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April 18, 2022

How to reduce Rx costs for employees and employers

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  • Under : Discussion Topic, Monthly Topic, Uncategorized

Pharmaceutical costs represent 35 to 40% of your total spend (and even a higher percentage for many of your employees) AND drug costs are increasing 15 to 25% per year so they represent the obvious component to understand.

If you have a fully insured plan, this will be a painful read. Odds are very high that you don’t have the information on what your employees take, where they buy it (CVS or mail order), if they are price conscious and what your total spend on drugs was for last year or last month. But, read below and perhaps you can get some information from your broker or ask HR what employees are complaining about.

If you have a partially or fully self insured plan, you have the information to do the following analysis. People fixate on free generics vs low cost generics but that is not your top priority. Look at the monthly prescriptions that people take every month because they represent a huge opportunity to reduce the cost to the employer AND the cost to the employee.

Pharmaceutical costs represent 35 to 40% of your total spend
Two Situations:

Ever watch the drug commercial and wonder the following comment“if you are unable to afford XYZ super drug perhaps abc manufacturer is able to provide this drug at a low cost or perhaps free!” works? The ad or announcer says just enough to confuse you. These are the Manufacturers Assistance Program-an outcome of the Affordable Care Act-that was supposed to reduce the cost of healthcare. Bottom line is that about 300 monthly prescription drugs have MAP programs that allow employees who have taxable income under a certain level (frequently 80 to 100k per year for a couple filing jointly) to receive these drugs at no cost or perhaps 5 or 10 dollars per month These prescriptions generally cost the employee 100 or more in copay per month AND cost the employee over 1000 per month. HUGE savings AND I bet your broker never explained this best practice to you BECAUSE they don’t want you to bypass the PBM supplier since that is how they get paid their commission and bonuses! Maybe some of your employees investigate with their doctor but most just get hammered by the copay and then every year you decide to increase their copay when you get the plan renewal increase.

Here is a real life example. Happened to one of our CFOs in NJ with an employee with Hepatitis C.  The treatment is an 84 day/ 84 pill regimen and it works but it is not cheap. 84 pills with 84 prescriptions at 1000 per day with usually a 200 dollar a day copay by the employee.   So the employee pays 16k out of pocket and the employer pays about 45k (after discount). But, our advisor ran the numbers (employee earned about 65k) and he received the pills for F R E E and the employer’s cost (fee paid to advisor) was about 15k.  Employee saved 16k, employer saved over 30k and the spend was not via the plan SO it was not included in the three year spend base. Win Win (but a lose for the broker whose commission declines!). REMEMBER the fiduciary requires that the CFO has a plan that is in the best interest of the employees.  A fully funded plan is NOT in the best interest of the employee and the CFO is at risk. If you don’t understand the role of a fiduciary AND the impact of Sarbanes Oxley regs on your personal exposure, get educated and manage your risk. Just for chuckles-ask your broker if their plan protects you by assuming the fiduciary responsibility.

The best practice is to engage an advisor who handles those prescriptions for your employees-they get their prescription at a zero copay which means they take the drugs and don’t cut pills in half to save money AND the employer has NO COST. Never hits your plan so there is no three year trailing cost stack and you pay the advisor a percentage of what you would have paid the PBM!

For those employees who do not qualify for the economic assistance of an MAP program, consider buying the same prescription from a Tier One (fully FDA approved) source from Canada where price competition is alive and well. The surprise is that all of the major pharma manufacturers have factories in Canada that have to meet FDA standards and have distribution networks that serve Canadian pharmacies. Canadian pharmacies can ship to a US customer if you have a partner that knows how to get your prescription to them.   Keep in mind, your employee could do this and probably purchase the drug below their copay costs in some cases but they have no incentive to do that until they retire! Provide this service and the employees get their drugs in their mailbox for zero copay AND the employer generally saves at least 50% and often as much as 80%.  Thank the second largest lobby industry for that control-teachers unions have more lobbyists than pharma but that is a different topic (and we don’t have a best practice on that challenge). Bottom line, two more best practices that a partially self insured healthcare plan can implement to reduce the total cost of healthcare, reduce the cost for their employees and save a lot of money in the meantime. If you don’t understand partially self insured healthcare and don’t understand risk minimization with stop loss coverage, it’s time to talk to one of our partner advisors.

Since you love examples, here are three common drugs-first is a blood thinner, second is a Type 2 diabetes treatment and third is a stress/ personality treatment.

Xarelto   

PBM Plan Cost: $16.30 per pill daily (some portion paid by employee)
Best Practice Cost: $5.29 per pill (68% savings + zero cost to employee)


Januvia

PBM Plan Cost: $15.55 per pill daily (some portion paid by employee)
Best Practice Cost: $4.11 per pill (73% savings + zero cost to employee)


Latuda

PBM Plan Cost: $44.70 per pill daily (some portion paid by employee)
Best Practice Cost: $4.42 per pill (90% savings / over $1,200 per month)

Again, whether partially self insured or fully insured, ask your broker what you can do to reduce costs of high cost maintenance prescriptions. Let me know what they say.

Glad to provide information-we have examples of almost every drug that is offered in the MAP and in the International Sourcing programs. For you skeptics on international sourcing, Ohio shifted to international sourcing for all of their plans joining many large employers who have been offering it for years. It is frequently offered as an elective for the employees to reduce their costs while continuing to offer the base plan-and strong conversion happens “naturally within a couple of years”-all it takes is knowing that co workers are spending less than you are!

Finally if you happen to have a legacy dinosaur plan (fully or partially self insured) that allows a working spouse (with access to coverage but prefers to remain on “your plan”), we have a brilliant, proven solution for that-and it is a painless incentive that encourages the employees to elect to have the spouse exit your plan AND they are extremely happen to do so.

If want an analysis done-no cost/ no obligation OR if you want to chat about other best practices, give me a call at (215)421-8291. Renewals are a few short months away so analyze now, get educated and get ready to provide a health care benefit instead of a healthcare plan that no one can afford to use.

June 7, 2021

Views From the Stream – Let’s Go Fly A Kite

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When I was young, my parents took me to a wonderful, magical movie called Mary Poppins.  It starred Julie Andrews and Dick Van Dyke with award-winning music from Richard and Robert Sherman.  It had wonderful songs, such as A Spoonful of Sugar (Helps The Medicine Go Down) and Chim Chim Cher-ee, the latter of which won the Oscar for Best Song.  And with Julie Andrews’s magical performance as Mary Poppins, not only did she win the Oscar for Best Actress, but the songwriters Richard and Robert Sherman won the Oscar for Best Music Score (Original).  And, with the wonderful performances on all sides, the music, magic, and dance of the movie transformed the audience and was greeted with universal acclaim.  This acclaim reflected the uplifting message of the movie in which the father and the children are transformed from a proper, prim, distanced group in early 1900s London to a close-knit, family.  The movie ends with the rousing song, Let’s Go Fly A Kite, where the father takes his children to the park to fly a kite and Mary Poppins, having reunited the family, opens her umbrella and flies off to save the next family.  

For those watching the US Economy over the past year, something magical has occurred.  From the grim lockdowns put in place during the Spring of 2020 to combat the Pandemic, to the reopening of the economy over the past few months as vaccinations put the Pandemic to rest, the American economy underwent a mystical metamorphosis.  Whether one looks to the restaurants, filled once more as people reclaim their lives, or at the beaches, with wall-to-wall bathers lying in the sun, the US economy continues to hit its stride.  As the following chart demonstrates, Nominal GDP already hit a new high:

And, when measured in “Real Dollars”, which adjusts for inflation, Real GDP appears headed to new heights shortly:


In fact, at the end of Q1 2021, it stood less than 1% below the previous high in Q4 2019.  And thus, as indicated in January, Real GDP should exceed its prior peak level in Q2 2021.  

Other indicators of the economy continue to demonstrate strong underlying growth.  Industrial Production through March, despite the massive freeze in February, already recovered 80%+ of its drop during the Pandemic:

Forecasters project IP to exceed its prior peak before year-end.  Single-Family Housing Starts stand back at their levels from the late 1990s and at a new high for this Housing Cycle.  These levels were only exceeded during the Housing Bubble:

And New Single Family Home Sales continue extremely strong:

They were only exceeded from 2003 – 2006.  

On the public side, Real State and Local Government Expenditures stand within 0.5% of their peak early in the recession:

And lastly, Real Investment into the US economy stands at record levels, what economists would call Gross Fixed Capital Formation:

With all this data flashing Green, the US Economy appears headed up and to the right.  And as the 11% of the economy related to leisure and travel continues to reopen, another whole layer of growth will add to the above data.  

For the US, it appears a short, harsh winter has given way to a long, beautiful spring, replete with numerous flowers in brilliant bloom with dark green leaves on the trees.  The heat of the summer, that will fade the blooms and the leaves, stands far away.  And with the nourishing rains of spring in place, from both the US Government and Federal Reserve, rapid Economic Growth will continue.  With all this in place, the US continues to metamorphosize from the dark greys and blacks of the Edwardian era to the bright colors of the Roaring ‘20s fashions.  One can almost see the final scene of Mary Poppins, with its colored kites flying in the sky, and hear the rousing chorus of its final song rising as the family is reunited as one, singing together: 

Let’s go fly a kite
Up to the highest height!
Let’s go fly a kite and send it soaring
Up through the atmosphere
Up where the air is clear
Oh, let’s go fly a kite!

Music and Lyrics by Richard M. Sherman & Robert B. Sherman
Music Written for Mary Poppins, 1964


Vaccination Passports To The Rescue

Last month we asked the following questions.  “With Americans getting vaccinated at a rapid rate, the question seems: where are you going?”  And then we pointed out that the true question might be: “Where can you go?”  Well, given the number of those vaccinated, it appears governments in Europe and the US are moving to salvage the summer tourist season.  For a country like Spain, where visitors to the country totaled 84 million in 2019 compared to a population of less than 47 million, this cannot come soon enough.  The miracle solution appears Vaccination Passports.  These would be verifiable government documents that would validate that someone was fully vaccinated and thus posed a low risk to get or transmit COVID.  They would enable tourists to avoid 2-week quarantines and a variety of other rules imposed by governments to address the Pandemic that makes a tourist feel very unwelcome.   From a practical standpoint, these rules ruin a vacation.  Imagine arriving in Italy on a 10 day holiday, only to find out you were confined to your hotel for 2 weeks and could not see the Vatican in Rome or Michelangelo’s David in Florence while you were there.  It might make more sense to travel within your own country than bother going to Italy.  With this in mind, the US and EU continue to work hard to fix the problem and put a system in place at light speed.  Thus, it may be only a matter of weeks until a British tourist can enjoy an Aperol Spritz on the Costa Del Sol in Spain.  With tourists exhibiting a bad case of cabin fever, it appears a strong prescription of Vaccination Passports are coming To The Rescue, enabling all to regain their normal lives and bust out of the mandatory lockdowns citizens have endured over the past one and a half years.  

Sell In May and Go Away

For those of us involved in the markets for many years, there is an old saying on Wall Street, “Sell In May and Go Away”.  This saying originated in the old-time brokerage firms whereby the wealthy would retreat to their summer homes in the cities in order to avoid the summer outbreaks of disease in the cities, such as polio.  They would return in the fall when the weather cooled down.  However, this phrase also relates to a curious seasonality in the Equity Markets.  From November 1 to April 30, the market tends to rise strongly, while from May 1 until October 31 the market performs much less strongly.  Even though the former period outperformed only 63% of the time since 1950, the average outperformance over the entire period totals 5.47% per year.  Given the almost 28% rise from November through April this past year and the tendency for strong performance to then see a period of digestion in the Markets, as the real economy catches up, for long term investors in the Equity Markets, it may truly become a year to “Sell In May and Go Away”. 

Upcoming Speaking Events

Our “live” Public Speaking continues to accelerate in 2021 as groups have adjusted to the Zoom and Skype dominated world.  Recent appearances include several private investor groups and associations.  Upcoming appearances include a number of C Level Executive groups, industry associations, and investor groups.  Having received our first shot and scheduled to receive our second shot on April 12, we looked forward to appearing live at the United States National Strategy Seminar in June in Carlisle, PA.  Unfortunately, despite vaccinations accelerating, the event will now occur via Zoom and not live.  However, we look forward to the fall and getting up in front of a large audience once more.  As to speaking for your group, either Zoom or live, please feel free to contact us.  We would be happy to accommodate your needs.

Monthly Letter Preview

This Month, we provide perspective on the Commodity Markets and a further installation in our Great Game of Power Series:

  1. Commodities: Thank You for the Green Energy Driven Boom – We take a look at Green Energy and how the wholesale move to these technologies likely will create a commodity boom.  These technologies are surprisingly commodity intensive and thus, with their rapid adoption, they create a Demand Shock for a variety of Commodities.  With mine exploration and development taking years, such a Demand Shock will likely produce a multi-year period of Supply chasing Demand.  
  2. The Great Game of Power: The Cuban Missile Crisis, The South China Sea, & The Contest for Global Dominance – The South China Sea continues to heat up.  China, since the change in US Administration, continues to ramp up its challenge to the U.S. as a test of the Biden Administration.  This comes in the form of rising violations of Taiwan’s airspace and increasing encroachment into The Philippines territorial waters.  With the US possessing a Mutual Defense Treaty with The Philippines and an obligation under the Taiwan Relations Act “to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan”, a potential confrontation with China, similar to the Cuban Missile Crisis, could erupt at any time.

As always, we end the Monthly Letter with Economic Observations on the US Economy through Interesting Data Points that provide color on the happenings in America.  The link to the Monthly Letter is:

https://greendrakeadvisors.com/views-from-the-stream-may-2021/

Should you have any questions on how the above issues or the items discussed in our accompanying Monthly Views From the Stream Letter impact your family’s financial position or your business’s future as well as the potential actions you could take in response, please do not hesitate to contact us.  We welcome the opportunity to discuss this with you.  

Yours Truly,

Paul L. Sloate

Chief Executive Officer


January 29, 2020

The Heads Up Adviser Podcast

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Recent Posts
  • How to reduce Rx costs for employees and employers
  • Views From the Stream – Let’s Go Fly A Kite
  • Who Was Prepared For This? – Property Insurance and Civil Unrest
  • 5/21/2020 Covid-19 Update – Return To Work Incentive IF YOU DID NOT Receive PPP
  • 5/19/2020 Covid-19 Update – Hiring or Rehiring Furloughed Employees
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