When a $0 copay is too high

May 9, 2007

The Wall Street Journal reports (New Tack on Copays: Cutting Them) that employers and insurers are cutting some drug co-pays to a few dollars or even zero. The emphasis is on getting patients with chronic conditions to adhere to drug regimens that promote good health and reduce other medical expenses. The programs typically target asthma, heart failure and diabetes –illnesses where the employer or health plan can realize a return on their investment within the short time a typical employee or member is with them.

The new initiatives are notable for going beyond low co-pays for generics to include low co-pays for branded products that are cost effective.

Behind the about-face is mounting evidence that higher copayments may not make long-term economic sense. While they’ve curbed drug spending in the short run, studies show they’ve also discouraged some people from taking essential medicines. A 2004 Rand Corp. study of more than 80 corporate and commercial health plans, for instance, showed that chronically ill people used to taking regular drugs cut their medications by between 8% and 23% when their copays were doubled.

I’ve written about low co-pays before, and pointed out that generic drugs shouldn’t need insurance coverage at all.

But why stop at $0 copays? Employers are already shelling out thousands of dollars for employees’ health benefits, so why shouldn’t they pay their employees specifically for adherence? In addition to zero dollar co-pays, why not pay employees cash bonuses –or top up their HRAs or HSAs (assuming they can find a way to do so legally)– for staying on worthwhile drugs over extended periods of time?

And there is an opportunity to align the interests of employers, patients and pharmaceutical companies by allowing the pharmaceutical companies to fund these bonuses and contribute ideas and programs that enable adherence. In the absence of new drugs or pricing power the main growth opportunity for the pharmaceutical industry is increasing adherence.

As long as the programs are directed toward reducing overall medical costs then I’m not concerned about abusive promotional practices. And this is where employers can play a big role. Time and again it’s been demonstrated that pharmaceutical benefit managers and physicians are unduly influenced by financial incentives to push particular drugs. (Look no further than today’s lead story in the New York Times (Doctors Reap Millions for Anemia Drugs) to see what I mean.) Let’s see if employers can do a better job of looking out for their employees’ best interests. I think they might be up to the task.
An intriguing aspect of such a plan would be the chance for branded pharmaceutical companies to compete against generics. If the branded company can do a better job of promoting adherence, an employer might find it better to pay the extra cost of the branded product.

5 thoughts on “When a $0 copay is too high”

  1. Paying employees to pop some pills to head off trouble down the road is a great and workable idea. There can be ways to limit any abuses. Your BCG “thinking out of the box” creativity seems to be at work here. 🙂

    Adopting such practices can also help another concept – that of employer or insurer sponsored medical tourism. Patients requiring costly surgeries can be offered the option of getting these done safely and inexpensively in pre-approved foreign hospitals that meet quality benchmarks. What’s the connection? It is that such patients will likely need significant financial incentives (like being paid a portion of the savings) for this to work in a big way.

  2. This is really a very intresting article discussing about raising costs of insurances and also the balancing act to bring down the copay costs.

  3. Nice article – and you don’t have to leave the country for medical tourism – how about patients traveling to known centers of excellence for superior care and much lower cost outcomes?

    TO’B

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