Consumers Paying More for Their Prescriptions
Consumers who rely on prescription drugs should pay particular attention this year when choosing a health plan. Not only will they pay more for their medicine, but also the co-payment formulas are becoming increasingly complex.
In fact, experts recommend using a calculator while mulling over the drug benefits alone.
The changes are driven by employers. The cost of providing employee health benefits rose by 11% over the past year, according to a recent Kaiser Family Foundation report, and companies are looking to pass more of these costs along to their employees. Because that increase was fueled mostly by a 15.5% jump in prescription drug prices, drug benefits are a natural target.
Higher co-payments are one result, as is scaled-back coverage of expensive breakthrough medications and so-called lifestyle drugs such as Viagra. But it’s the multitiered formulas that may pose the biggest headaches for consumers trying to choose a health plan, especially those who have chronic conditions such as high blood pressure, diabetes, asthma or depression.
Nearly three-quarters of employee-sponsored health plans now offer double-, triple-or even higher-tiered co-payment plans, with financial incentives to use generics (which normally cost 25% to 50% less than brand name equivalents) and older brand name medications. Some of the plans encourage mail orders. And more tiers are being devised.
“Employers can even make generic substitution mandatory if a generic equivalent is available and require that the pharmacy substitute that regardless of whether the brand name is prescribed,” says Praveen Thadhani, an associate in the Los Angeles office of William Mercer, an employer benefits consulting firm.
Some Kaiser plans, for example, have a two-tier system, in which consumers pay $5 to $10 for generics, and $10 to $25 for their brand name counterparts.
Others, like the new one offered by CalPERS (California Public Employees’ Retirement System), which provides health coverage to 1.2 million state and local government workers, have a three-tiered approach.
In the CalPERS program, which takes effect in January, co-payments are $5 for generics, $15 for brand names on the plan’s formulary (which is a list of preferred drugs) and $30 for non-formulary drugs. CalPERS members are also encouraged to buy prescription drugs by mail at a substantial savings. A three-month supply of a generic will cost $10, the brand name $25, and non-formulary brands $45.
“This is the first time we’ve changed our prescription drug benefit since 1993,” says Patricia Macht, chief of public affairs for CalPERS in Sacramento. “We didn’t make the change lightly, but we’re up against the same problems as everyone else, with prescription drugs driving up costs.”
Other plans, such as those offered by Wellpoint, a health insurer in Thousand Oaks, have a fourth layer that requires consumers to shoulder 30% to 50% of the cost of breakthrough drugs, such as self-administered injectable diabetes medications.
And Express Scripts Inc., a pharmacy benefits manager based in St. Louis that provides pharmacy services to health-care companies, just launched a five-tiered program. It includes $4 co-pays for older generics; $10 to $15 on more expensive generic drugs, such as calcium channel blockers for heart disease; $20 for preferred brand names; $35 for brand names not on the formulary list; and $50 for drugs such as allergy medications needed for symptom relief as opposed to saving a life or preventing a problem.
On the horizon, health-care providers are devising other strategies they hope will shave costs. Wellpoint, for one, is taking a hard look at the top 12 therapeutic drug classes, such as antibiotics, antidepressants, migraine medications and cholesterol drugs, to determine which are the most effective in each category. Ultimately, members will be encouraged to use those medications.
“The biggest price increases come from new drugs for which there is no generic equivalent and which are heavily promoted directly to consumers,” says Robert C. Seidman, Wellpoint’s chief pharmacy officer. “We want to know if we’re getting the most bang for our buck.”
On other fronts, insurers in the Northeast are experimenting with paying for over-the-counter drugs, which normally aren’t covered. The rationale here is that consumers often opt for generics, with the low $5 co-pay, even if the OTC equivalents are readily available at their local pharmacy because their total out-of-pocket expense is less.
If this strategy works, this benefit will be offered elsewhere.
In the meantime, consumers should read the fine print in their health-care benefit packages before making their final selection. Are the drugs they normally take included on the plan’s formulary? Their company’s benefits manager can provide a list. Or they can look it up on the health plan’s Web site. If not, they should ask their doctor if the plan’s formulary has an acceptable substitute. Or is there a generic that will do the job just as well? How much will their co-payments total? If they consume drugs regularly, does the plan cap out-of-pocket expenses? Most plans limit employee’s costs to $1,000 a year.
“People need to be smart shoppers,” says Clark Miller of the Pacific Business Group on Health, a San Francisco-based health-care consortium of major employers such as Safeway, Union Bank and Chevron. “Just asking a few simple questions can make a huge difference.”
