Buck Bond Group

How to manage pharmacy benefits plans: Part 1: Getting the plan design right

by Tags: ,

Pharmacy benefit plans in the employer marketplace have the potential to play an important role in positively affecting the health and well-being of their plan participants. Not only do they help employees with the cost of treatment, they help reduce absenteeism and improve worker productivity. But unless you manage them appropriately, they can be a constant, growing drain on your organization’s financial resources.

Plan Design goes generic

This is the first in a 5-part series that looks at how to manage those plans in a rapidly changing pharmaceutical landscape. A number of major developments are changing employees’ annual drug spend. Perhaps foremost among them is the recent expiration of blockbuster brand drug patents, and further patents are due to expire in the next 4 years. This presents major savings opportunities through increased use of low-cost generic drugs.

Employers that have designed their pharmacy plans to encourage generic drug use are achieving generic dispensing rates of 75% or more, and will likely exceed 80% over the next 2 to 3 years. In 2009, these rates were in the 60%-65% range


As pharmacy plan costs have risen and the economy has deteriorated, many employers have made significant changes in their pharmacy benefits plan designs. Two key plan design trends have emerged during the past 5 years, which were validated in the findings of our 2011 Prescription Drug Benefit Survey Report:

  1. A shift from 2-tier to 3-tier cost sharing to encourage plan members to switch to lower-cost generic drugs and formulary brand drugs
  2. A shift from flat-dollar co-pays to co-insurance to minimize cost-shifting to the employer as drug costs rise


Employers need to set employee cost-sharing policy based on:

  • Their plans’ specific claim and usage experience
  • Industry-specific benchmarks
  • Corporate budgets
  • Benefits philosophy and objectives

This requires employers to evaluate their current employee cost sharing to determine the appropriate approach (i.e., flat-dollar vs. co-insurance), and the percentage of pharmacy benefit costs that plan members should pay for generic, formulary brand, and non-formulary brand drugs.

This approach enables employers to set specific member cost-sharing targets and allows far more precise cost budgeting for the upcoming year.


Next: Part 2: Poor drug adherence can play havoc with pharmacy benefit plans