Traditional drug benefit designs use carrots and sticks concurrently. Copays for generics are low to “sweeten” the attraction. Copays for nonpreferred brands are high to add “pain” to their purchases. Copays for preferred brands are in the middle ground, a carrot compared to nonpreferred brands and a stick compared to generics.
Unfortunately, the data are clear that current drug benefit designs aren’t successfully controlling total drug costs given that double-digit increases have occurred nearly every year since 1990.
Business as usual is producing results that are unsustainable. It’s painfully obvious that traditional drug benefits aren’t satisfactory, but it’s unclear whether carrots and sticks are misapplied, flat/tiered copayments are inadequate, the existing drug benefit management (PBM) model is problematic, or other variables areamiss.
One of our clients recently helped us observe the transformative power of carrots. This lesson may be the harbinger of reformation in drug benefits leading to badly needed savings—or it may be the method for quicker adoption of a new business model for drug benefits. In 2008, our client’s drug benefit was provided by a traditional PBM. Members had a drug card and paid copayments of $10 for generics, $20 for preferred, and $40 for nonpreferred brands.
On Jan. 1 2009, our client implemented an innovative drug benefit. Through BidRx and our partner PBM, Partners Rx (PRx), Scottsdale, AZ, members got two benefit options. They got a traditional drug card from PRx with a two-tier copayment benefit, $20 generics, and $40 brands. Members also got a benefit option where all prescriptions were free if purchased using a new Competitive Electronic Marketplace (CEM) model on www.BidRx.com.
In 2009 drug costs for our client decreased 7.5% compared to 2008 in the same six-month period. Sixtytwo percent of prescriptions were filled through BidRx. com and 38% of prescriptions were filled using a Partners Rx drug card.
Although counterintuitive, free drugs lowered total costs for our client. Members preferred free, so they used the option that eliminated copays six out of 10 times. Concurrently, they learned that similar products at lower prices are available for most expensive drugs. Armed with transparency on availability and prices of similar prescriptions on the competitive marketplace model, members and doctors started making different choices.
Can Free Drugs Lower Total Drug Costs?
Free is a powerful motivator, seldom used in drug benefit design with the exception of a few over-thecounter drugs. Interestingly, low-cost generic drugs are available for high blood pressure, diabetes, high cholesterol, asthma, allergies, arthritis, pain, heart burn, ulcers, glaucoma, heart disease, seizures, migraines, depression, psychoses, hypothyroidism, skin disorders, weak bones, hormone disorders, etc. Many of these drugs cost $40 or less for an annual treatment regimen. Using a unique and powerful competitive marketplace, our client lowered drug costs by the tantalizing, judicious use of free medication.
Use Carrots Plus Competition and See a Better Trend
Many benefit sponsors are adopting high-deductible health plans to break the cost trend. Others struggle with making dramatic changes to benefits. Sponsors search for plans that encourage consumerism and tools that members need to master new behavior. They adopt plans that include a safety net for slower adopters. Still others hire auditors to monitor contract compliance by PBMs.
Yet, overall cost trends continue to rise. It may be the right time to consider innovative options. By adding a competitive marketplace model to the PBM-delivered Rx benefit, sponsors gain greater flexibility in benefit design, modernize benefit delivery, ensure transparency, and deploy a new paradigm using market forces to lower costs. Members get the tool they need to be informed prescription drug consumers, and they have choices for purchases: tradition or innovation.
With the adoption of free low cost drugs, a powerful motivator is unleashed that creates a desire for high-value treatment options. Free saves money for members, and the Competitive Electronic Marketplace saves money for benefit sponsors. Can carrots really help us see savings that benefit sponsors are seeking?
Dr. Thomas A. Kellenberger is vice president and co-founder of BidRx LLC, a competitive electronic marketplace for pharmaceutical products and pharmacy benefits. Additionally, he was vice president of Clinical Strategies at Medco. Thomas can be reached at tom.kellenberger[at]BidRx.com