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Multi-tiered Medicare plans cut prescription costs, boost generics use

Newswise — Seniors enrolled in Medicare plans that charge higher copayments for brand name or non-preferred medications could spend less and fill fewer prescriptions, thereby lowering drug spending, say the authors of a new study.

The downside is that people on these multi-tiered drug plans could miss needed medicines.

“Consumers are sensitive to price — when they have to pay more, they tend to consume less,” said Boyd Gilman, Ph.D., a senior researcher at Mathematica Policy Research, Inc., in Cambridge, Mass.

Gilman and colleagues evaluated prescription drug spending among 352,760 Medicare beneficiaries with employer-sponsored retiree drug coverage. The researchers compared drug spending of enrollees in single-tiered plans to that of enrollees in three-tiered prescription drug plans.

The three-tiered plans charged retirees higher copays for using drugs that were not generic or preferred brand names or that might have had less obvious therapeutic value, whereas the single-tiered plans charged a $5 or $10 copay for all prescribed medications.

The study appears online in the journal, Health Services Research.

Overall, researchers found significant evidence that multi-tiered prescription plans reduced total drug spending. Medicare beneficiaries in three-tiered plans spent 14.3 percent less total on prescriptions and filled 14.6 percent fewer prescriptions, compared to those in single-tiered plans.

“They bought fewer drugs, but among those drugs that they continued to purchase, they’re relying more heavily on generics . . . In general, that’s probably a good thing,” Gilman said.

“These findings certainly suggest that multi-tiered copayments may steer prescriptions toward less expensive medications and generic substitutes, reduce overall spending on prescription drugs and therefore represent an important cost-containment tool to consider in designing plan benefits,” said J. Michael McWilliams, M.D., of Harvard Medical School’s Department of Health Care Policy. He was not involved in the study.

However, Gilman’s study also found that members in three-tiered plans had 57.6 percent higher out-of-pocket costs and filled 11.5 percent fewer prescriptions for maintenance medications used to treat chronic conditions such as diabetes, arthritis and hypertension.

This finding suggests that seniors with chronic conditions might reduce or forego important maintenance medicines under these multi-tiered plans in an attempt to keep costs in check, McWilliams said.

To mitigate the potential drawbacks of multi-tiered drug formularies, McWilliams suggested consumers discuss prescription needs with health care providers before choosing a drug plan.

“The use of prescription medications is fairly predictable. People know what drugs they need, and they can find out whether their drugs are covered by a plan, and — if they are covered — whether they belong to a lower-cost tier or a higher-cost tier,” Gilman said.

Health Services Research is the official journal of AcademyHealth and is published by Blackwell Publishing on behalf of the Health Research and Educational Trust. Contact Jennifer Shaw, HSR Business Manager, at (312) 422-2646 or jshaw@aha.org. HSR is available online at http://www.blackwell-synergy.com/loi/hesr.

Gilman, BH, Kautter J. Impact of multi-tiered copayments on the use and cost of prescription drugs among Medicare beneficiaries. Health Services Research online, 2007.