Pharmacy Corner: 40% in U.S. Now Use Prescription Drugs

Data reported by Health and Human Services (HHS) in their annual report, Health, United States 2004, shows that just over 44 percent of all Americans take at least one prescription drug, and 16.5 percent take three. This utilization rate is up from 39 percent and 12 percent for the period 1988-1994. (Report available at www.cdc.gov/nchs/hus.htm)

Not surprisingly, the data shows that prescription drug use increases with age. For Americans under 18, utilization of prescription drugs was 24.1 percent. The rate rose to 34.7 percent between the ages of 18 and 44, for those aged 45 to 64, the utilization rate was 62.1 percent.

While some percentage of drug utilization is for acute needs, i.e. infection or injury, the overwhelming majority of prescription drug use is for chronic conditions. Chronic disease, that includes conditions such as high blood pressure, high cholesterol and diabetes all necessitate life-long medication therapy.

The HHS report also shows that drug expenditures have risen at least 15 percent on an annual basis since 1998.

How can employers manage this increase in utilization?

A majority of employer-sponsored plans are using three-tier and four-tier prescription benefit designs, the Kaiser Family Foundation reports.

According to Kaiser’s 2004 Survey of Employer Health Benefits, 65 percent of workers are now enrolled in three-tier plans which provide a different co-pay, or member cost share, per tier based on generic, preferred brand or non-preferred brand drug lists. Another 3 percent of employees are in four-tier plans with a higher cost share for lifestyle or injectable drugs.

The Kaiser Survey data is very similar to the type and design of employer plans in use at ODS. Excluding Medicare Supplement plans and Indemnity plans, 66 percent of our employers are using a three-tier program. Within that percentage we have just 1 percent in four tier programs.

Are three-tier and four-tier plans slowing drug cost trends?

At ODS, our tiered programs positively impact member utilization and promote cost savings. Our average co-pays for three tier programs in 2004 were Generic-$15, Preferred Brands-$25 and Non-Preferred Brands-50 percent. Our four-tier programs include a $0 co-pay tier. That tier includes selected OTC products, cost-effective brand products and generic drugs. Analyzing claims data for 01/01/2004 to 10/31/2004, we found that generic utilization for our three-tier plans was 55 percent; for our four-tier plans generic utilization reached 60 percent.

Drug mix can be a cost driver as employees move from generic drugs to higher priced brand drugs due to direct-to-consumer advertising or brand samples. We evaluated the drug mix between tiered programs and non-tiered programs in the top therapeutic categories based on amount paid.

In our four-tier program, the average amount paid per prescription for high blood pressure was 23 percent less than the amount paid in our non-tiered business. The category of cholesterol lowering drugs was 14 percent less; depression: 22 percent less; and ulcer medications were 20 percent less. Overall, the average amount paid was 8 percent lower in the four-tier program than in the non-tiered programs we evaluated.

While the four-tier program with the $0 co-pay tier is attractive to members and an excellent benefit transition from a fixed or two-tier co-pay plan, our experience shows three-tier programs provide the largest cost savings. We attribute this increase in savings to strategic pricing of generic co-pays. Prescriptions for generic drugs are often less than the member’s generic co-pay of $15. This co-pay level promotes use of generic drugs, allows the member to pay 100 percent of the generic drug cost (less than $15 on average) and the employer plan pays zero.

The average amount paid per prescription in three-tier plans was 30 percent lower for high blood pressure medications, 15 percent lower in cholesterol lowering drugs, 28 percent lower in antidepressants and 20 percent lower in ulcer medications. All comparisons were to our non-tiered plans. The greater savings appear in categories where more generic alternatives are available and support our assumptions regarding benefit design and co-pay amounts.

ODS Prescription innovations planned for launch in 2005 include web-based drug pricing and formulary look-up for members, four-tier programs that include a cost-share tier for injectable drugs, expansion of our specialty drug program, and expanded OTC coverage.

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