With drug prices rising nearly 200 percent since 1980 and the numbers of prescriptions steadily increasing, benefit plans are looking at ways to rein in runaway costs.
Some alternatives will mean more money out of the pockets of employees, while others restrict choice of drugs and pharmacies. But employers will continue to pay the largest share of health-care coverage.
Nearly 40 percent of all working people are estimated to be covered by some drug benefit plan. And more prescriptions are being filled each year -- about 1.7 billion last year, up from 1.4 billion in 1980.
Last year, those prescriptions cost about $33 billion, more than half that bill paid through health plans.
"When it was only 3 or 4 percent of the total health-care budget, it wasn't so significant. Now it's 8 to 9 percent, and it has become a big gorilla," said Don S. Hillier, human resources vice president of MNC Financial Inc.
Over the past few years, the banking company's drug plan cost has risen 40 percent annually, compared with a 20 percent annual rise in overall health costs, he said. Costs of drug plans offered by Maryland Blue Cross-Blue Shield have increased 20 percent a year in the past three years.
"It's definitely a serious matter these days, eating up 15 percent of some of our health plans," added David Blitzstein of the United Food and Commercial Workers, which has 100 joint employer-union trust funds across the United States.
Prescription drug coverage has become a standard benefit bargained by labor unions and a valuable benefit for non-union employees, too. "It's a wonderful benefit; you would really miss it. Employers would find it very hard to back away from offering it," said Donald M. Steinwachs, a health policy professor at the Johns Hopkins University. But expensive new drugs and increased consumer use are placing greater financial pressures on such plans, he noted.
"They [employers] may not be dropping prescription plans, but they can make it too expensive for people to use, with 30 percent and 40 percent co-pays," warns Ernest R. Crofoot, who with Mr. Hillier is co-chairman of the Baltimore Area Labor Management Committee's health cost task force. "We could see a return to the '60s and early '70s, when poor working people could go to a doctor but couldn't afford to get their prescription filled."
Employers admit that higher drug plan costs are forcing them to shift more of that bill to workers and to bargain tougher with drug providers.
Among the options gaining currency are:
* Generic drug substitution programs, either mandatory or with an economic incentive for consumers to opt for the cheaper brand. Use of generics could save 20 percent to 40 percent of the prescription drug bill, according to the Maryland Pharmacists Association.
* Mail-order. Primarily useful for chronic medications, such as those to treat diabetes, ulcers or hypertension, mail-order houses claim savings of 20 percent to 30 percent compared with retail pharmacies. But the main savings appear to be for consumers who get a three-month supply for one co-pay instead of a one-month supply at the drugstore.
* Retail pharmacy network. Negotiated discount arrangements with chain pharmacies typically offer a 10 percent discount for prescription card holders.
* Managed care systems. Health Maintenance Organizations (HMOs) and Preferred Provider Organizations control costs by dispensing through their own or contracted pharmacies and by relying more heavily on generics where indicated. A study by Hopkins researchers found that HMOs were three times more likely than card plans to prescribe generics. They also tend to use formularies, or restricted lists of a few drugs for specific ailments. But more than 90 percent of HMO members have drug coverage.
* Shifting costs. Prescription drug cards that had 50-cent or $1 co-pays in the 1980s have risen to $5 or $10, or even $12. Next year, employees of Westinghouse Electric Corp. will pay 30 percent of the cost of prescriptions, replacing the current $5 co-pay per prescription. Baltimore Gas and Electric Co. expects to raise employee health-care contributions at least 7 percent to cope with rising costs. Some employers are moving from co-pay cards to major medical plans for drugs, the consumer paying the full cost and applying for partial reimbursement from health insurance.
Drug plans are well established among major employers. A national survey of 1,850 employers by A. Foster Higgins & Co. last year found only 3 percent of them did not offer prescription drug coverage.
About 95 percent of groups insuring through Maryland Blue Cross have drug plans. Nearly all of the prescription card plans now have a mandatory generic-substitution rule, which was uncommon 10 years ago, said Leslie Epstein, the insurer's pharmacy plan director.
"The generic plan can save an employer 10 percent from the start," she said.