NCPA - National Center for Policy Analysis

Study Finds Aggressive Health Plans Dramatically Slow Drug Spending

May 3, 2002

According to pharmacy benefit manager AdvancePCS, many of its health plan clients outperformed the national average in minimizing the rate of increase in prescription drug spending in 2001. Greater generic competition and the introduction of fewer "breakthrough" drug therapies helped slow down drug spending increases. However, the most aggressive health plans -- those which use a preferred drug list with three-tier co-payments and have instituted other cost management techniques -- achieved the greatest reductions.

Among the findings:

  • In 2001, "highly managed" plans experienced a mere 4.5 percent increase in drug costs per member, sharply under the national average of 17 percent.
  • Members covered by a three-tier co-pay plan incurred annual prescription costs that were 16 percent less for drugs in the cardiovascular class and 10 percent less in the psychotherapeutic class than seen in the general population.
  • A third of those in the study had growth rates of less than 15 percent while another 15 percent of clients kept drug-spending growth below 10 percent.
  • A fraction even experienced negative growth rates, AdvancePCS said.

Co-pays by plan members increased 10 percent, reflecting a new trend, as employers and insurers pass along health care cost increases to their employees and members. More health plans are moving to multi-tier benefit designs. The proportion of AdvancePCS clients with three-tier plans more than doubled to 27 percent at the end of last year from 2 percent in 1999.

Health plans are also using more generic drugs, the study found. Generics accounted for 41.2 percent of total prescriptions dispensed in 2001, up from 40.1 percent the previous year. Generic spending also rose during that period, accounting for 13 percent of total expenditures versus 11.6 percent in 2000, due to higher generic drug costs.

Source: "Aggressive Health Plans See Dramatic Slowdown in Drug Spending, PBM Reports," Reuters Health, April 24, 2002.


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