Industryweek 4491 Employer Retirement Health Benefits

Study: Fewer Employers to Offer Pharmacy Benefits to Medicare-Eligible Workers

May 31, 2013
“With many medications having double-digit price increases, and with the continued consolidation among PBMs [third-party pharmacy benefit managers], this is a buyer’s market for PBM pricing,” said Paul Burns, a principal with Buck Consultants. “Employers should be aggressive in their negotiations.”

The percentage of U.S. employers that offer prescription drug coverage to their Medicare-eligible employees is expected to drop sharply in coming years, according to the results of a national survey.

The survey, conducted by Buck Consultants, a human resource consulting firm, found that 48% of employers currently offer prescription coverage to Medicare-eligible participants, and that of those 48% that now offer the coverage, only slightly over half—55%—intend to continue offering it.

That 55% figure represents a steep decline compared to the corresponding figure in Buck Consultants’ last survey on the topic, which found that 75% of employers that offered their workers prescription Medicare coverage planned to continue offering it.

The survey also found a continued rise in the percentage of employers that contract third-party pharmacy benefit managers—PBMs—to handle their prescription drug claims as a means of uncovering better prices for medications. Sixty-one percent of employers now use PBMs. In 2011 that figure was 57%, and in 2009 it was 47%.

Sixty-eight percent of respondents cited “pricing competitiveness” as an important service they receive from PBMs.

“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 Paul Burns, a principal with Buck Consultants. “Employers should be aggressive in their negotiations. Any PBM contract that is 18 to 24 months old should be reviewed for pricing competitiveness as well as up-to-date contractual language.”

The survey also found that 87% of employers say they expect affordable pharmacy benefits to have a high impact on their ability to contain health care costs over the long run.

More than 250 employers in a broad range of industries participated in Buck’s Prescription Drug Benefit Survey, its fourth annual report on the subject. For more information, go to www.bucksurveys.com. Buck Consultants is a subsidiary of Xerox Corp. (IW 1000/194).

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