Plan members unaffected by three-tier co-pay changes

September 1, 2000

Pharmaceutical Representative

Results from the first study within the healthcare industry documenting how implementation of a three-tier prescription co-pay plan affects pharmaceutical and medical utilization and expenditures, continuation with chronic medications and plan enrollees were presented at the fourth annual Express Scripts Outcomes Conference, held in St. Louis.

Results from the first study within the healthcare industry documenting how implementation of a three-tier prescription co-pay plan affects pharmaceutical and medical utilization and expenditures, continuation with chronic medications and plan enrollees were presented at the fourth annual Express Scripts Outcomes Conference, held in St. Louis.

The results of the study, presented by researcher Brenda Motheral, indicate that three-tier co-pay prescription programs have enjoyed success since their inception two years ago.

According to Motheral, the relatively new co-pay structure can significantly lower payers' trend in pharmaceutical expenditures, and members are not showing evidence of medication noncompliance, as was expected by some industry experts when the three-tier co-pay structure was initiated three years ago.

Motheral and co-investigator Kathi Fairman studied two comparable preferred provider organization groups located in the same state. The plans had nearly identical demographic profiles in terms of age, gender and incidence of chronic illness.

Group one instituted a three-tier co-pay plan in 1998, changing from a two-tier plan with a $7/$12 co-pay structure to a co-pay structure of $8/$15/$25, depending on the tier level.

For the year preceding implementation, brand name and non-formulary drugs placed on tier three constituted 14% of prescription claims.

Group two, the control group, maintained its $7/$12 two-tier structure for the duration of the study.

The study substantiated the claim that a three-tier structure can significantly lower plan sponsors' trend in pharmaceutical expenditures. "Costs were lowered primarily through cost-shifting, with members assuming a greater percentage of the cost of the drugs they consume," said Motheral.

Members showed no ill effects from the switch from two-tier to three-tier co-pay structure either.

According to Motheral, skepticism about the three-tier co-pay structure resulted from concern that it would encourage medication noncompliance and lead to increased medical costs, but no significant differences in medical costs were seen between the two-tier and three-tier plans.

"We wanted to determine whether moving to a three-tier co-pay structure would trigger unintended consequences," said Motheral. "The data show that it did not, at least in the short run."

How much a plan sponsor can expect to save with a three-tier co-pay structure varies. Said Motheral, "The magnitude of savings will vary, depending on co-pay amounts at the time of the change, co-pay amounts assigned to each of the three tiers, market share of preferred drugs and the approach to selection of tier-three drugs." PR

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