The City of Buffalo has saved $3.6 million in prescription drug costs for its employees and retirees during the last fiscal year following a change in insurance, but City Hall should try to cut further the risk of rising costs, according to the city comptroller.
The city pays for medications for its employees, their dependents and retirees through a self-funded plan, which took effect in September 2011.
Under a fully insured plan, the city’s premiums would have been $25.2 million for the fiscal year that ended June 30, but the actual expenses were $21.6 million, according to an audit from Comptroller Mark J.F. Schroeder’s office, which was submitted to the Common Council last week.
“It appears adopting a self-funded prescription program was a cost-effective decision for the City,” wrote city auditor Kevin J. Kaufman.
However, in a self-funded plan, the city takes on the full risk of the rising cost of medications and higher prescription drug use among its employees and retirees, and the city should mitigate that risk, Kaufman wrote.
The city’s health insurance plans cover about 12,100 employees, retirees and family members. Unlike prescription drug costs, the city continues to be fully insured for medical expenses.
In the year that ended June 30, the city’s prescription drug expense per person was $1,795. On average, each insured individual had 22 claims at a cost of $81 each.
Human Resources Commissioner Patricia Folts responded to the audit and outlined the city’s risks for future cost increases, such as the general growing reliance on prescription drugs to treat disease instead of invasive procedures, the advanced age of the city’s pool of insured individuals relative to other large employers, and two claimants that have each cost the city more than $100,000 in medication.
The city should have a different pricing structure for two of its most prescribed drugs, which are “lifestyle” drugs, Folts said. Of the city’s top 30 medications, Viagra is the 12th, and Cialis is the 23rd, she said.
The city also needs to increase its use of generic drugs and increase employee drug co-pays, Folts said.
The audit urges the city to make sure its employee and retiree database is up to date so that it isn’t overpaying for coverage, though in response to the audit, Antoinette Palmer,director of compensation and benefits, writes that various city departments have been working on the issue for nearly two years.
The audit also suggests the city take action to continue to curb “doctor shopping,” where patients visit multiple doctors to obtain “unneeded medication.”
The city was facing a 16 percent increase in health insurance costs when the 2011-12 fiscal year began. At the time, prescription drug costs were 32 percent of the city’s health insurance costs, and the city’s broker projected savings of $2 million by going to a self-funded plan for medications. The actual savings were 80 percent greater than the broker’s projection.
Daniel Cunningham, president of the Buffalo Professional Firefighters Association, said that he is not aware of any effects to city firefighters or their families related to prescription drug coverage because of the change to a self-insured plan.