How to Uncover and Manage Your Healthcare Costs

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For this week’s Workplace Intelligence Newsletter, I interviewed Dr. Sunil Budhrani, Chief Innovation and Medical Officer, and Josh Golden, Senior Vice President of Strategy, at Capital Rx , a healthcare technology company advancing our nation’s electronic healthcare infrastructure to improve drug price visibility and patient outcomes. In their roles, Sunil and Josh are responsible for assessing market trends, evaluating business initiatives, and developing strategic partnerships and innovative solutions to improve how health benefit programs are administered.

During our conversation, we discussed employers’ largest healthcare costs, which areas of healthcare are often overlooked, and top priorities. We also explored some key challenges to providing a better employee wellness benefits package, and they offered some ways to control or even lower healthcare costs.

Read on for his insights about these important topics, and be sure to join us for our live event on October 9th at 2:30 PM EST, where we’ll continue this timely discussion.

What are the biggest healthcare costs right now that are impacting employers?

Healthcare costs overall are increasing at an unsustainable rate for employer plan sponsors, and the primary driver of increasing costs is the employer’s pharmacy benefit.?

Overall, healthcare costs have increased more than 50% since 2017, and rising pharmacy costs, which now account for about 27% of overall spending , are to blame. Moreover, within vertically integrated vendors that manage both medical and pharmacy benefits, the pharmacy component represents well over 50% of enterprise profitability, so from a profit standpoint, pharmacy really is the tail that wags the dog for a large national carrier.

Within the pharmacy benefit, specialty medicines (which are typically delivered via injection, require special handling, treat rare or orphan diseases, and are more expensive) have risen to an astonishing 54% of overall spending , up from 49% in 2018.

More recently, the skyrocketing use of glucagon-like peptide-1s (GLP-1s), including Ozempic and Wegovy, for diabetes, obesity, and other conditions is a major inflationary factor and massive financial concern for employers.?

Other factors contribute to employers’ expectations for 7%—8% annual cost increases , including the high costs of treating musculoskeletal conditions (hip and knee replacements, for example), cancers, cardiovascular disease, and newborn/infant care, which are among the top triggers of stop loss reimbursement annually.?

Which areas of healthcare do employers typically overlook?

“The issue isn’t necessarily that employer plan sponsors overlook areas of healthcare,” says Josh. “It’s that they have historically relied on vendors that profit from higher prices, whether it be pharmacy benefits managers (PBMs) profiting from the dispensing of high-cost medication or a health plan and provider profiting from surgical procedures.” These misaligned vendors have not only reaped immense profits at the expense of health plans and patients for years - they have also made accessing plan data difficult. This is because their profit models thrive on opacity. So, it has been extremely challenging for plan sponsors to uncover and manage the specific sources of inflation or waste.

The misaligned profit models can drive vendors to make bad decisions on behalf of the plan sponsors that they serve. The area of pharmacy benefits is particularly plagued by this phenomenon – the three largest PBM vendors control about 80% of the market, and they all rely on profit structures that are directly linked to the cost and volume of drugs utilized by patients, creating an unavoidable conflict of interest as they attempt to support the plan sponsors’ objectives.

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