Can Data Analytics Shed Light on Prescription Costs?

Saturday, November 16, 2019

Analyzing the data of a population is a good way to gain new insights into what that population needs, and can perhaps assist the company in creating more efficient ways to meet those needs. This is proven across many industries, from healthcare and benefits analysis, helping sales teams devise more effective strategies to allocate resources, and assisting procurement departments with delivery and inventory processes. So why not look to the data to help companies tackle the rising costs of healthcare, specifically prescription drugs? 


In this article, we’re going to examine a case study done that analyzed the healthcare data available from a company’s employees, which helped it see where spending was increasing, and devised new ways to try to lower those costs.


Cost of Prescriptions Expected to Rise

Employers are dealing with rising costs of the healthcare plans of employees across the board, and are turning to creative solutions to try and counter these costs. Many have already looked to the data of their populations to see where more efficient solutions can be found. A large part of healthcare spending continues to be the cost of prescription drugs, and like overall healthcare spending, there seems to be no end in sight to rising prices. In 2016 the U.S. spent $3,337 billion, or 17.9% of the gross domestic product (GDP) on healthcare, of which $329 billion was on prescription drug costs.


It makes sense that companies are looking for ways to rein in these costs-- in the very least they want to see if there are better ways in which they can manage the prescription costs of their employees. Taking the time to examine their current practices can not only allow them to gain new insights for better ways to manage costs, but can help stave off any surprises that would cause them to go over budget in the future.

Different color pills in pop packaging
The rising costs of prescription drugs are a major concern for employers who are seeking new ways to lower them.

Innovu’s In Depth Client Study

Innovu was asked by a client in the metals industry to take an in depth analysis of their current program for prescription drugs. They were interested to see if they were in fact managing it efficiently, and if not, if there were better ways to keep costs under control so that they could stay on budget. The findings of the study allowed this company to see where there was room for improvement, and pointed out areas where better strategic decisions could be made.

What were the findings?

  1. Employer prescription benefits

The client wanted both their employees’ medical and pharmacy data analyzed from May 1, 2015-April 30, 2017. They hoped to see how well both sides of their medical plans were functioning, and get a more comprehensive understanding of if there was any room for improvement. They found that:


  • Pharmacy spending was $2.8 million
  • Medical pharmacy spending was $673,000


Executives and benefits administrators at the company had never seen the pharmacy costs costs that are associated with medical benefits (such as outpatient procedures and professionally-billed services) because this information was stored in separate data silos with the vendor. By finally being able to see the costs associated with medical pharmacy, the company can now create a more comprehensive effort to keeping their prescription costs under budget.


  1. Brand names vs. generic

Most prescription drugs have a generic equivalent, which in most cases doctors allow their patients to utilize due to their lower costs. The FDA conducts a rigorous review of generic drugs to ensure that they meet the high standards set by their brand name equivalents. Generic drugs use the same ingredients and are designed to provide the same benefit as the brand name prescription drugs.


Over the period of this study, Innovu found that employer spending on drugs had increased due to three brand name drugs, all that have a generic equivalent. These three drugs cost the employer $83,000 in prescription drug costs:


  • Adderall XR 
  • Crestor
  • Nexium


By encouraging employees to use the generic version of these drugs could help the company save a substantial amount in drug costs.


  1. Specialty pharmacy costs

Specialty pharmaceutical drugs are those that cost $1,000 and above. Over the course of the time period analyzed, the company spent $1.2 million on combined prescription benefit and medical pharmacy specialty drugs. The costs associated with these drugs are on the rise for most employers as well, and are of specific interest to create ways to lower their costs.


Due to their specialized nature, they are typically dispensed after a confirmed diagnosis for a condition. After a review of the data, Innovu was able to find that one drug, which cost the company $92,000, was dispensed for an unspecified diagnosis. In order for this specialty drug to be necessary and effective, a more thorough and complete diagnosis should be done on the patient.


chart of drugs and their cost
These are the costliest 10 drugs on the company’s specialty drug expenses.
  1. Medical contraceptives

Another area that saw an increase of spending over the 24 month period of analysis was in medical contraceptive procedures. The company saw a 65% increase in spending related to medical birth control procedures. Medical contraceptives such as a birth control implant or an intrauterine device (IUD) have become popular alternatives to daily oral medications, but there is an increased cost associated with implanting and removing the devices.



Recommendations Based on Data

Now that the company finally a more complete analysis of their data, they were ready to see what could be done to better manage their prescription drug expenses, and how to make more effective decisions moving forward.

Go for generic

The company can help reduce drug costs by leveraging pharmaceutical competition with generic drugs. Using generic equivalents can save a company thousands of dollars, and provide the same clinical benefits as a brand name prescription. One way for the employer to help facilitate this would be to cap the employer’s rate at the cost of the generic drug. This will encourage more widespread use of generic equivalents.


tablet and paper on wooden table
Analyze the data to see if there are unnecessary prescription expenses, and use it to gather new ways to help fight rising costs.

Take a second look at specialty pharmacy use

In this specific study, the analysis found that the employer was paying more than the national average for one of their employee’s drugs. In order to help rectify this, the employer and plan advisor could evaluate market price variances at the National Drug Code level to perhaps help lower the price to be more consistent with the national average. They could also consider a specialty drug request for more information to see if this particular drug is the only one available for this specific condition.


An additional way to help understand and determine if this particular specialty drug is necessary is to confirm with the prescribing provider that this drug is indeed medically required, and that there is no substitute-- generic or otherwise.

More analysis on medical contraceptives

This study revealed that there has been a marked increase in medical contraceptive spending, however a more thorough and concentrated analysis is necessary to determine the cause of this 65% cost spike.

Education is key

Some drugs can be administered in an outpatient facility, in a physician’s office, or even at home with a qualified health professional, instead of in a hospital setting. However, some employees who need prescriptions that require injections might not necessarily be aware of this. Employee education regarding site of care costs in this regard might be of use to help curb those expenses as well.

More analysis

Further analysis is recommended for this client as well, as broadening the scope could lead to further insights. A good place to start would be to examine the duration of time a certain drug is required, specifically for those drugs with a higher risk for abuse. Knowing this could help companies avoid employee abuse and overuse of a drug.


Studies such as this show the power behind an in depth look into the data of your population. There are insights to be gained from knowing specifics, especially when it comes to curbing the cost of prescriptions. Employers would be wise to have a second look at the cost of their medical plans-- it could shed light on new areas of cost savings.


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