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CCH® BENEFITS — 11/15/11

Prescription Drug Benefit Plans Increasingly Incorporate Multiple Tier Copayments

from Spencer’s Benefits Reports: Cost sharing design for prescription drug benefit plans became increasingly complex in 2011 as more plans adopted four-tier copayment structures, the Pharmacy Benefit Management Institute (PBMI), with sponsorship from Takeda Pharmaceuticals North America, found in its recent 2011-2012 Prescription Drug Benefit Cost and Plan Design Report. Although most prescription drug benefit plans still apply a three-tier copayment structure (41% with fixed dollar copayments and another 18% with percentage coinsurance), another 25% have adopted four-tier designs, up from 8% in 2008.

Key findings from the PBMI survey include the following:

• The complexity of cost-sharing continues to increase, driven by increased use of four-tier plans and coinsurance designs. The percent of employers with four tier plans grew to 25% in 2011, reflecting the growing use of specialty tiers. The percent of plans using coinsurance increased to 34%, up from just 14% in 2008.
• While copayments for generics and traditional brands remained relatively flat, copayments for specialty drugs rose by 37%. The average specialty copayment grew from $61 to $84 in 2011 in efforts to keep pace with the rapidly increasing cost of specialty drugs.
• The average copayment differential between tiers continued to grow in 2011 as follows—between generics and preferred brands, $16, compared to $7 in 2000; between preferred and nonpreferred brands, $20, compared to $13 in 2000. The copayment differential between tiers—generic, preferred, and nonpreferred—are at an all-time high; and while differential copayments can steer members towards more cost-effective alternatives, the impact on demand is not always clear, the PBMI report observed.
• The most prevalent drug utilization management tool is prior authorization, used by 76% of respondents, trailed by step-therapy at 56%, and utilization management, along with aggressive formulary management, were rated among the most effective cost-reduction strategies (assigned 6.7 and 6.8 points, respectively, out of 10). Two-thirds of survey respondents expressed concern about drug affordability for members and nearly the same proportion (64%) felt that member education is a primary tool to help members. Members on average pay about 25% of the claims costs for retail purchases and about 20% for mail pharmacy purchases. About one-fifth of plans require members to meet a deductible, a median $200 for single and $275 for family.
• Nearly 60% of employers now cover 90-day supplies of maintenance medications (those used to treat chronic conditions) at retail pharmacies. However, most plans are offering a greater copayment discount for 90-day supplies obtained from mail pharmacy than from retail. For example, the average ratio of copayments for a 30-day supply of nonpreferred brand prescription drugs obtained from mail pharmacy versus retail was 2.2, compared to 2.5 for the retail 90 to retail 30 copayments.
• In contrast, specialty pharmacy networks are tightening. Thirty percent of respondents require that specialty medications be dispensed through their PBM’s specialty pharmacy. Nearly half (48%) use designated specialty pharmacies, up from 40% in 2010. Management of specialty drugs on the medical plan side continues to grow as 24% of employers now restrict coverage of specialty drugs on the medical side, up from 12% in 2010.
• The majority of respondents (54%) now exclude nonsedating antihistamines from coverage, likely reflecting the growing acceptance of over-the-counter drug promotion as well as continued budget pressure in the slowed economy.

“The growing complexity of plan designs, with a larger number of tiers and increased use of coinsurance, brings increased need for effective member education about cost-sharing,” the report emphasized. Because many plan members will not turn to available online tools before they fill a prescription, “other forms of member education are important in order to minimize member confusion and disruption and maximize savings opportunities for the member and the plan,” the report suggested.

“The demand for member support and education will continue to be most acute for users of specialty medications. With the addition of specialty tiers, the growth of limited specialty networks, and the tightening of benefit coverage for specialty medications, the need for benefit advocates to help navigate the growing complexity of the specialty benefit across medical and pharmacy is clear.”

The survey was conducted during April and May 2011 and the 274 respondent employers cover an estimated 6.7 million members. For more information, visit http://www.pbmi.com.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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