Reducing A Hospital’s Prescription Benefit Costs

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Low angle view of female nurses pushing patients on wheelchairs with doctor walking at corridor in hospital

By Monique Lappas

Q Consulting Services has been working with hospitals all over the country to develop strategies to lower their prescription benefit costs – both as it relates to the plan costs, as well as an employee’s prescription copays.

The two methods that have provided the biggest benefits (and that are not already being managed by a PBM) are utilizing an outpatient pharmacy for reduced medication expenses through either GPO pricing or 340B eligibility (for those hospitals that are eligible) and better utilization of Patient Assistance Programs for lower income employees.

An Outpatient Pharmacy Strategy

Q Consulting Services works closely with the HR department to help calculate the financial benefits of insourcing key parts of their benefit plan by leveraging the existing skills of the retail pharmacy staff. The HR department is not usually aware of the GPO discounts that are available to employees, and at non-340B hospitals, anywhere from 12-20% off the total plan spend can be found just by leveraging the GPO purchasing ability of the outpatient pharmacy. Most importantly, hospital employees and their family members are all eligible purchasers of GPO medications. When you consider that the average pharmacy benefit plan sits, on average, at about $1,300 per year per employee, and the average mid-sized hospital system has around 1,500 plan members, just simply utilizing an outpatient pharmacy that is owned by the hospital would save the plan around $400,000 per year in prescription benefit costs!

Further, if you consider the ever-increasing costs of specialty expenses and being able to extrapolate these types of savings through to these high-priced drugs, simply saving an extra 10% on a drug like Humira, that is probably costing the plan about $45,000 per year – that would be around $5,000 per employee per year on this medication alone.

For those hospitals that are 340B eligible, one of the best programs is one that targets high-cost employees with chronic conditions like diabetes, the implementation of a Medication Therapy Management program, and a strict referral process that is compliant with 340B HRSA laws. Through a series of workflow processes and with an auditing trail that can be tracked and referenced, several mid-sized hospitals have been able to save over $1 million on their prescription benefit plan, and pass along much of the benefit to the employee through lower or no-cost drug prices. 

Patient Assistance Programs

Through patient assistance programs (PAPs), many pharmaceutical companies offer limited quantities of free or low-cost medications to patients who are unable to afford the out-of-pocket costs associated with their medication expenses. There are close to 800 PAPs in existence today, with most high-cost and brand name drugs covered. These programs are especially relevant to patients that are receiving chemotherapy or other in-office infusions or injectables that carry a high out-of-pocket cost to the plan member.

Patient assistance programs are a valuable resource for low-income patients and would generally cover most employees within a custodial, food service and even nursing staff. As a rough estimate, any employee earning under $30 per hour would likely qualify for a PAP.

PAPs can be difficult to understand and there is a seemingly infinite variety when it comes to their requirements. They also tend to change or be discontinued frequently without warning. It’s beyond the scope of this article to discuss the details of specific programs, but the following are some general characteristics.

The one important point to take home from a PAP is that while an employee will not have any cost associated with their medication, neither will the health plan. The drug is provided free of charge to the patient (employee) because the out-of-pocket expense related to that drug is considered to be a financial burden to the patient. This means that there is no cost passed along to the plan and both the employee and hospital save.

Here is a client example:

  1. A patient was prescribed Brilinta.
  2. It was going to cost them $400 per month until they hit their deductible, which was $2,500.
  3. The household earned $70,000 per year and there were three people in the house.
  4. The total expenditure of the household medical expenses (including drugs, doctor visits, OTC) was $2,500.
  5. Under the Brilinta PAP program (at the time), if a household spent over 3% of their household income on medical and OTC expenses, they would be eligible for free drugs under the PAP.
  6. This household’s level was at 3.6%, so they were sent free medication for the entire year; which meant that they did not have any out-of-pocket costs AND the hospital’s insurance plan was no longer having to pay for this medication. Therefore, this saved the hospital $400 for every month after the deductible was met.

Monique Lappas, founder and CEO of Q Consulting Services, provides consulting and support services that saves hospitals and healthcare providers time, money and lives. She has worked with over 400 hospitals, across the United States and Canada, with clients ranging from critical-access hospitals to the country’s largest healthcare systems.

Monique has had to tap into much of her knowledge base, both in healthcare, finance and business management, to make the business a success. Her background in healthcare has spanned over 20 years. It began as a Quantitative Analyst for an investment bank in Sydney, then as an analyst covering the Emerging Markets at Wellington Management in Boston, MA and continued through to Wasatch Advisors in Salt Lake City, UT. In these roles, she analyzed healthcare service providers, pharmaceutical companies and hospitals from an investment perspective. She also spent time working within the investment banking healthcare team at Goldman Sachs and within the M&A division of a large Australian industrial company.

Monique hails from Sydney, Australia. She holds a B.Comm from Bond University (Australia), an MBA from the Tuck School of Business at Dartmouth and has also earned the Chartered Financial Analyst (CFA) designation.

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