Kaiser Permanente pharmacy demonstrates significant cost savings

Renton, Wash. - Kaiser Permanente commissioned Milliman, a global actuarial and professional services consulting firm, to conduct a study comparing Kaiser Permanente's 2023 prescription drug costs for mid-to-large commercial employer groups in Washington to a matched market benchmark.

The study revealed statistically significant prescription drug cost savings for commercial groups with 50 to 10,000 employees enrolled in Kaiser Permanente's HMO and preferred provider organization products relative to market products in Washington.

The analysis excluded members with Medicare coverage, members residing outside of Washington, jumbo accounts that have 10,000 or more members, and groups managed outside of Washington.

Milliman's study showed that, after rebates, employers experienced:

• 26% lower prescription drug costs with Kaiser Permanente HMO plans ($21.52 savings per member per month compared to the market)
• 15% lower prescription drug costs with Kaiser Permanente PPO plans ($15.56 savings per member per month compared to the market)

"This study will help consumers better understand the real value of our integrated pharmacy model, because it focuses on lower net drug costs instead of cost performance driven by drug manufacturer rebates," said Sharon Burks, executive director of pharmacy for Kaiser Permanente Washington. "This helps provide a more comprehensive view of value for employers with the Kaiser Permanente model relative to the market. We're able to leverage our purchasing power, evidence-based formulary, and coordinated medication management to achieve lower net costs and deliver greater affordability."

Milliman reviewed pharmacy cost data from Kaiser Permanente's mid-to-large commercial groups and compared it with matched employee populations covered by other health plans offered by similarly sized Washington businesses. The analysis accounted for demographic and clinical factors, including age, gender, geographic region, and disease categories.

The study found lower costs for both Washington employers and employees enrolled in Kaiser Permanente health plans. One key driver of savings was greater use of cost-effective generic and biosimilar medications. The study also showed key differences in how Kaiser Permanente delivers prescriptions compared to the market benchmark, including direct service to members through its retail, mail-order, and specialty pharmacies.

According to the study, Kaiser Permanente's overall generic dispensing rate was more than 5 percentage points higher than the market benchmark for HMO members (89.6% versus 84.4%) and 4.5 percentage points higher for PPO members (89.2% versus 84.7%).

The study also found that Kaiser Permanente's cost for generic drugs was lower than other pharmacies in the market, measured as a percentage of the national average drug acquisition cost, a federal benchmark that reflects the average price pharmacies pay for drugs. The greatest differences between Kaiser Permanente and the market benchmark were seen in mail-order and specialty drugs, where the study found significant savings.

"Our purchasing model cuts out traditional intermediaries that are common elsewhere in the U.S. health care system," said Cynthia Dold, regional president of Kaiser Permanente in Washington. "That means we can deliver competitive pharmacy pricing, and we can pass those savings on to our customers and members. Kaiser Permanente is known for high-quality care and our commitment to keeping care affordable. Integrating pharmacy services with our care delivery system promotes more efficient, cost-effective care and provides a better experience. It's one more way we deliver exceptional value."

View the full study, titled "Pharmaceutical Cost Impact Effectiveness Study of Kaiser Foundation Health Plan of Washington and Kaiser Foundation Health Plan of Washington Options, Inc."