Anyone who’s ever suffered from chronic pain will tell you it’s a great motivator. When you’re in pain, you’ll go to great lengths and will try just about anything to eliminate or reduce it. I know that from experience.

The rising cost of prescription drugs is becoming a persistent source of pain for many employers. For some, the pain has reached levels they can no longer ignore, and many have taken action to manage costs by implementing changes to plan design.

Read: Pitney Bowes focuses on prevention in benefits redesign 

Not so long ago, employers had few choices for managing their drug plan costs that didn’t involve reductions in coverage for employees. Today, it’s a much different story. Employers have many options that have minimal, if any, financial impact on employees, who are, in turn, willing to make some modest changes in behaviour.

Many employers have implemented no-brainer plan changes, such as mandatory generic substitution, prior authorization and step-therapy programs for high-cost specialty and biologic drugs. Most employers that have implemented those programs have seen little, if any, opposition from employees, particularly in a non-union environment. Other options that carry low financial impact for employees are dispensing fee maximums and frequency limitations, home delivery and tiered managed formularies.

The latter offers perhaps the largest potential for financial impact. Tiered managed formularies promise cost savings of about five to 15 per cent and lower annual inflation. They typically consist of two or three levels of co-insurance (for example, Tier 1 at 100 per cent, Tier 2 at 70 per cent and Tier 3 at 50 per cent). The top tier usually includes the best-value generic and brand-name drugs that are the most cost-effective for treating every medical condition. The lower tiers include drugs of lesser value that cost more without being notably more effective.

Read: The debate over drug formularies

While tiered formularies are generating a lot of interest among employers, few have taken the plunge.  Presumably, many employers haven’t yet reached their pain threshold, where the cost benefits of a tiered formulary outweigh the perceived inconvenience to employees. However, employers shouldn’t underestimate the adaptability of their employees when they incorporate a proper communication strategy. Tiered formularies aren’t as difficult to understand as most mobile phone packages, and everyone has one of them. The changes won’t affect the vast majority of employees and, for those they will have impact on, there are many resources available to help them understand and use the new program.

Employers that are looking for an option to reduce drug costs may want to consider the benefit of a tiered managed formulary. The change won’t affect the majority of employees, while the rest will have the option of an alternative drug that will minimize the financial impact while still providing an adequate therapy.

Kenneth MacDonald is a senior consultant with Morneau Shepell in Calgary. These are the views of the author and not necessarily those of Benefits Canada.
Copyright © 2022 Transcontinental Media G.P. Originally published on

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