When "Cost" means "Co-Pay"

A new research study from health-information company Wolters Kluwer Health reports that in the fourth quarter of 2008, U.S. patients failed to fill 6.8% of on-patent prescriptions, a 22% increase from the first quarter of 2007. Patients also abandoned prescriptions for generic drugs at a higher rate, failing to fill 4.1% of generic prescriptions. Why?  Because of “cost.”

What does “cost” mean?  Does it mean the AWP of a medicine?  Not for the 85% of Americans who have health insurance.  For them “cost” means “co-pay."

According to a story in today’s Wall Street Journal, “Higher co-payments required under health-insurance plans and other plan features helped boost the number of patients unwilling to pay for their prescriptions, according to the research.”

Not surprising.  Daniel M. Hartung, of Oregon Health & Science University, and his colleagues analyzed the effect of small co-payments -- $2 for generic and $3 for brand-name -- for prescription drugs introduced for Oregon Medicaid enrollees in 2003. The co-pay fees weren't required for patients who were unable to pay. The researchers examined pharmacy claims data on about 117,000 Medicare enrollees with depression, schizophrenia, respiratory disease, cardiovascular disease and diabetes. The patients' overall use of prescription drugs decreased by about 17 percent after introduction of the co-pay policy.

Why higher co-pays?   Because insurance companies don’t want patients to fill prescriptions for on-patent medicines. The Journal writes that “… insurers are flexing their muscle and rejecting coverage for more prescriptions. Health plans denied 10.8% of brand-name prescriptions in the 2008 fourth quarter, a 21% increase from the first quarter in 2007.

Cause and effect.

And it’s not because the medicine themselves are becoming more expensive. Consider this, from 1998 to 2003; insurance companies increased their premiums by an average of $104.62 per person. During that same time period prescription-drug costs increased by $22.48.

Are the majority of Americans with private health insurance spending more for drugs? Yes — because their insurance companies are paying less. In 2000, people under 65 with private health insurance paid 37.2 percent of the cost of their prescription drugs costs out of their own pockets. (Not surprisingly, this leads many Americans to believe that their increased out-of-pocket expenses are because of higher drug costs.) The truth is that the growth in prescription-drug co-payments outpaced the growth rate of prescription drug prices four to one.

Good for payers.  Bad for everyone else – including employers.

In June 2007, Gray Lady scribe Milt Freudenheim reported on a new study by the Integrated Benefits Institute that shows, "Employers that shift too much of the cost of drugs to workers in their company health plans could wind up losing more than they save, through absenteeism and lost productivity, according to a study by health policy researchers."

"Among the 17 employers in the study, conducted by the nonprofit Integrated Benefits Institute, more than half the workers with rheumatoid arthritis were not taking their drugs — in many cases because they considered the out-of-pocket co-payments too high.

As a result, the institute’s study found, the employers incurred $17.2 million in costs from lost productivity, 26 percent more than the estimate of what they would have spent if the workers had taken their arthritis drugs."

The headline of that New York Times article was, "Health penny wise, medical pound foolish?

Indeed.

Okay -- once more with feeling -- patients (otherwise known as "people," aka "voters") need to be on the right medicines for their conditions. And when payers interpose themselves between doctor and patient, when prescribing decisions are made by accountants based on “cost-effectiveness” studies, health outcomes decline for the individual and costs go up for our health care system.

This is not healthcare reform.