Due to rising prices and the increased availability and use of specialty drugs, the cost of the University of Michigan’s prescription plan through the University Benefits Office increased significantly in 2015.
Specialty drugs are defined as high-cost drugs used in cases requiring specialized medications, such as rheumatoid arthritis, multiple sclerosis and oncology.
The prescription plan itself cost $121.6 million in 2015 — a 15.8-percent increase since 2014. The total cost on a per-member per-month basis would be 13.4-percent increase, ultimately making the cost of the plan $15 million more than 2014.
Rich Holcomb, senior director for benefits, said the Benefits Office works with vendors to develop plans for aspects such as dental and visual coverage, prescription drugs and retirement.
“The Benefits Office is responsible for developing strategy and developing subsequently our health and welfare plans for all University faculty and staff,” Holcomb said.
Keith Bruhnsen, prescription drug plan assistant director and manager for the Benefits Office, said the prescription plan specifically covers nearly 103,000 beneficiaries, including faculty and staff members, retirees and the dependents of these individuals.
“The prescription plan is a self-insured, self-administered plan by the University in which we provide coverage for out-patient prescription drugs for all of our beneficiaries that are enrolled in any of the various health plans that we offer,” Bruhnsen said.
The prescription plan is part of University efforts to limit how much beneficiaries pay for health care, according to the Benefits office. The plan recommends a number of ways to save money on prescriptions such as requesting generic medications when possible to pay the lowest available copay, using the preferred drug list to pay a lower copay on brand name prescriptions and using mail order programs to save much of the original copay costs.
“The University took control of managing our prescription drug plan back in 2003 so that we could maintain both a quality plan for the University and its members, but also provide some strong cost-containment strategies in terms of managing the plan toward appropriate use and utilizing the internal expertise of the faculty and staff here to help us in our operations and strategic planning,” Bruhnsen said.
Prior to 2003, prescription drugs were embedded within each medical plan, he said. Each medical plan — whether through Blue Cross, Care Choices HMO Plan, HAP HMO Plan or other plans — would monitor and manage its own drug plans, but coverage of drugs was sometimes different from one plan to another. Members were moving from plan to plan in order to get the coverage they needed at a particular time.
As the cost of prescription drugs increased, a University task force studied these plans and made a recommendation to executive officers to include a prescription drug plan with other benefits to better manage cost trends.
Along with general economic inflation and use of specialty drugs, an increase in Food and Drug Administration approval for more specialty drugs also contributed to the cost increase, Holcomb said. These specialty drugs require careful management, dispensing and monitoring, and can often result in dramatic health care improvements for some conditions.
In particular Holcomb cited the release of specialty drugs for treating hepatitis C a year ago, which cost patients nearly $90,000 for an eight- to 12-week course of treatment. Between 95 and 100 percent of the patients who used this prescription drug received complete remission of the disease, indicating the necessity for the prescription drug plan to cover particularly costly and specialty drugs.
Though only 1.6 percent of the 949,000 prescriptions that were dispensed last year through the plan are specialty medications, $40 million was spent in 2015 on these prescriptions through the plan. This was a significant percentage — about 37 percent — of the total cost of the prescription drug plan, Bruhnsen said. Due to upcoming developments in the pharmaceutical industry, he said he expects this percentage to increase to nearly 50 percent of the prescription drug plan’s total cost.
Because of these cost increases, the University holds a separate contract for both mail-order pharmacy and specialty pharmacy, due to it being a more cost-effective arrangement. For example, NoviXus, a mail order pharmacy, supplies larger quantities of maintenance medication at a reduced copay. Maintenance medications include those taken on a regular basis, such as medications for high-cholesterol or birth control. The University uses its own hospital pharmacy specialty service for narcotic-based medications that cannot be shipped via the NoviXux mail-order pharmacy.
“(Mail-order prescriptions) are more cost-effective than retail pharmacies because they automate all of their processing and they mail it and it’s very convenient,” Holcomb said. “They usually turn the prescription around in less than a day and often people receive it the next day in their mailbox. They have…low error rate and very high satisfaction from the surveys that we’ve done with our membership.”
Ultimately, employees and other beneficiaries are not personally penalized due to these increasing costs — members have the same level of cost-sharing copayment regardless of whether the medication is a low-cost or specialty medication — but in general, the cost of health care will continue to increase due to these medicinal advances, according to Holcomb.