The US spends more on medication than any other developed country, at over $1,300 per capita annually, according to statistics from the OECD. This cost is often borne by employer-sponsored health plans, putting pressure on these employers to keep premiums affordable while still maintaining benefits programs that meet the needs of employees.


According to Jim Lodge, Vice President of Kansas-based employee benefits broker and consulting firm RPS Benefits by Design, Inc., more than half of spend for prescription drugs is for expensive specialty medications, which cost an average of $84,000 a year, according to the AARP. Furthermore, specialty medications are making up a larger proportion of new drugs developed each year, up almost eight-fold over the past 20 years.

Around 10% of Americans suffer from rare diseases that require these specialty drugs to treat or manage, and around half of them rely on their employer-sponsored health plan to help foot the bill. This translates to around 5% of employees associated with more than half of drug spend for these plans.

"Almost everyone in the benefits space is aware of this problem, but the general public is not. I have talked to some procurement officers of large organizations and they're aware of it because they see their insurance spend on benefits increasing significantly each year . When broken down, other elements of overall medical spending, such as hospitalization or doctor visits, are certainly increasing, but drug spend is increasing at a much higher rate." Lodge says.

Lodge argues that there are mechanisms for them to get these medications for less money such as pharmaceutical companies' patient assistance programs, drug importation, and Federal or State government-funded programs.To mitigate the incredibly high drug spend, many benefits consultancies, like RPS, will facilitate partnerships between their clients and vendors that help significantly reduce the cost of specialty medications. This is done utilizing a procurement strategy for the small subset of employees that rely on expensive specialty drugs. These companies provide employees with the exact same FDA-approved drug, but sourced differently.

"This will save both the organization and their employees significant amounts of money while mitigating the increasing costs associated with the drug trend. For the organization, drug spend is decreased; for the participating employees, they are often less impacted by the cost of those drugs on their deductible or max out-of-pocket," Lodge says.

In one case study that Lodge shared, an organization with 1,700 employees netted annual savings of over $3.5 million, and realized a return on investment from their specialty medication program of 6.7:1. These programs can help reduce prescription drug costs by between 50% and 70%, which is advantageous to both the employer and employee.

Lodge adds that making this change will benefit not only the 5% of employees that take specialty medications, but also the remaining 95%, as it helps slow the pace of premium increases for the entire company, due to the nature of group insurance plans.

"The company we partner with has looked across their entire book of business and have found that, on average, they are able to save about $1,000 for every employee that's on the medical plan. For a company with 4,000 employees, that's approximately $4 million saved on an annual basis. Every dollar counts in today's tough economic climate, so employers must figure out ways to reduce costs without taking away from their employees' benefits programs."