Office of the Vice President for Global Communications

Wednesday, March 30, 2011

U-M prescription drug plan outpaces the nation; saves $57 million

U-M's prescription drug plan consistently has outperformed the national average, saving nearly $57 million over the eight years the university has operated the self-insured plan, according to the latest report.

While the plan's 2010 annual report shows that the university is experiencing continued growth in the total cost of drugs — up 5.4 percent in a year — an array of efforts have helped keep university increases lower than the national average.

"Price increases from pharmaceutical manufacturers were the most significant cost driver last year, up 7.4 percent," says Keith Bruhnsen, prescription drug plan manager and assistant director in the Benefits Office. "But with the support of our faculty-led pharmacy committees we've taken a number of approaches targeting the areas that we can most influence."

Strategies have included negotiating drug discounts, pill-splitting programs and participation in federal subsidies, but increasing the use of generic medications has been among the most important and consistent efforts. The medications used by plan members in 2010 cost well over $85 million.

"With that kind of volume and the growing cost difference between generic and brand name drugs, increased use of generics can save a lot of money for both the plan and the patient," says Bruhnsen.

"Generic drugs are a safe and effective alternative to brand-name drugs, and they cost 90 percent less on average than their brand-name counterparts," says Cheryl Kaltz, clinical pharmacist in the Benefits Office.

Nearly 76 percent of the prescriptions in 2010 were filled with generics, up by 5 percent since 2009.

"To put the numbers in perspective, every percent increase in our use of generics saves the university nearly a half million dollars," explains Bruhnsen. National averages for the use of generic drugs range from 64 to 71 percent.

Plan members save money because generic drugs have the lowest copay at $5 to encourage their use. In 2010, the total member out-of-pocket copays for the plan's 90,000 members went down by 2 percent because of their increased use of generics.

As more drugs become available in FDA-approved generic form or over-the-counter with no prescription, communications to prescribers and members help encourage their use. Bruhnsen says that an e-prescribing system implemented in 2010 in the U-M Hospitals and Health Centers also makes it easier for university clinicians to access plan information and better determine the medication options with the greatest coverage by the plan.

The disciplined approach to spending also has enabled new partnerships to encourage health improvement. In collaboration with the MHealthy Tobacco Independence Program (MTIP), the prescription drug plan is providing coverage for generic over-the-counter smoking cessation products with a $5 monthly copay.

The university goes smoke free in July. Learn about the MHealthy Tobacco Independence Program at hr.umich.edu/mhealthy/programs/tobacco/mtip/. For more on the U-M Prescription Drug Plan, go to www.benefits.umich.edu/plans/drugs.