Prescription drug spending is an important driver of health care costs nationwide, but the University of Michigan drug plan has contained costs better than many employers.

The university spent $117 million on prescription drug benefits for faculty, staff, retirees and their families in 2016, according to the drug plan’s latest annual report. Drug spending made up one-fifth of the total health benefits expense of more than $500 million.

The self-managed plan beat national trends reported by Express Scripts for both specialty drug cost and total spending in 2016.

New programs for drug plan members

The Benefits Office relies on the expertise of clinical faculty in the College of Pharmacy and the Michigan Medicine Department of Pharmacy to make plan decisions that balance safety, cost and effectiveness. As a result of these partnerships, the drug plan recently expanded two successful pilot programs to all eligible U-M faculty, staff and retirees.

The aim of one program is to reduce the member’s total spending on medications. Under this program, members will be contacted by MedImpact or their Michigan Medicine clinic pharmacist to discuss options to reduce their out-of-pocket costs, where opportunities exist.

Another program targets medication effectiveness, and focuses on members who take five or more medications and are Michigan Medicine patients.

They will also have the opportunity to work with a pharmacist to review all their drugs together, considering drug interaction, medication effectiveness and opportunities to consolidate medications. In a pilot version, this comprehensive medication review program improved effectiveness, safety and cost for participants.

Rising cost of drugs

After double-digit cost increases in 2014 and 2015, the drug plan team renegotiated contracts for better rates last year. Along with programs to manage utilization, contracting is a key part of a comprehensive approach to limit the impact of rising drug costs on faculty, staff and retirees.

Drug spending has been in the national spotlight in recent years due to significant price inflation and breakthrough specialty drugs. These products treat serious conditions such as diabetes, asthma, cancer, rheumatoid arthritis and multiple sclerosis.

Out of almost one million prescriptions filled by U-M drug plan members in 2016, specialty drugs made up less than 2 percent. Their share of the total cost? Almost 37 percent.

Dawn Parsons, pharmacy services manager in the Benefits Office, expects half of all spending could be on specialty drugs by 2020. Last year, 26 of the 36 new products added to the list of covered medications were specialty drugs.

“This is great news from a treatment perspective,” says Parsons. “But it changes the cost equation, particularly when new generics aren’t coming to market at the same rate they did in the past.”

Overall, U-M plan members paid less out of pocket for prescription drugs in 2016 than in 2015. Copays and other out-of-pocket spending made up less than 10 percent of the total drug cost. This member share is about half the national average, according to the Pharmacy Benefit Management Institute. It has been shrinking for several years due to lower-than-average copays and high generic utilization.