Unraveling the Effects of Tier-Copayment Drug Benefit Designs

Drug Benefit Designs More information is needed about the effects of member out-ofpocket copayments on prescription drug utilization and costs. On the one hand, the introduction in the last 2 years of generic versions of several popular drugs reduces dramatically the treatment cost per patient for hypertension, coronary heart disease, community-acquired bacterial infections, depression, gastroesophageal reflux disease (heartburn), and hyperlipidemia. Over-the-counter loratadine (generic Claritin) has added more opportunities for costeffective drug benefits management and caused many pharmacy benefit managers to reconsider the common coverage exclusion for OTC drugs; competition had reduced the OTC price of loratadine to less than $. 50 per day of therapy within a few weeks of OTC availability of loratadine, a discount of about 75% compared to prescription drug alternatives cetirizine, desloratadine, and fexofenadine. Generic versions of therapeutic class leaders such as Mevacor, Prilosec, Augmentin, Zestril, Prinivil, Vasotec, and Prozac make it possible to treat up to 5 times as many patients for the former cost of treating one patient with the brand-name drug. A generic-only drug benefit plan is becoming increasingly plausible. Clinicians will differ, but the economics are compelling. Short of a generic-only benefit, health plans and employers can push members to generic drugs with low copayments ($5 or less per month of therapy) and higher brand-drug copayments ($20 or more per month of therapy) in 2-tier copayment drug plan designs. Three-tier, 4-tier, and 5-tier copayment designs create more opportunities to influence member behavior. Member satisfaction must always be a measure to consider in designing any health benefit, particularly prescription drugs, the most commonly used health plan benefit. In this issue of the Journal, Nair, Wolfe, Valuck, McCollum, Ganther, and Lewis conclude that drug utilization changes were modest in the measurement of prescription utilization behavior among health plan members who were converted from a 2-tier copayment plan to a 3-tier copayment drug benefit plan. Other observers may find generic drug utilization changes of 6 to 8 absolute percentage points and a 5.6% absolute increase in formulary adherence, from 81% to 87%, to be more than modest. In fact, most managed care pharmacists would find these changes significant and remarkable. In addition to utilization changes associated with benefit design (copayment) changes, members in the drug plans that “converted” from 2-tier to 3-tier copayment designs had median health plan costs per patient per month (PPPM) that were 60% less than the median health plan costs PPPM for 2-tier plans and 33% less than 3-tier plan members who remained in the 3-tier copay plans. The median copayment for members converted from a 2-tier to a 3-tier plan increased from $3 to $16.83, but this amount was less than the median copayment of $19.81 for 2-tier plan members who remained in 2-tier plans and a median $21.42 copayment for 3-tier plan members who remained in 3-tier copayment drug plans. These collective data appear to suggest that while median copayment changes may be large in relative terms for members converted to a 3-tier copayment plan from a 2-tier copayment plan, these changes produce significant and remarkable changes in drug utilization and significant reductions in net health plan costs. Yet, the extant work by Nair et al. appears to raise as many questions as it provides answers, similar to published work that preceded this article. These outcomes may be associated with the lack of a common definition of the intervention. Multiple-tier copayment drug benefit plans are a heterogeneous lot. Two-tier plans may or may not be administered with prior authorization requirements (for nonformulary or high-cost drugs), and these PA requirements may be rigorous or lax, the latter amounting to not much more than hassle factors for physicians, pharmacists, and members. The formulary content for 2-tier plans may be small in scope or more comprehensive, and without PA or other restrictions on access, the 2-tier formulary would rely upon voluntary behavior change among members, prescribers, and pharmacists. Three-tier copayment plans may be associated with a small number of formulary drugs or broad in scope. Some 3-tier copayment plans employ the third copayment tier for nonformulary drugs while other 3-tier copayment plans have 2 copayment tiers for formulary drugs. As with 2-tier copayment plans, the amount of the copayments and the magnitude of the difference between the copayment tiers may be small ($5 or less per month) or quite large ($20 or more per month of drug therapy). Controlling for all of the important factors that may have some effect on cost and utilization outcomes in prescription drug benefits is a formidable task, particularly as the content of the drug formulary may change as often as each calendar quarter. One particularly thoughtful and comprehensive examination of prescription use among persons aged 65 years or older also raised as many questions as it provided answers. Within the long list of findings was the apparent conclusion that 3-tier copayment drug plans for persons aged 65 years or older were associated with higher member cost-share, but this additional cost was offset by plan cost savings greater than the amount of the increase in the average member cost. This finding suggests that financial incentives caused persons aged 65 years or older to use lower-cost brand drugs and more generic drugs, resulting in more value for each drug benefit dollar (with a potential favorable effect on the drug benefit premium). A study published 2 months earlier, in October 2002, found that adding a third copayment of $30 for nonpreferred brand-name drugs to a $10 generic, $20 brand, 2-tier copayment plan reduced overall drug spending by 4% (P<.001), providing additional evidence of the ability of 3-tier copayments to improve value in excess of the simple transfer of costs from health plans to health plan members. Sophisticated pharmacy benefit managers will note that the work by Nair, Wolfe, Valuck, McCollum, Ganther, and Lewis in this issue of the Journal pertains only to members in health plans with specific chronic disease states. These findings may have little relevance to pharmacy benefit managers and actuaries when estimating future costs and premiums, both of which are calculated