Andy NearyI help insurance professionals turn brand awareness into business growth.

SOTSQ Episode 26_11.15.2018

12 Nov 2018 · 1 min

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1:25

Andy Neary (SOTSQ Episode 26) argues that prescription drugs are the primary leverage point to reduce health insurance costs, predicting they could account for up to 50% of claims cost within five years. He gives a numeric example: an organization with $1.2M in insurance spend where 70% is claims, prescription drugs are 30% of total cost, and four drugs make up 85% of drug spend — by sourcing those four drugs at 50% lower price the employer could save about $110,000 (~9% of total insurance spend). He directs viewers to chapter 17 of the book "Breaking through the Status Quo" for tactics.

Questions this video answers

50% (as stated by the speaker).

$1.2 million.

70%.

30% of the overall cost.

Four medications.

Chapters

So last week, I addressed the healthcare supply chain and why you need to focus on it if you want to control your health insurance costs. And with it came the question, Andy, what area of the supply chain should we focus on first to get the biggest bang for our buck? And that's easy. Prescription drugs. You see, the cost of prescription drugs will become your biggest problem moving forward. In fact, in the next five years, the cost of prescription drugs could account for 50% of your claims cost. So how do you go the farthest with the least amount of effort? Let me give you an example. I'm working with an organization right now that spends about $1.2 million on its health insurance. 70% of that cost is its claims. And inside its claims, prescription Drugs account for 30% of the overall cost. And get this. Inside the prescription drugs, four medications account for 85% of the overall prescription drug cost. So where are we going to go to go the farthest? We're simply going to buy those four medications from a different source and reduce their price by 50%. For this organization, that equates to $110,000 in savings. Four drugs and almost 10% knocked out of their health insurance spend every year. Now, if prescription drugs are becoming a big problem for your organization, do yourself a favor. Click the link below and get yourself a copy of our book, Breaking through the Status Quo and go to chapter 17, where Gary Becker talks about how you can address the cost inside your prescription drugs today. Until next time, bear down, focus on the target, and strike out status quo.