Medical Claims Control - exercise restraint

Medical Claim Reduction Strategies

Reference-based Pricing

Reference-based pricing (RBP) contains cost by limiting the reimbursement level of therapeutic classes. The costs of various drug therapies differ significantly. RBP establishes a specific cost per day as the reference and uses that amount to limit reimbursement for all drugs with the therapeutic effect of that class.

Drug Formulary

There are numerous drug formularies that can help you identify which pharmaceuticals will be covered. It is important to use one that meets the needs of the plan members and satisfies the intent of the benefit program.

Dispensing Fees

Consider limiting the dispensing fee to $9 per prescription and permit the dispensing of a 90 day supply.

Approximately one third of prescription drug cost is generated by the professional dispensing fee. The dispensing fee is clearly identified on prescription drug receipts and range between $5 and $12 per prescription. Some pharmacies double the dispensing fee if they fill more than one month's supply of a drug.

Some pharmacies have other charges such as stock charges for expensive drugs

Generic Drugs

The Prescription Drug Cost Regulation Act 1986 [Section 7] requires pharmacist to provide the lowest cost interchangeable product in inventory. However, If the doctor writes "no substitution" or the patient requests a particular brand, then the drug requested will be dispensed.

Many plan sponsors only cover the cost of the lowest price interchangeable product.

Ingredient Cost

Drugs included on the Ontario Drug Benefit (ODB) formulary have a 10% mark-up on the best available price. Other drugs can have any mark-up the pharmacy chooses. Some preferred providers will limit the mark-up to 20% of the best available price.

Preferred Providers

Mail order pharmacies often have lower dispensing fees and mark-ups than their retail competitors. Some retail pharmacies will negotiate with employers to compete with other preferred providers.

It is most effective to design the plan with the cost containment features noted above and let employees select the distribution channel. Pharmacies do make errors and the most cautious approach is not to recommend a pharmacy to employees.

Exclusions

Drugs that require a prescription that are used to treat an illness or injury are normally covered. It is common to exclude preventive or cosmetic treatments.

Some plan specifically exclude certain drugs or treatment of specific conditions. This appears to be discriminatory and caution should be used. It may be more effective to have general limitations that accomplish the same results.

Semi-Private Hospital

The cost of semi-private hospital has escalated at an astounding rate. Some plan sponsors have introduced annual limits expressed in days or dollar amount or eliminated the coverage. The daily rate ranges from $20 to $200!