PCMA: New JAMA Analysis Suggests Employers Striking Right Balance in Prescription Drug-Plan Benefit Design

5/18/2004

From: Phil Blando of PCMA, 202-207-3614

WASHINGTON, May 18 -- A new research analysis modeling increased prescription drug copayments and their effect on consumers' use of prescription drugs suggests that employers are striking the right balance of quality and affordability in benefit plan design, and, the authors suggest, without PBMs' proven tools, prescription drug costs in employer-sponsored health coverage would be far higher, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing pharmaceutical benefit managers (PBMs).

"This report suggests that, at a time of rising health care costs, employers have struck the right balance and are targeting scarce health care dollars effectively," said PCMA President Mark Merritt. "Other peer-reviewed data have shown that increased copayments associated with multi-tier pharmacy benefits do result in reduced prescription drug spending, but do not result in higher use of other health care services. By working collaboratively, employers, physicians, pharmacists, health plans, and PBMs are assuring consumers access to a predictable, high-quality, and affordable prescription drug benefit."

Modeling simulations were performed by researchers at the RAND Corporation, Merck & Co., and the California Healthcare Foundation and are published in the current issue of the Journal of American Medical Association (JAMA). The analysis examined the pharmacy claims data and health plan benefit designs from insured, working-age individuals from 30 employers and 52 health plans from 1997 to 2000. Notably, the models published in JAMA did not examine consumers' actual prescription drug use and health outcomes associated with changes in copayments.

In many respects, the findings resulting from this modeling appear to echo similar findings by other researchers. In a first- of-its-kind 2001 study, a peer-reviewed analysis appearing in Medical Care,(1) the official journal of the Medical Care Section of the Journal of the American Public Health Association, found that higher copayments associated with a multi-tier pharmacy benefit helped reduce third-party payers' prescription drug costs and, equally important, did not result in adverse consequences, such as higher emergency room use, inpatient hospital visits or physician office visits. The analysis examined medical and prescription claims data for more than 20,000 enrollees enrolled in preferred provider organizations (PPOs) from 1997-1999.

Among the key points from the new report in today's issue of JAMA:

-- The very tools PBMs rely upon - including physician- directed generic substitution, mail-service pharmacy, and formulary development - have, as the authors note in the first paragraph, "large effects on drug spending" and serve to drive down drug spending. For example, the data confirm that a 90-day supply of prescription drugs dispensed through a mail-service pharmacy is much more cost-effective than that provided at the retail pharmacy.

-- Most individuals managing complex, chronic conditions -- particularly those with hypertension and depression - continue to take the prescription drugs they need, regardless of increased copayments and particularly if there is no close substitute available over-the-counter. The exception to this trend appeared to relate to individuals managing diabetes. The reasons for this exception are not identified in the analysis. While not identified by this analysis, employers, PBMs, and others are pioneering innovative disease management programs to help address quality and cost issues associated with individuals managing chronic conditions.

-- Consumers are most price sensitive for prescriptions addressing symptoms or conditions with close over-the-counter substitutes, such as analgesics and antihistamines. These consumers are most likely to reduce utilization of prescription drugs seeing increased copayments.

PBMs increasingly are recognized as playing a critical role in assuring a high-quality, affordable, and integrated prescription drug benefit for consumers. According to the Centers for Medicare & Medicaid Services, the share of consumers' out-of- pocket expenditures as a percent of total expenditures on prescription drugs declined by 30 percent between 1995 and 2002 - - a time when PBM market penetration grew significantly. Moreover, other data suggest that, in 2002, consumers' prescription drug copayments for most "tier 1" prescriptions remained under $10 dollars.(2)

PCMA believes these data also should serve as an important guide to those policymakers seeking to undermine PBMs' cost- savings tools and quality improvement initiatives. Without PBMs in the system, prescription drug costs would be far higher, medical errors more prevalent, and consumers would be more likely to forgo needed medicines that would help hold down overall health care costs.

"These data also suggest that policymakers should take heed: efforts to undermine PBMs' tools and techniques will only harm consumers," Merritt added. "Without PBMs in the system, prescription drug costs for consumers would be substantially higher."

Notes:

(1) Motheral BR, Fairman KA. Effect of a three-tier prescription copay on pharmaceutical and other drug utilization. Medical Care. 2001; 39(12): 1293-1304.

(2) Prescription Drug Benefit and Cost and Plan Design Survey Report, Takeda, 2003.