The Pittsburgh Business Group on Health proves that employers banding together, especially as a purchasing block, can make a difference.

In 2006, the employer-led coalition's prescription drug program had a 3.7% increase in spending, compared to the national average of 14%.

The group's participants and their workers saved $21.5 million, according to officials at PBGH.

Other similar coalitions reported increases ranging from 4.4% to 5.6% last year.

It's the third consecutive year that PBGH has pulled in single-digit numbers related to spending on prescription drugs.

In 2005, the group had an increase of less than 1%, and in the previous year it had 4%.

Despite the single-digit report card, the group did witness a 22% increase in its specialty and biotech drug spending recently.

"The results of our program over the last three years have been very impressive and extremely consistent, especially when you take into account that 20% of the members covered under the program are over 65 years old," says Christine Whipple, executive director of PBGH.

To vet its findings, the group hired New York-based Arxcel, an independent auditor of pharmacy benefit managers, which reported that it found no errors due to benefit designs when auditing the claims paid by the 26 employers participating in the program.

United over pharmacy benefits

The Pittsburgh Business Group on Health is a nonprofit organization with 64 members representing more than 1 million employees, dependents and retirees and more than $3 billion in health care expenditures.

Founded in 1981, the organization focuses on business solutions and ideas addressing health care cost, quality and delivery.

Donna Frisch, president of the board of directors for the group and senior manager of health and welfare plans at H.J. Heinz Company, credits the PBGH prescription drug program's success to the proactive employers that take advantage of the buying power that the program provides, while still being able to design and maintain their own unique benefit plans.

PBGH implemented the prescription drug program in 2000 with eight participating employers, including Heinz.

That year, the group had 32 members, and now 26 of the 64 members are enrolled in the program.

Annually, program membership has grown between 20% and 40%. The program covers more than 150,000 participants.

Caremark Pharmacy Services manages the coalition's drug program, which includes a broad network of more than 61,000 pharmacies and mail-order pharmacy facilities across the country.

Under the program, participating employers self-insure their benefits while receiving deeper discounts, lower administrative fees and enhanced client and member services than they would typically receive on their own, thanks to the program's ability to aggregate covered individuals across employers into a buying pool.

The program also helps reduce costs by offering employers strong employee communication campaigns that educate workers about effective drugs that cost less and measures to help them transition from brand-name drugs to generics.

Frisch, who is in her third term as president of the PBGH board, admits that achieving a meeting of the minds among many varied employers is no easy task.

"To get 30 to 60 employers into a room and make a decision on which direction to go can be difficult because each organization has its own concerns and issues," she says.

"But the one area that regularly rose to the top when we surveyed our members on areas they felt they could cooperate was prescription drugs."

Employers joining together to purchase a medical benefit is much more complicated to do for medical programs, Frisch says.

"The prescription drug benefit is one of the easier benefits to develop a group purchasing arrangement for multiple employers, but still keep your independence."

Pittsburgh-based Heinz, the famous maker of Heinz ketchup and other well-known food brands, joined the coalition in the mid-90s. Heinz employs about 10,000 workers in the United States, including approximately 1,200 in Western Pennsylvania.

Before the company joined the PBGH program, its prescription drug benefits were administered by its numerous health plans.

"Because our drug benefits were scattered among the various health plans, it was difficult for us to strategically track our drug spending costs," Frisch says.

"Carving out the prescription drug benefit and moving it into the pharmacy benefit management arena now allows the company to better manage its drug costs."

Future challenges

The next challenge for the PBGH program participants is tackling the escalating cost associated with specialty and biotech drugs, which increased 22% in 2006.

Biotech and specialty drugs are normally administered by a physician, and often their cost falls under the medical coverage and not necessarily under prescription drug coverage.

"We are looking at how to identify what needs to be administered by a physician and what drugs can be moved over to the prescription drug benefit, so that patient care and costs can be best managed," Frisch notes.

"From a biotech perspective, it is about reviewing your medical claims to see where drugs are showing up and pulling them out and getting them into the prescription drug benefit, where you can use care management tools and specialty pharmacy counseling to work with participants that need those drugs. It's going to be a challenge, but it is doable."

Frisch believes that an important lesson that she has learned through this experience is that employers in business coalitions should treat the building of a purchasing block as a fact-finding mission.

"You need to find out what your members are really interested in doing and how much latitude they have in banding together" she says.

At EBN's 20th Annual Benefits Management Forum & Expo in Dallas, Kristy Arciszewski, the director of health and welfare at New York-based Buck Consultants, said, "Prescription drug trends have been surpassing all other health care expenditures."

And while drug costs are about 10% of health plan spending, they are increasing faster, compared to all other health care services, such as physician visits and hospital services, Arciszewski explained.When designing the pharmacy plan, employers should keep in mind that "the prescription drug aspect does not behave like other health care services," she concluded.