Prescription Drug Cost Sharing
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Figure 1: The Effects of Cost Sharing Depend on the Type of Drug
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SOURCE: Goldman et al., 2004.
NOTE: NSAID = nonsteroidal antiinflammatory drug, such as ibuprofen.
Figure 2: As Co-Payments Rise, Compliance with Drug Therapy Falls
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SOURCE: Goldman et al., 2006. Used with permission.
* Average co-payment for each plan year is for a 30-day supply of cholesterol-lowering therapy. http://www.rand.org/pubs/research_briefs/RB9474/
A powerful policy level to use with care
In an attempt to control costs, many employers and insurers have increased patients' co-payment on prescription drugs. The idea is that if consumers have to pay more out of their own pockets, they will use fewer drugs or switch from brand name drugs to generics. Does increased cost sharing work? The answer is yes, but . . .
A series of RAND studies examined how prescription drug cost sharing affects drug use, overall costs, and patient health. Increasing a patient's co-payment, whatever the benefit design, significantly reduced annual drug spending. But how strongly patients responded to cost sharing depended on the kind of drug involved (see Figure 1).
Increasing cost sharing across all drugs and all patient groups equally doesn't make clinical sense. For example, in the case of cholesterol-lowering drugs, RAND found that for every $10 increase in co-payments, average compliance fell by 5 percentage points (see Figure 2). Because cholesterol- lowering drugs help reduce cardiac events and mortality, poor compliance with recommended treatment results in greater use of expensive medical services, such as hospitalizations and emergency departments.
Another type of cost sharing is capping the amount of coverage for prescription drugs at a specific amount per year. RAND found that patients who reach their benefit caps are more likely to stop taking their medications. And only a minority of patients resumed use in the first three months after their coverage returned. The adverse effects of this disruption in drug therapy are likely to be greater among low-income patients, who have high rates of chronic health problems.
RAND found similar effects of drug caps in Medicare Part D. In 2009, drug expenditures are capped at $2,700. Seniors who reach that point must pay 100 percent of subsequent drug costs until they reach $4,350, when the program's catastrophic coverage kicks in. The gap between the expenditure cap and the threshold for catastrophic coverage is known as the "donut hole."
About 3 million seniors reached the "donut hole" during 2007. About 20 percent of them stopped taking their medications, skipped doses, or switched to a different medication.
Prescription drug prices are a powerful policy lever. What's needed going forward is a nuanced approach that recognizes the link between the design of drug benefits and population health.
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