Decoding 2023 Rx Drug Pricing Trends: Challenges & Solutions for Self-Funded Companies

By Mike Cody

The dynamics of prescription drug pricing are becoming increasingly complex. 2023 has brought forth a range of trends that demand closer scrutiny, especially for self-funded companies seeking to offer the best healthcare solutions to their employees.

Dissecting these developments will help companies understand the current state of affairs, and how a skilled insurance broker can help you improve the vitality of your pharmacy contract.

Generic Drugs & the Price Paradox

One would expect that generic drugs, being off-patent and manufactured by multiple companies, should be more affordable than their brand-name counterparts. However, this has not been the trend.

For instance, despite the cancer drug Gleevec transitioning to a generic status in 2016 and being available for a mere $55 a month, insurance plans are marking up prices exponentially. How exponentially? In some cases, more than 100 times the generic price.

Evaluating Pharmacy & Insurer Markups

A deep dive into the Wall Street Journal's analysis reveals startling data showing the inconsistency of prominent pharmacy entities. Certain major pharmacy and insurance conglomerates, for instance, have set Gleevec's price tag at $6,600 per month.

But it's not just about Gleevec. When assessing a range of specialty generic drugs, markups can be up to 24 times higher than the prices set by drug manufacturers.

In comparison with other leading health organizations whose pricing is 3.5 times the manufacturer's price, it becomes evident that there is a lack of standardization and transparency in the pricing strategies of these health giants.

This significant markup is possible largely because these companies hold sway over both insurance and pharmacies — a potential conflict of interest.

Disparities in Pricing

Pricing disparities start with the industry titans and work their way down to individual organizations — placing much of the responsibility to find the best prices on the employee.

In fact, within a single city, the cost of a prescription can vary up to 10 times. A store just five miles away might offer the same drug at a fraction of the price compared to the one just down the street.

The High-Cost Drug Dilemma

New drug categories, especially those like GLP-1s, which address weight loss and diabetes, are surging in popularity due to their efficacy. However, their pricing is exorbitant, with drugs like Ozempic, Wegovy and Mounjaro coming in at around $10,000 per year.

The Murky Middle: Pharmacy Benefit Managers (PBMs)

Central to this discussion are PBMs, who act as intermediaries in the drug pricing equation. They determine which drugs make it to the formulary and at what cost to the member.

Their role has become controversial due to the rebates they receive from pharmaceutical manufacturers for placing certain drugs in an affordable tier on the formulary.

With large insurance entities owning their own PBMs, these rebates often stay within the company's ecosystem, thanks to vertical integration.

For perspective, a PBM owned by a major insurer recently reported a 14% revenue increase in the third quarter of 2023, representing an additional $29 billion.

The Silver Lining: An Insurance Broker’s Expertise

The overarching trend is clear: Healthcare and prescription drug costs are spiraling. While this seems advantageous for insurers in the short run, the long-term impact will be reflected in the increased premiums passed on to customers.

For self-funded companies, this presents a unique challenge. These organizations require insight, expertise and strategic thinking to effectively handle contract language adjustments, implement clinical and formulary management strategies and understand their employee purchasing trends.

It's within this complex backdrop that the benefits of partnering with an insurance broker or consultant become evident, such as:

• Innovative Data-Driven Solutions: Offering tailored, data-informed strategies that align with the specific needs of your company.
• Enhanced Cost Management: Implementing strategies for effective cost and trend supervision to prevent overspending on pharmacy contracts.
• Strategic Contract Optimization: Enhancing contract language and terms that favor the client, ensuring transparency and favorable rates.
• Expert Negotiation Expertise: Prioritizing the client during pharmacy contract negotiations to secure beneficial deals.
• Comprehensive Specialty Drug Management: Offering strategies to manage the high costs of specialty drugs, grounded in clinical insights and data analytics.
• Advanced Clinical Analytics: Employing advanced clinical analytics to provide recommendations for program enhancements and member engagement.

Maximize Your Pharmacy Benefits and Savings with MMA

Not just any broker can ensure self-funded companies get the best deals without compromising on the quality of healthcare benefits for their employees.

With a comprehensive understanding of the market dynamics, combined with its vast network and negotiating prowess, you can partner with MMA to leverage our comprehensive pharmacy benefits management services and tap into transparent, equitable and cost-effective solutions. To navigate the complexities of the pharmaceutical landscape with confidence, contact Mike Cody and Marsh McLennan Agency today.