Top employers aim at Big Pharma with group project to bring down drug costs

Skyrocketing drug prices have lawmakers, payers and the public up in arms. Now, a consortium of top employers is joining the fray with its own joint plans to bring down prices for expensive meds.

Dubbed the Health Transformation Alliance, the group of 20 employers, including Coca Cola ($KO) and American Express ($AXP), is working toward at least one pilot project for next year aimed at driving down drug costs.

The group is playing its ideas close to the vest; it doesn't have "any official public plans" to reduce pharma spending, Tevi Troy, president of the American Health Policy Institute, told FiercePharma.

Tevi Troy

"It's premature to add more details yet" and "the strategy has not yet been developed or announced," Troy said. But the group's effort could be focused on new methods of PBM contracting, The Pink Sheet reported.

The companies are pooling their data and experiences to target "costly, wasteful and inefficient" practices that result in higher insurance payments for their combined 4 million employees, Health Transformation Alliance said in announcing its formation last month. Altogether, the companies spend more than $14 billion on healthcare for their employees each year.

"The employees in these companies are faced with increasing costs, and there's a concern among the employers and chief human resources officers that their health plans won't be affordable to employees in the long run if these trends continue," Troy said. "Our goal is to take hold of the problem, address these trends and make for more affordable healthcare for employees."

Now, the organization is collecting data from the companies "that will help us figure out how we approach a pharmaceutical strategy," Troy said. If all goes accordingly, Health Transformation Alliance will launch its pharma initiative in 2017, Troy said.

"Patients, along with the health care system, too often pay for prescription drugs that are not the most cost effective for their care," Health Transformation Alliance said in a statement. The group "will seek to change costly and inefficient purchasing and contracting systems that don't deliver better health care results, but do drive up health care costs."

Enlisting more help from PBMs could pay off for the alliance. PBMs of all stripes have been stiff arming pharma lately, what with exclusive discount deals and formulary exclusions. Express Scripts ($ESRX), for example, is axing 80 meds in 2016, which will save $1.3 billion for insurance-plan customers that use its preferred formulary, the PBM giant said last year.

As Troy told the Pink Sheet, PBMs have played a major role in operating the pharmacy benefit for employers and "we are determined to work with them to see how we can improve it."

Conversely, the group might take over some of their own pharmacy management to get a direct look at what's happening with their spending, the Pink Sheet suggests, citing another large employer that took some drug negotiations into its own hands, Caterpillar ($CAT).

GSK's Jack Bailey

In the meantime, pharma is taking a hard look at pricing after some high-profile pushback. Pricing debacles last year thanks to Turing Pharmaceuticals and Valeant ($VRX) spurred backlash, with some critics saying that the industry gouged prices for lifesaving meds.

Drugmakers would be smart to cut costs and get more efficient, instead of waiting for the storm to pass, one pharma exec said recently. Instead of counting on their pricing power, companies should focus on how to "do everything faster, better and cheaper," GlaxoSmithKline ($GSK) U.S. pharma president Jack Bailey said.

"If you're a pharmaceutical firm and you're not looking soup-to-nuts at your operations about how you do a better job of still getting great innovation, but getting it out there as efficiently as possible, you're going to get left behind," Bailey said.

- here's the statement (PDF)
- get the Pink Sheet story

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