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DEPARTMENTAL MATTERS INDIAN RIVER COUNTY MEMORANDUM TO: Jason Brown County Administrator FROM: Suzanne Boyll Human Resources Director DATE: January 16, 2018 SUBJECT: Approval to Carve Out Pharmacy Benefit and Select New Pharmacy Benefit Manager effective May 1, 2018 BACKGROUND: The County is self-insured in its Group Medical Insurance and insures over 3600 members. The goal is to maintain a plan that is affordable, competitive, and sustainable. Human Resources works in conjunction with our benefits consultant to review plan utilization and expenses and identify opportunities for improvements and savings. Effective October 1, 2017, a new benefits consultant, Lockton Companies, was selected and began evaluating our plan. A large part of the County's medical plan expense is the pharmacy benefit which accounts for approximately 30.2% ($4.5M) of the total claims expenses ($14.9M) for the 2016/17 plan year. In plan year 2015/16, pharmacy expenses were at 29.4% of the total claims expenses, and in 2014/15 the pharmacy costs were at 25.4% of the total claims expenses. In the 2016/2017 plan year, the County introduced an additional pharmacy option through CanaRX with the hopes of mitigating the rising pharmacy costs; however, the pharmacy costs continue to rise from year to year. In October 2017, Lockton met with the County and discussed the opportunity to reduce pharmacy expenses by simply changing the pharmacy benefit management contract without changing the medical plan's pharmacy benefit or copayments. The current medical plan provides the following pharmacy coverage: Tier 1 Generic Medications $15 copay Tier 2 Preferred Brand Name $35 copay Tier 3 Non -Preferred Brand Name $50 copay Mail Order Drug (90 -Day Supply) 2x Retail Copay A drug formulary is established by the pharmacy benefit manager (PBM), and the formulary determines which tier a prescription medication falls under. The formulary may be changed throughout the year as new medications are introduced or when the PBM determines a change is necessary. Typically, this occurs at least two times per year. The PBM contracts with pharmacies, negotiates discounted pricing and rebates with drug manufacturers, and processes 96