HSC in the News
September 27th 2001
Table 1 Selected Strategies for Containing Pharmacy Costs |
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STRATEGY | PLAN AND COMMUNITY | YEAR INTRODUCED | CHARACTERISTICS |
Benefit Design | |||
Three-tier copayment benefit | AvMed, Miami | 2000 | $10 copayment for generics, $20 preferred brands, $30 for non-preferred drugs |
Three-tier coinsurance benefit | Regence BlueShield, Seattle | 2000 | 10 percent coinsurance for generics, 30 percent for preferred brands, 50 percent for non-preferred brands |
Reference pricing | Blue Cross of Calif., Orange County | 2002 (expected) | A fixed monthly drug benefit for each therapeutic class; patients pay costs exceeding cap |
Drug Selection | |||
Closed formulary | BC/BS of Mass., Boston | 1999 | Covers formulary drugs only unless plan grants exception for medical necessity |
Formulary exclusions | Arkansas BC/BS, Little Rock | 2000 | Excludes second-generation drugs that replace older drugs facing patent expiration |
Utilization Management |
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Physician profiling with prompts | Tufts Health Plan, Boston | 1998 | Identifies patients who could be switched to less-expensive drugs and sends detailers to consult physicians and place prompts in medical charts |
Prior authorization | Blue Cross of Calif., Orange County | 2000 | Requires prior authorization for drugs subject to misuse |
Pharmacy management bonus | Arkansas BC/BS, Little Rock | 2000-01 (pilot test) | Provides physicians with a bonus if established drug utilization targets are met |
Purchasing Strategies |
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Mail order pharmacy option | CIGNA, Greenville, S.C. | 2000 | 33 percent discount on consumer copayment if drugs are ordered through mail order option |
Preferred buying | Blue Cross of Calif., Orange County | 1997 | Negotiates discounts directly with manufacturers in exchange for placing drugs on preferred tier |
BC/BS = Blue Cross and Blue Shield |
Policy Implications
espite some recent successes with three-tier designs, plans have little optimism that drug utilization and cost trends will slow considerably. As the limits of cost-control efforts are reached, plans see few alternatives to higher consumer cost sharing if they are to preserve pharmaceutical choice for consumers while holding down employer premiums. This strongly suggests a return to the pre-managed care era of modest prescription drug benefits- except that tiered benefits provide consumers with more choice and purchasing power than they had with indemnity insurance. Nevertheless, because consumers rely on and benefit from pharmaceutical care more than they did a decade ago, a reduction in drug benefits could cause some consumers considerable financial burdens-particularly low-income and chronically ill populations. As tiered-benefit designs proliferate, consumers facing choices among therapeutically equivalent products may adopt more cost-conscious conscious utilization patterns, thereby helping to constrain overall drug spending. However, where choices among perfect therapeutic substitutes do not exist, the movement toward higher, tiered consumer cost sharing has some risks. Some argue that higher costs may influence consumers to choose less effective drugs or deviate from prescribed dosage or duration instructions, undermining the quality of care and compromising treatment outcomes.7 As drug spending continues to rise, state and federal policy makers will continue to face pressure for action to contain costs. As health care purchasers, some states are adopting cost-containment tools much like those used by health plans and PBMs, including counterdetailing, preferred-drug lists, disease management programs and purchasing pools to negotiate lower prices from drug manufacturers. Most state actions focus on Medicaid drug expenditures, but some also offer savings to Medicare beneficiaries and the uninsured. Policy makers also are considering regulatory responses that include limits on drug pricing and direct-to-consumer advertising and allowing reimportation of drugs sold at lower prices outside the United States. Price controls and reimportation may offer some relief but are unlikely to yield long-term solutions because much of the current spending growth results from rising drug use rather than price inflation. Whether savings produced through these regulatory actions would be worth the political and possible public health risks they entail is unclear. By comparison, new limits on direct-to-consumer advertising could potentially curb consumer demand for possibly unneeded drugs, but they also raise concerns about constraining free speech and informed consumer decision making. 8 Given the likelihood of continued growth in pharmaceutical spending, heightened consumer concerns about access to prescription drugs and lack of large-scale federal intervention, state policy makers and health plans-as agents of employers-will continue to face pressure to reduce drug costs and utilization.1. | Tracking Health Care Costs: Hospital Care Key Cost Driver in 2000, Data Bulletin No. 21 Revised, Center for Studying Health System Change (September 2001). |
2. | Berndt, Ernst R. "The US Pharmaceutical Industry: Why Major Growth in Times of Cost Containment?" Health Affairs, Vol. 20, No. 2 (March/April 2001). |
3. | 2000 Drug Trend Report, Express Scripts (2001). |
4. | Prescription Drug Trends,Henry J. Kaiser Family Foundation (2000). |
5. | Strunk, Bradley C., Paul B. Ginsburg and Jon R. Gabel. "Tracking Health Care Costs," Health Affairs, Web-exclusive publication, www.healthaffairs.org (Sept. 26, 2001). |
6. | 2000 Managed Care Formulary Drug Audit. Scott-Levin (2001). |
7. | Olmstead, Todd, and Richard Zeckhauser. "The Menu-Setting Problem and Subsidized Prices: Drug Formulary Illustration," Journal of Health Economics, Vol. 15, No. 5 (October 1999). |
8. | Wilkes, Michael S., Robert A. Bell and Richard L. Kravitz. "Direct-to-Consumer Prescription Drug Advertising: Trends, Impact and Implications," Health Affairs, Vol. 19, No. 2 (March/April 2000). |