The Effects of Multi-Tier Prescription Plans: Look Before You Leap
by Pat Deverka, M.D., vice president of scientific affairs at Medco Health Solutions Inc.
Copyright WorldatWork June 2004

The following is an article about a joint study by Harvard Medical School and Medco Health Solutions on the impact of changing copays.

Note that the greatest impact of rising copays occurred for the group with predominantly hourly employees, which should translate into lower income, a result that one would expect.
_________________________________________________

Source: Workspan
Publication date: 2004-06-01
Arrival time: 2004-06-15

As employers have sought to balance the need to control pharmacy benefit costs with their interest in providing choice and quality health care to employees, multi-tier pharmacy benefit plan designs have grown increasingly popular among benefit providers. In fact, 63 percent of employees with prescription benefit coverage are now in three-tier plans, according to the Kaiser Family Foundation's Employer Health Benefit 2003 Annual Survey.

Mult-tiered plan designs are part of the consumer-driven approach founded on the theory that, given choice and financial incentives, employees will make more cost-effective health care decisions. These plans are designed to encourage the use of generics when appropriate or other less expensive drugs by applying the lowest out-ofpocket costs for those medications, while instituting higher co-pays for more expensive brand-name prescription drugs.

A study by Medco Health Solutions Inc. and Harvard Medical School published in the December 2003 New England Journal of Medicine examined how a move to a three-tier plan affects drug spending and utilization. The article also provides information for health plan providers who are considering increasing member cost sharing as a strategy for reducing their drug spending.

The study found that, for two employers who implemented multi- tier plan designs, this change in benefit design led a significant proportion of patients who were on brand-name drugs with the highest co-payment to choose more cost-effective alternatives. Depending on the particular drug class, at least 18 percent and as many as 49 percent of plan members switched to lower-cost medication. But, the survey also found that an aggressive approach to plan changes can have the unintended result of causing some patients to stop taking their medications altogether.

A Closer Look at Co-Pay Changes

The study followed two employers ("Employer A" and "Employer B") as they changed their prescription coverage plans in 2000 and looked at how those changes affected drug spending and usage for three classes of commonly prescribed drugs:
* ACE inhibitors, a high blood-pressure medication
* Proton pump inhibitors (PPIs) for the treatment of acid reflux disease
* Statins, for high cholesterol.

Employer A, with 55,500 predominantly hourly workers, switched from a one-tier to a three-tier plan and increased co-pays across all tiers. This employer went from a $7 co-pay for all prescriptions to $8 for generics, $15 for preferred brand-name drugs and $30 for third-tier brand-name medications.

Employer B, with 11,600 predominantly salaried employees, made a less dramatic change, switching from a two-tier to a three-tier formulary and increasing co-pays for the third tier only. This employer kept the co-pay for generics at $6 and $12 for preferred brand names, but added a third tier for nonpreferred brand-name drugs with a $24 co-pay. The study also included two comparison groups selected from a pool of employers covered by the same insurer that did not implement incentive formulary plans during the study time period.

The primary purpose of these plan changes was to provide financial incentives to patients to use lower-tier, less expensive drugs if they were taking higher-priced brand-name medications. This goal was largely achieved, with a significant proportion of employees from both employers switching to a lower-tier drug for each medication category. The largest percent changes were seen in the group of patients taking statins; 49 percent of Employer A's employees and 48 percent of Employer B's employees on a tier-three statin switched to a lower-tier drug, while only 17 percent and 8 percent respectively of the control groups' patients made the switch.

While increasing member cost sharing resulted in greater use of generics and preferred brand-name drugs, the dramatic increases in Employer A's co-payment schedules also adversely affected the medication compliance of some employees. Sixteen percent of Employee A's patients taking tier-three ACE inhibitors for cardiovascular disease stopped taking their medication after the change (only 6 percent stopped in the comparison group). Twenty-one percent of patients using tier-three cholesterol-lowering statins discontinued their medication (11 percent stopped in the control group), and 32 percent using tier-three acid-relieving PPIs stopped using the drug (19 percent stopped in the comparison group).

Due to the increase in co-payments, the enrollees in Employer A's plan experienced a dramatic change in out-of-pocket expenses. Relative to the patients in the comparison group, patients in Employer A's plan paid 142 percent more for ACE inhibitors, 148 percent more for PPIs and 118 percent more for statins. As would be expected, spending by the health plan covered by Employer A decreased significantly - 58 percent for ACE inhibitors, 15 percent for PPIs and 14 percent for statins.

Conversely, Employer B's more modest co-pay increases did not result in any significant changes in the probability of using any of the three drug classes under study. With respect to significant changes in the distribution of spending, there were small decreases in plan spending for ACE inhibitors and PPIs only, with accompanying small increases in enrollee spending. However, Employer B's members were more likely to switch from a nonpreferred brandname medication to a less expensive brand-name or generic drug than were the members of the comparison group.

What currently is not known is whether these changes in spending and utilization had an adverse effect on health outcomes. Future studies will be needed to better characterize the impact of incentive formularies on clinical outcomes and total health care spending.

Changing Plan Structure: Take It Slow and Steady
The take-away message for health plan providers considering a change is that plan design changes should be made incrementally with consideration for the speed and size of the change. Implementing more incremental increases in member cost sharing can be important for reducing the risk of unintended effects, such as stopping the use of essential medications.

For example, in contrast to the response patients had to Employer A's plan changes, Employer B's more modest co-payment increase did not result in medication non-adherence. By instituting a modest vs. dramatic change in plan design, Employer B, who simply added one more tier to its formulary, was able to provide members choice while adding financial incentives to make prudent, yet clinically appropriate decisions.

But the size and speed of the plan change is not the only consideration when making plan changes, employers not only need to consider the specifics of those changes, but also how they will be communicated to employees, especially when the change affects plan members' wallets.

Don't Leave Members in the Dark
Of all communications they receive from their health plans, communications about plan changes rank most important, according to the Medco Health 2003 Drug Trend Report (separate from the study conducted with Harvard). The research also found that an effective communications strategy reduces member confusion and increases satisfaction and member willingness to comply with plan changes.

Therefore, if an employer adopts a multi-tier plan or adds tiers to an existing design and raises co-payments, those changes need to be clearly communicated to members before implementation. The worst- case scenario is "counter shock" - when an employee learns from the pharmacist at checkout that his or her co-pay has increased. Poor communication may result not only in dissatisfaction with the plan provider, but also may contribute to a member's decision to stop taking a medication.

Overall, an effective communications strategy clearly and concisely outlines the plan changes, makes evident why the change is necessary and customizes the message to target specific employee populations. It also requires that communication:

* Takes place early (before changes go into effect) and often (not just during open enrollment)
* Goes beyond just direct mail, using a combination of direct mail, outbound alerts, the Internet and e-mail.
By leveraging an array of channels, health plans can more effectively reach plan members to communicate plan changes.

Teach Your Members Well
While outlining plan changes might comprise the vast majority of any member communications, health plans cannot simply tell members that a change has taken place, especially when it results in higher out-of-pocket costs. Patients also need to be educated about the availability, value and benefits of lower-cost options to increase their willingness to use them in place of heavily advertised brand- name drugs. Given the right information, members may make the clinically appropriate and cost-efficient choice. A 1999 Bruskin- Goldring Research survey of adults found that 40 percent do not consider themselves knowledgeable about generic drugs, and nearly half were not knowledgeable about the price of generics. This data indicates that there is an opportunity for health plans to educate members about low-cost options; plans simply need to take the steps to educate members about the vital cost-saving opportunities that generics and over-the-counter drugs offer.

To raise patient awareness and acceptance of generics, employers should work with their health plan or pharmacy benefit manager \(PBM) to provide members with easily accessible generic drug education resources and materials. Members are far more likely to use generics when appropriate if presented with evidence showing that these alternatives are clinically equivalent to brand-name drugs and that they undergo a thorough FDA approval and oversight process. They also are far more likely to see the value of using generics when provided with planspecific cost comparison information showing the actual price differences between generics and brand- name drugs.

Keep an Eye on Outcomes
Poor medication compliance can have adverse results in terms of health outcomes and related costs. In some cases, a drug may no longer be required, so discontinuation due to higher co-pays is not a bad thing. However, it is cause for concern when patients stop taking medications used to treat serious chronic conditions, such as hypertension and high cholesterol, without a physician's knowledge or consent.

To help ensure that medication compliance is not negatively affected, employers should systematically evaluate their plan design, particularly on health outcomes and medical resource utilization. To help track utilization trends, benefits managers should work closely with their health plan or PBM to monitor these factors. Some employers may be able to take advantage of Web-based monitoring tools offered by their insurer for real-time and continual access to drug-utilization and drug-spend data.

Difficult decisions are required of plan sponsors who struggle to maintain an affordable prescription benefit for their members. However, making incremental plan changes and keeping an eye on the impact those changes have on medication usage is a sensible approach to controlling drug costs while assuring healthy outcomes.

FOOT NOTES
For more information related to this article, go to www.worldatwork.org
and:
* Go to the "Info Finder" section of the home page, click on the blue "Power Search" button and then click on "Advanced Search."
* Leave the "Rewards Category" and Optional Filter" blank.
* Type in this key word string on the search line: Multi and tier and prescription OR consumer driven and prescription.
QUICK LOOK
* Sixty-three percent of employees with prescription benefit coverage are in three-tier plans.
* There are several issues health plan providers need to consider before increasing member cost sharing as a means for reducing their drug spending.
* To help ensure that medication compliance is not negatively affected, employers should systematically evaluate their plan design, particularly on health outcomes and medical resource utilization.
By Pat Deverka, M.D., Medco Health Solutions Inc.

ABOUT THE AUTHOR
Pat Deverka, M.D., is vice president of scientific affairs at Medco Health Solutions Inc.
Copyright WorldatWork Jun 2004
Publication date: 2004-06-01