Bitter Pill to Swallow: Fewer Employers Planning to Continue to Offer Pharmacy Benefits to Medicare-

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Bitter Pill to Swallow: Fewer Employers Planning to Continue to Offer Pharmacy Benefits to Medicare-eligible Participants

Buck Consultants survey also finds employers increase use of pharmacy benefit managers to save on drug costs

NEW YORK--(BUSINESS WIRE)-- A new nationwide survey released today by Buck Consultants, A Xerox Company (NYS: XRX) , uncovers a sharp decline in the percentage of U.S. employers that intend to continue to offer prescription drug plans to Medicare-eligible participants.

Currently, 48 percent of respondents offer prescription drug plans to Medicare-eligible participants. Of these respondents, only 55 percent intend to continue this benefit, down from 75 percent in the previous survey.

"Employers have options for controlling prescription drug costs for Medicare-eligible participants," said Paul Burns, principal, Buck Consultants. "For example, since Retiree Drug Subsidy payments are no longer tax-exempt and do not keep pace with rising drug costs, some employers are considering moving to an Employer-Group Waiver Plan to take advantage of additional subsidies available as a result of the Affordable Care Act (ACA)."

Nearly all (99 percent) respondents provide active employees with prescription drug coverage, an increase from 96 percent in 2011.

Buck's "Prescription Drug Benefit Survey" is the firm's fourth survey on this topic. The survey identifies strategies employers use to manage their prescription drug benefits and costs. More than 250 organizations participated in the survey, representing a broad range of industries and more than 3.9 million covered lives.

Pharmacy Benefit Managers

The survey shows an increase in the percentage of employers that contract third-party pharmacy benefit managers (PBMs) to process and pay prescription drug claims, signaling many employers turn to PBMs to uncover better drug prices.

According to the survey, 61 percent of employers now use PBMs compared to 57 percent in 2011 and 47 percent in 2009. The majority (68 percent) cite "pricing competitiveness" as an extremely important PBM service.

"With many medications having double-digit price increases and with the continued consolidation among PBMs, this is a buyer's market for PBM pricing," said Burns. "Employers should be aggressive in their negotiations. Any PBM contract that is 18-24 months old should be reviewed for pricing competitiveness as well as up-to-date contractual language."

Prescription Drug Costs

The majority (71 percent) of survey respondents spends 16 percent or more of their total healthcare benefits cost on pharmacy benefits.

Eighty-seven percent reported affordable pharmacy benefits as having a high impact on containing healthcare costs over the long run. This indicates that employers believe appropriate prescription drug utilization can substitute for more expensive medical services.

"Pharmacy benefit costs continue to increase and, on average, currently represent more than 15 percent of employers' total health care costs," explained Burns. "If not managed effectively, prescription drugs can represent a constant financial drain on company resources and undermine the return on investment of a plan sponsor's entire healthcare benefits program."

Affordable Care Act Requirements

Buck's survey asked organizations how they are responding to some of the pharmacy-specific requirements within ACA.

Of the two major categories of health benefit plans under ACA - grandfathered (i.e., plans in existence on March 23, 2010 meeting certain requirements) and non-grandfathered (subject to a larger set of requirements) - only 26 percent of survey respondents report being grandfathered. Of those grandfathered plans, 42 percent plan to keep this status long-term, beyond 2014.

Survey responders were almost evenly divided among the three specific options listed as various approaches plan sponsors may have chosen to comply with the ACA mandate of offering contraceptive products at no cost to plan participants:

  • Cover only contraceptives that are generics and brands without generic equivalent at $0 copay, and cover others at the brand drug copay level (27%).
  • Cover only generic contraceptives at $0 copay, and cover others at the brand drug copay level unless deemed medically necessary (25%).
  • Cover all prescription contraceptives at $0 copay (25%).

The majority of survey respondents provide coverage of immunizations under the medical benefit only, with approximately 20 percent offering coverage under both the medical and pharmacy benefit.

Specialty Drugs

Specialty medications, used to treat chronic catastrophic illnesses such as multiple sclerosis and an array of cancers, are typically used by only 1 percent or less of covered employees, but represent 20 percent or more of pharmacy plan costs. These specialty medications can cost upwards of $75,000 or more per year, per course of treatment.

Despite their cost, more than 30 percent of respondents did not know the portion of overall drug spend attributed to specialty medications.

Sixty-seven percent of respondents use utilization management programs and 55 percent use step therapy protocols to manage specialty drug costs ̶ up from 45 percent and 34 percent, respectively, in the prior survey. This indicates that more plan sponsors recognized the need to manage these therapies whenever possible.

Buck's "Prescription Drug Benefit Survey" is available at no cost to the media by contacting Ed Gadowski at 910-253-9816. It is available to other interested parties for $395 from Buck's Global Survey Resources at 800-887-0509. It also can be ordered online at

About Buck Consultants

Buck Consultants, A Xerox Company, is a leader in human resource and benefits consulting with more than 1,500 professionals worldwide. Founded in 1916 to advise clients in establishing and funding some of the nation's first public and private retirement programs, Buck is an innovator in the areas of retirement benefits, health and welfare programs, talent and human resources solutions, compensation, and employee communication. News and other information about Buck Consultants are available at

About Xerox

Since the invention of Xerography 75 years ago, the people of Xerox (NYS: XRX) have helped businesses simplify the way work gets done. Today, we are the global leader in business process and document management, helping people be more efficient so they can focus on their real business. Headquartered in Norwalk, Conn., more than 140,000 Xerox employees serve clients in 160 countries, providing business services, printing equipment and software for commercial and government organizations. Learn more at

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Xerox® and Xerox and Design® are trademarks of Xerox in the United States and/or other countries.

Buck Consultants, A Xerox Company
Ed Gadowski, +1-910-253-9816
Text 100 for Buck Consultants
James Baussmann, +1-617-399-4906

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