. The original prescription came from a clinician other than the patient’s primary care physician and was dispensed out of a pharmacy that can be tracked to a home address.

Some common examples of grossly hyperinflated drugs and their higher-value/equal-efficacy alternatives are shown below. The prices listed reflect the average cost for a 30-day supply:

Chlorzoxazone tab 250 mg $2,902.64 Alternative: Cycloben-zaprine $1.76
Metformin ER tab 1000 mg  $617.17 Alternative: Metformin $3.80
Fenoprofen cap 200 mg $3,001.25 Alternative: Diclofenac Sodium $6.62
Lidocaine tetracaine cream $731.88 Alternative: Lidocaine-prilocaine $22.61
Ortho DF cap 1-3775IU $2,858.44 Alternative: Folic acid $1.50

Recommended action

Employers and their consulting partners are encouraged to assume a more proactive stance in monitoring hyperinflation and ensure that their PBM is eliminating culprit drugs from the formulary in a timely manner.

  • Discuss formulary customization options with your PBM, or at least ensure formulary changes are allowed per your PBM contract and can be done with necessary frequency. Review your claims monthly, monitoring for drugs that fall into the above hyperinflation parameters.
  • Regardless of formulary customization ability, challenge your PBM to stay on top of these hyperinflationary drug culprits and remove them from coverage in a timely manner. Push for proactive market surveillance and increased reporting frequency.
  • Ideally, seek solutions to get out ahead of this problem so that these drugs are never given the opportunity to hit your claims data in the first place (e.g., pro-active market surveillance, monitoring of data through your PBM portal or data warehouse).
  • Consider offering a price transparency tool for your members that can allow them to see the full cost of the drug and recommended lower-cost alternatives.

References

PICCHI, A (July 1, 2019). Drug prices in 2019 are surging, with hikes at 5 times inflation. CBS News. https://www.cbsnews.com/news/drug-prices-in-2019-are-surging-with-hikes-at-5-times-inflation/. Accessed October 25, 2019.

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