Managing drug costs: the perception of managed care pharmacy directors

L M Litton, F A Sisk, M E Akins
American Journal of Managed Care 2000, 6 (7): 805-14

OBJECTIVE: To examine the perceptions of health plan pharmacy directors about drug costs and utilization drivers, interventions the plans use to control drug expenditures, and strategies considered necessary to permit continued provision of a comprehensive drug benefit.

STUDY DESIGN/METHODS: A multipart survey developed and mailed to 500 pharmacy directors of managed care organizations across the country.

RESULTS: The survey respondents (response rate = 18%) represented managed care health plans in the following percentages: 49% of respondents were from network/independent practice associations; mixed-model health maintenance organizations (HMOs), 20%; group HMOs, 15%; and staff-model HMOs and network/preferred provider organizations, 8% each. Drug mix and utilization were reported to be the primary drivers of drug expenditures. Half the respondents rated inflation as a somewhat strong cost driver. Interventions the health plans use to control drug expenditures include formularies, generic substitution, preauthorization, manufacturers' rebates, drug benefit design, physician profiling, target drug programs, academic detailing, and tiered copays. With the exception of formulary use, generic substitution, and manufacturers' rebates, which all the plans have instituted, the types of interventions used by the different model types vary widely. More than half the pharmacy directors reported generic substitution, drug benefit design, and differential copays as very effective interventions used to control drug costs.

CONCLUSIONS: The majority of pharmacy directors predict continued double-digit increases in drug expenditures over both the short term and the long term. Of the respondents, 91% reported that additional limits and/or exclusions to the benefit design would be necessary to control these increases. To continue providing a comprehensive drug benefit, 54% indicated that they would have to achieve sufficient cost savings in other areas to offset increases in drug costs.

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