Managing Pharmacy Costs to Create Savings

Benefits Case Study

As healthcare costs continue to rise, one of the main drivers remains constant across markets: the cost of prescription drugs.  Since many plans include copay amounts for different drugs, consumers are not exposed to the full cost of the drug paid for by the plan. These unseen prescription drug costs often account for up to 25-30% of a plan’s overall utilization and play a large part in plan costs and future inflationary renewal rates.

One group facing this problem was a government entity with more than 2000 employees. This organization was using a partially self-funded model for medical benefits when they noticed a significant increase in pharmacy spending. They were previously aligned with a pharmacy benefit manager (PBM) that utilized the typical average wholesale price minus discount and maximum allowable cost pricing methodologies. Additionally, the PBM contract included a rebate definition that could apply to multiple provisions within the contract, allowing the PBM to retain rebates under the reclassification.

Summit’s Solution

Summit became the consultant for the organization’s benefit plans, pharmacy program and subsequently conducted a thorough analysis of the current PBM contract and pharmacy spending. Summit conducted an analysis comparing the current spend to a model that eliminated the reclassification of rebates, mandated no formulary change without client consent and mandated 100% pass through of client rebates. The analysis resulted in a projected 28% savings in average script net price per year for a three-year period.

This analysis allowed the employer to reduce the inflationary glide path and enrich benefits for the participants, enhancing employee morale.

Todd Rolland


These results are for illustrative purposes only and should not be deemed a representation of future results. Circumstances, solutions, and/or results are based on specific facts tied to unique client situations. Favorable results cannot be guaranteed even in a similar scenario. Each specific set of circumstances will differ depending on client needs and profile. Actual results may be more or may be less than those shown. Past performance does not guarantee future results. This assessment is that of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives. The solutions presented in this scenario are being offered through Summit.

Todd Rolland is not affiliated with Cetera Advisor Networks LLC.