Drug Costs Dropped in 2008; New Contract Terms Meet Employer Goals, Estimated to Save $55 Million
PITTSBURGH, November 13, 2009 — The Pittsburgh Business Group on Health, a regional employer-led coalition advocating for cost-effective, quality health care and benefits, landed a solid one-two punch against rising prescription drug costs on behalf of employer members participating in its Prescription Drug Program.
In 2008, overall prescription drug costs under the program decreased by 2.2 percent, while cost increases ranged between 4 and 11 percent nationally. Additionally, PBGH, recognizing employers’ need to identify and capitalize on money-saving opportunities to remain competitive in a business environment significantly changed by recent economic conditions, negotiated a favorable three-year agreement with CVS Caremark to administer the program. The new terms and guarantees provide employers with significant savings in 2010—one year earlier than the current contract. Over the next three years, participating PBGH employer members are positioned to save an estimated $55 million in prescription drug costs.
The One-Punch: New Contract Expected to Save $55 Million
Although 2009 is only the second year of a three-year contract negotiated in 2007 with CVS Caremark, PBGH saw an opportunity to further improve savings for the employer members participating in its program.
Under a new three-year contract, which begins in 2010, the PBGH Prescription Drug Program aligns with employers’ goals and helps them fully realize the value of their benefits strategies. The contract is guaranteed to improve each year through a combination of aggressive discounts off average wholesale price, low administrative fees and enhanced education tools.
“By negotiating a contract now that improves on the third year of the existing contract and uses it as the first year of the new contract, PBGH has put its members on very solid footing for the foreseeable future. Employers will recognize savings a year earlier, rather than waiting for the existing contract to expire and negotiating a new one for 2011,” said PBGH Executive Director M. Christine Whipple said. “Given the economy and the costs of health care, getting a strong contract now was imperative.”
Butler Area School District, a PBGH employer member, is an example of the savings PBGH employer members can expect.
Under the new terms, Butler Area will save an estimated 10 percent of what it would have spent under the current contract translating to over $175,000 in estimated savings.
“This speaks for itself,” said. Dr. Edward Fink, Butler Area School District Superintendent. “Not only have we saved significant taxpayer dollars through the PBGH program, we have been able to maintain our valuable and competitive benefits for our teachers and staff and spend our dollars where they count most—on our students, our community’s children. The fact that we can realize additional savings under the new contract one year earlier than expected significantly adds to the value of this great program.”
The Two-Punch: Decreased Drug Costs
Total costs—which include employer costs and employee copayments under their prescription drug plans—decreased by 2.2 percent in 2008, resulting in savings of approximately $12 million in the first year of the current contract.
The 2008 results, significantly better than cost trends reported nationally and by similar employer coalitions during the same period, follow four consecutive years of single-digit increases under the PBGH program.
Employer efforts around employee engagement strategies aimed at changing prescription drug purchasing behavior produced positive results for not only the employer, but also the employee. Educating employees on the value of generics and mail-order prescriptions resulted in a subsequent increase in the use of both, according to Whipple.
“Pricing discounts, performance guarantees and low administrative fees are hallmarks of the PBGH Prescription Drug Program and are essential to achieving the results we have experienced since the inception of the program,” said Whipple. “What is becoming more evident, though, is that consistent, effective communication and education efforts by employers can truly help change behavior and move the needle toward even greater cost savings.”
The PBGH Prescription Drug Program offers PBGH employer members the opportunity to purchase prescription drug benefits in a carved-out, self-insured arrangement with PBGH coalition discounts and enhanced services. The program, which is audited annually by an independent third party, provides PBGH employer members the ability to design their own benefits to meet the needs of their company and employees, manage their prescription drug costs and continue to offer competitive prescription drug benefits.
About the Pittsburgh Business Group on Health
Founded in 1981, the Pittsburgh Business Group on Health (PBGH) is a non-profit organization and business-only coalition representing over 60 employer members, more than 1.2 million employees, dependents and retirees, and over $4 billion in health care expenditures. The organization strives to improve the delivery, cost and quality of health care through implementing and supporting quality initiatives, analyzing health care data and resources, and providing forums for exchange of ideas and viewpoints. Visit www.pbghpa.com for more information.
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