Tuesday, October 20, 2015

How Pharmacy Benefit Deductibles Stimulate Manufacturer Copay Program Spending

With little fanfare, the IMS Institute has just snuck out an interesting report: Emergence and Impact of Pharmacy Deductibles: Implications for Patients in Commercial Health Plans. (free download) The report’s overarching theme is unsurprising: Higher out-of-pocket costs reduce patients’ adherence to drug therapy and increase prescription abandonment rates.

The report’s major contribution, however, links the growth in pharmacy deductibles to manufacturers’ copayment offset programs, which cover a beneficiary’s out-of-pocket costs for a brand-name drug. High deductible plans are shifting costs from payers to consumers and—in many cases—back to manufacturers.

And as the charts below show, pharmaceutical manufacturers end up (perhaps inadvertently) paying full-price for an increasing number of prescriptions for their own products. Ouch.

Read on and then consider whether these results affect your company’s strategy.


The report’s Background section provides a useful primer on deductibles and why the Affordable Care Act (ACA) is increasing payers’ usage of combined pharmacy/medical deductibles.

Using data from the PwC Health and Well-Being Touchstone Survey, IMS shows that almost half of all commercial plan beneficiaries now have a pharmacy benefit deductible.

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IMS estimates that as a consequence of pharmacy deductibles, 17 million commercial brand pharmacy claims were filled at full cost in 2014. That’s a whopping 9% of all commercial claims.


Pharmaceutical manufacturers continue to increase their use of copy offset program, as I discuss in Co-Pay Offset Programs Are Blooming in Specialty Pharmacy.  Copay offset programs differ from patient assistance programs (PAP), which focus on uninsured patients (or those denied coverage by their commercial plans) who meet financial eligibility criteria. Note that copayment offset programs are not permitted by beneficiaries of any federal healthcare program, including Medicare Part D.

Here’s the twist: For some major therapeutic categories, IMS documents that copay offset programs are used more frequently by patients in deductible plans. Here’s a key chart buried toward the end of the report, on page 26.

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Before any deductible is reached, a patient’s “copayment” always equals the full prescription price. Consequently, for diabetes therapies (DPP-4 and GLP-1), manufacturers could be paying full price for 15% to 25% of their own prescriptions.

The findings echo what payers have been doing by adding coinsurance rates to higher-tier products, per Employers Get Tougher About Pharmacy Benefits and Specialty Drug Management. Most people can’t afford to pay hundreds or thousands of dollars every month. Payers are therefore essentially daring pharmaceutical manufacturers not to pick up the patient’s coinsurance with a copayment offset program. This is the same dynamic that links the growth in four-tier benefit plans with copay offset program. See How the Fourth Tier Coinsurance Boom Drives Copay Offset Programs.

I’m not sure how many manufacturers have analyzed the codependent relationship between benefit design and their consumer-directed programs. This report suggests that such analysis would be truly therapeutic.

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