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Where Should Copays be Set for Specialty Drugs?

A continually popular question that I receive is how high can specialty copays be set before patients stop taking their medication? 

Unfortunately, empirical data to guide the answer to this question is fairly limited.


Four studies of elasticity of specialty medications have been published, most examining data from the early to mid-2000s.  The first published study by Goldman et al. examined price elasticity for specialty medications used to treat cancer, kidney disease, rheumatoid arthritis (RA), and multiple sclerosis (MS). 

                                              Summary of Studies of Specialty Pharmaceutical Price Elasticity

Author Year Population Conditions* Key Dependent Variable
Karaca-Mandic (2010) 2000-2005 35 large private employers RA Medication initiation and continuation
Gleason (2009) 2006-2008 13 million commercially insured IBD, MS, RA, Psoriasis Prescription abandonment, defined as a reversal of a previously adjudicated claim
Curkendall (2008) 2002-2004 45 large employers RA Medication adherence and persistency
Goldman (2006) 2003-2004 15 large employers Cancer, Kidney disease, MS, RA Medication initiation and continuation

For specialty meds used to treat RA, a doubling of patient cost-sharing was correlated with a 21 percent reduction in patient spending.  Elasticity for MS medications was -.07, and kidney disease and cancer did not demonstrate any statistically significant relationship between patient cost-sharing and prescription demand.  Karaca-Mandic et al. found that for newly diagnosed RA patients doubling the average annual OOP cost under the pharmacy benefit (from $400 to $800) reduced the probability of initiating a biologic for RA by 9.3 percent.  For current users, doubling the average OOP cost under the pharmacy benefit reduced the probability of continuation by 3.8 percent (from 80 to 77 percent).  Interestingly, this study found that higher family OOP burden for medical expenditures, not just specialty, was also associated with decreased likelihood of initiation of a biologic.

In one of the most widely quoted studies, Gleason et al. (2009) examined abandonment of specialty prescriptions at the pharmacy for patients newly initiating a biologic for the treatment of MS or tumor necrosis factor (TNF) blocker for treatment of RA or other conditions. Prescription abandonment was defined as “reversal of an adjudicated claim with no evidence of a subsequent adjudicated paid claim in the ensuing 90 days.”  For MS, the abandonment rate for patients with OOP less than $100 was 5.7% compared to more than 25% for OOP expense exceeding $200.  For TNF, the abandonment rate increased most significantly at copays exceeding $500.

                                                                                                                                                               Results from Gleason et al.

 Out-of-Pocket Expense

Multiple Sclerosis (N=2,791)

TNF Factor (N=7,313)

Unadjusted Abandonment Rate Odds Ratio from Logistic Regression Unadjusted Abandonment Rate Odds Ratio from Logistic Regression
$0-$100 5.7 Reference Group 4.7 Reference Group
$101-$150 5.3 0.9 10.5 2.3*
$151-$200 10.6 2.0 14.6 3.7*
$201-$250 26.8 7.3* 10.6 2.1
$251-$350 25.8 6.5* 13.4 3.3*
$351-$500 26.2 6.1* 16.3 4.4*
>$500 28.5 6.7* 26.4 7.0*


Finally, Curkendall et al. examined the relationship between cost-sharing and compliance with two TNF blockers, adalimumab and etanercept.  A weekly OOP expense of $0-$40, which represented 95% of patients, was associated with a medication possession (MPR) of 0.53, compared to a MPR of 0.35 among individuals with a weekly OOP expense exceeding $40 (5% of the patients).  A separate analysis of medication persistency suggested that the poor adherence was primarily due to therapy discontinuation rather than patients missing doses. 

While these studies have provided important early insights on price sensitivity for specialty medication, their primary focus on rheumatoid arthritis and their examination of data from the early to mid-2000’s limit their application (exception being Gleason et al).  The specialty landscape has changed dramatically in recent years—annualized spend per commercial member has grown 50%, patient cost-sharing has grown rapidly with a fourth tier becoming the mainstay, and the majority of spend is now managed under the pharmacy benefit rather than the medical benefit.    Clearly more research is needed in this area.  In the meantime, Gleason’s work perhaps provides the greatest insight to this question, keeping in mind that the copay threshold for significantly greater non-adherence was different for the two therapy classes studied.  Even at $100, they observed a doubling of the abandonment rate for TNF factor so a $100 copay would be a conservative design.


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When Are Prescription Copay Waivers a Good Idea?

I recently received a question as to which drug class or population/disease state, if ever, would I recommend a zero dollar member cost share.   This is a great question, and there actually are some situations in which I would recommend use of a zero dollar copay.

First, let me briefly review why I do not recommend $0 copays as a standard part of the benefit design, even for classes such as diabetes and cardiovascular disease.

  • The primary reason is that most patients do not stop taking medication because of cost, particularly in a commercially insured population (see figure for common reasons for non-adherence).  Accordingly, copays are being waived without any possibility of benefit for the vast majority of patients.  This known fact is evidenced in the small improvements that are seen in compliance after implementing a copay waiver program—averaging 2-4 percentage points and representing 1-2 weeks of additional therapy.  Targeting copay waivers to patients at high risk for adverse events and who truly have cost as a financial barrier would be an ideal approach, but it raises HR and equity issues that are not easily resolved.
  • The second consideration to keep in mind is the potential for fraud.  I have heard from frustrated employers who implemented zero dollar copays for chronic conditions only to find that employees began sharing medications with family and friends with the same condition.  Quantity limits can help control this potential problem partially but not entirely.  I have not studied this phenomenon personally so I cannot speak to the magnitude of the problem.

I would however, recommend use of a zero dollar copay program under certain conditions.  First, zero dollar generic copays are a great tool for promoting use of lower cost, therapeutic alternatives for patients currently using brand medications. I would consider them for therapy classes for which you have step therapy in place as the two programs are complementary.  Step therapy will promote generic use for new users, and the $0 generic copay program is a carrot strategy for promoting generics with current brand users.  The $0 generic copay helps to grab the member’s attention and provides an extra little incentive for making the switch.  I would not make the copay waiver indefinite, however.  Six months of free generics is sufficient.  Based on my experience and rigorous evaluations, these programs have a solid ROI; and the patient saves money too of course.

Second, a population for which I MIGHT consider a $0 generic copay is hypertension and cholesterol, and other cardiovascular medications in seniors. The rate of adverse cardiovascular events (absent treatment) is much higher in the senior than in the commercial population; so IF price elasticity is at least as high as we see with commercial members, there is the potential to materially reduce the rate of adverse cardiovascular events and to achieve a net savings from reduced hospitalizations.  The key to this decision is determining the actual price elasticity of demand within your senior population.  As little contemporary public data is available on price elasticity within the senior population, individual vendors will have to assess the elasticity within their own data.  Once identified, a simple analytic tool, like the VBID calculator, can be used to determine the potential reduction in hospitalizations and medical spend that can be achieved.  Of course, implementing copay waivers in the Medicare Part D program is a greater administrative challenge than a commercial plan or retiree plan, which would be a relevant consideration.

A third population for which I would PILOT a $0 generic program is patients at HIGH risk for adverse cardiovascular events but who have NOT initiated pharmacotherapy. The classic example is the patient with a recent myocardial infarction who has not initiated a statin and/or beta-blocker.  While cost is not likely to be the reason for non-initiation for most patients, it might be a useful short-term incentive, when combined with the right intervention, for encouraging use.  I would say pilot first because it simply may not be effective and there is the risk that a zero price could actually deter use if it serves as a quality indicator for non-initiating patients.  Another growing challenge is that many patients will appear as non-users because of the $4 generic programs which do not always result in a claim being submitted.

For those of you looking for more information on copay waivers, see the recent Fairman editorial in JMCP and a paper Steve Melnick and I published last year on the potential financial savings from copay waivers.

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Study Shows Slight Preference Advantage for Community Pharmacy Over Mail Pharmacy

I finally had a chance to read the study on mail and community pharmacy preferences published in The Journal of the American Pharmaceutical Association, an article which has been the focus of much discussion over the last several weeks.  The study, published by CVS Caremark, examined member’s choice of channel in the first 4 months after being converted from an incentivized or mandatory mail program to their Maintenance Choice program, which offers an equal financial incentive for mail and 90-day retail.

The study was well-done methodologically and the conclusions did not over-interpret the data.  What has been surprising to me is that the study is being discussed by some stakeholders as evidence that members, when equally incentivized, will choose mail over community pharmacy.  This conclusion is not supported by the study, was not a conclusion made by the authors, and in fact, a detailed review of the study suggests the opposite conclusion.

The basis for this inference seems to be the finding that 56% of patients who were new to therapy (i.e., had never filled that particular medication at either a mail or community pharmacy) chose mail service for their prescription, a slight majority.  However, if you read the study details, 76% of those patients had previously used mail for OTHER medications.  Accordingly, when results are examined by whether or not the member had previously used mail for any medication, only 32% of patients with NO prior mail use chose mail for the new prescription and 63% of those with prior mail use chose mail for their new prescription.  In other words, community pharmacy was the preferred choice for the majority of patients who had not previously used mail for any prescriptions.

The data for ongoing users can be broken down the same way, showing that 21% of patients with NO prior mail use chose mail for their refill and 75% of those with any prior mail use chose mail for their refill.  Again, when you examine data points for both new and ongoing users, community pharmacy appears to have a slight advantage in terms of percent choosing.  Furthermore, the authors note that the most important predictor of selecting mail service pharmacy was recent use of mail for another medication.  Specifically, the odds ratio for selecting community pharmacy was 3.77 for community pharmacy users compared to prior mail users.

Also note that this study did not examine whether the members’ spouse had previously used mail, which I have found in previous research to be a strong predictor of mail use.  Reason being, much of the initial paperwork is already in place and there is a familiarity with the mail service, reducing the barriers to use.  Inclusion of this covariate would likely increase the odds ratio for prior mail use.

All that said, the authors conclusion, which focused on the diversity of preferences rather than which channel had an inherent preference advantage, was on point—“Patient behavior indicates that certain patients prefer to access prescription medications via mail service and others through community pharmacy.”  Bottom line: if your PBM offers competitive 90-day retail rates, take advantage of them, with the caveat that you will need to make sure that your formulary and generic promotion programs remain effectively in place.

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ACOs, Pharmacists, and Transitional Care: A Winning Strategy

Among all the elements of health care reform, perhaps none has created as much debate in the halls of health plans and hospitals as Accountable Care Organizations (ACOs), which can be loosely defined as integrated and coordinated systems with financial incentives to reduce the cost of care within quality standards.    Norton Healthcare was selected by the Brookings/Dartmouth University initiative as one of the nation’s first pilot sites to develop an ACO.   Exciting for the pharmacist community is that Norton also happens to be one of a minority of hospitals where pharmacists are actively engaged in transitional care services.  Transitional care focuses on the coordination and continuity of health care as patients transition between different locations or levels of care.  While it can apply to various types of transition, patient transition from the hospital setting to home has been an area of particular interest because patients are vulnerable to gaps in care and adverse medication events, as evidenced by high rates of readmission.  Nearly two-thirds of adverse events following discharge from the hospital are related to medications.

Based on well-done randomized controlled trials, transitional care has repeatedly been shown to improve quality, reduce readmissions, and in many cases, save money—a rare find in health care.  Unfortunately, its commercial adoption has been limited until now due to a lack of financial incentives.   However, organizations such as Norton will now have just such incentives under health reform, and pharmacists are at the forefront of Norton’s efforts to reduce readmissions through transitional care services.  Norton staff pharmacists were trained in the provision of transitional care services, and a pilot project was implemented that allowed for pharmaceutical care provision by Norton pharmacists both during the admission and at discharge.  Norton reported better adherence to physicians’ orders at discharge and fewer medication errors at admission and at discharge.   An evaluation of readmissions apparently was not part of the initial pilot, but prior research bodes well for the savings potential of this initiative.  As a next step, Norton is placing pharmacists on a team with nurse navigators, who will follow up with heart failure patients after hospital release and will reach out to pharmacists to address medication issues.

The financial incentives that promote transitional care under health reform are a win for patients, and the early recognition of the value of pharmacists in transitional care at one of the first ACOs is a win for both the profession of pharmacy and for Norton.

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