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How employers handle prescription drug costs.

How Employers Handle Prescription Drug Costs

Earlier this year, the National Association of Employers on Health Care Action conducted a survey of its membership, including 35 Fortune 500 companies, to determine their prescription drug benefits policies. A 75 percent response rate was achieved. The results are summarized in this article.

Double-digit inflation has returned to employer-sponsored U.S. health plans, and employer prescription drug benefit plans have contributed to this inflationary increase. Some corporate members of the National Association of Employers on Health Care Action have experienced increases of up to 100 percent in prescription drug expenses over the past five years. To find out more about the cost of prescription drug benefits to U.S. industry, NAEHCA polled its membership on their benefit plans.

Health Plan Benefits

Seventy-one percent of employers in responding companies have their health benefits, including prescription drug benefits, in self-insured/indemnity plans. Twenty-five percent place benefits in HMOs--either traditional or "point of service." The remaining four percent of the respondents place their benefits in PPOs.

Decision Makers

Employee benefits directors and managers are the main decision makers for companies' prescription drug plans. Fifty-seven percent of the responding companies use only their employee benefits personnel in prescription drug benefits decisions. The remaining companies also use the corporate medical director, the chief financial officer, and consultants.


All of the companies responding use copayments or coinsurance for prescription drug plans. The coinsurance is usually 10 to 20 percent. Copayments range from $3 to $6. Sixteen percent of responding companies use incentives for generic drugs.

Retiree Benefits

Ninety-two percent of the companies responding to the survey provide prescription drug benefits to their retirees. This percentage is higher than that in a 1987 survey done by the National Pharmaceutical Council (NPC). The NPC reported only 3 of 10 respondents made prescription drug benefits available to their retired workers. The NPC survey sample did include smaller companies, whereas NAEHCA's sample was mainly composed of Fortune 500 companies.


Forty-three percent of the respondents contract with mail order drug companies. Seventeen percent stated they were considering adding mail order prescription drugs to their benefit plans. Most of the mail order drug programs were voluntary. Some plans were effective immediately, and others were geared to maintenance drugs and were effective after 30 to 60 days.


Sixty-five percent of responding companies communicate general information to their employees on appropriate utilization of prescription drugs. Thirty-five percent give information on generic drugs.

Employer Costs

All of the companies responding had seen an increase in prescription drug costs over the past five years. Twenty-five percent of those responding experienced a 100 percent increase. The average increase was 61 percent.

PHOTO : Ruth H. Stack is President of the National Association of Employers on Health Care Action,

PHOTO : Key Biscayne, Fla.
COPYRIGHT 1989 American College of Physician Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:National Association of Employers on Health Care Action survey on prescription drug benefits policies
Author:Stack, Ruth H.
Publication:Physician Executive
Article Type:column
Date:Nov 1, 1989
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