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The Price of Noncompliance

Hospitalization rates and other medical costs go down when employees take their medications regularly. Unfortunately, many aren't complying.

Tuesday, May 2, 2006
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When Blue Cross/Blue Shield of Minnesota wanted to put a price tag on the importance of plan members taking their prescribed medications properly, they tried a little experiment.

The Minneapolis-based health insurer, which covers 2.7 million people, collected data on a subset of covered patients in primary care clinics across the state over a two-year period.

The patients in the study had multiple chronic conditions (diabetes, hypertension, high cholesterol) and were supposed to be taking a wide range of medications. Prior to the study, their average monthly prescription-drug costs were about $161 per person, while their medical costs averaged $320 per person, per month--just under $500 combined.

For the project, pharmacists working for Blue Cross/Blue Shield engaged in face-to-face sessions -- pharmacist to patient -- trying to help the patients in the project sort out what medications they should be taking, and helping them manage the process more effectively. Meanwhile, an identical group of patients was put into a control group that underwent no interventions.

"In the beginning, most had multiple diseases, and they weren't very compliant overall," says Al Heaton, Blue Cross/Blue Shield of Minnesota's director of pharmacy. "Some of them were supposed to be taking 12 to 13 tablets a day, and it's physically very difficult to do that. How are you going to stay compliant with medications if you're facing that situation?"

With the help of the pharmacists, the patients began restructuring their medications, eliminating unnecessary pills and finding alternatives to multiple pills (for example, medications that could be taken once a day rather than three times). Based on the two-year data, after the intervention, monthly prescription costs increased from $161 to $170, but medical costs dropped from $320 to $241, for an overall per-patient savings of $70 per month. In the control group, drug costs remained flat, but medical costs went up over the same time frame.

"That was a pretty clear example of how compliance can make a difference," Heaton says. "If you look at disease, and make sure patients are on the most effective medication therapy, drug costs will go up, but total health-care costs will go down--if you are doing it right, that is."

Dollar for Dollar

Heaton's words are amplified by a recent study from Franklin Lakes, N.J.-based Medco Health Solutions Inc., a pharmacy-benefit-management firm with clients in the private and public sectors.

According to the Medco study, patients with diabetes and high cholesterol can save the health-care system (and employers) millions of dollars by properly taking their medication. The study found that, although prescription drug-costs have escalated 12 percent to 16 percent annually, the costs and risks of hospitalization far outweigh the costs of using medications as directed. The study was based on a sample of more than 137,000 patients under the age of 65 with either diabetes, high cholesterol, hypertension or congestive heart failure. According to Dr. Robert Epstein, co-author of the study and Medco's chief medical officer, it's one of the first studies to demonstrate the savings generated by medication compliance for these prevalent and chronic medical conditions.

"This research hammers home the dangers and the expense of not following a treatment regimen," says Epstein. "Increased medication compliance for chronic conditions can significantly cut medical costs and keep patients out of the hospital."

The Medco study found the least compliant diabetes patients were more than twice as likely to be hospitalized compared to those who were most compliant, and their total health-care costs were nearly double. The study notes that people who use their diabetes medications as directed are less likely to develop the short-term and long-term health problems that can require expensive care.

How expensive? For diabetes, every additional dollar spent on medication saved $7 in medical costs, according to the study. The medical-cost savings were $5 for each additional dollar spent on medications for high cholesterol, and $4 for every dollar spent on prescription drugs for patients with high blood pressure.

For patients with diabetes, the analysis found hospitalization risks and health-care costs were lower for patients who were highly compliant with their drug therapy. Diabetes patients who are highly compliant with their treatment programs have a 13 percent hospitalization risk for a diabetes-related problem, but patients with low compliance have more than twice the risk, at 30 percent. The combined drug and medical costs for the most-compliant patients average $4,570, which is almost 50 percent below the $8,867 cost for the least-compliant group.

The difference among patients with cholesterol problems is not as pronounced in terms of hospitalization risk, but the difference in costs is significant because a hospital stay for a cardiovascular problem, such as a heart attack or stroke, is expensive. The hospitalization risk for the most-compliant patients is 12 percent, compared to 15 percent for the least-compliant group. However, the total health-care cost is $3,924 for the most-compliant group, compared with $6,888 for the least- compliant group.

"Leap of Faith"

The Medco study also looked at medical expenses that included cases in which patients have more than one ailment. Better compliance with drug therapy helped reduce the risk of being hospitalized for any medical condition, and it reduced the overall costs for a patient's health care. The least-compliant group of diabetics had, on average, $16,498 in total medical and drug costs, compared with $8,886 for the most-compliant group. Among patients with high cholesterol, the total medical and drug costs were $10,916 in the least-compliant group versus $6,752 in the most-compliant category.

"The total cost of noncompliance may be as much as $300 billion to the U.S. health-care system," Epstein says, noting that employers end up paying a hefty share of that bill.

At technology giant IBM, headquartered in Armonk, N.Y., compliance strategies for prescription drugs are part of the company's "holistic" approach to employee health care and health benefits, according to Martin Sepulveda, IBM's vice president for employee well-being and health benefits. IBM's approach to boosting compliance includes condition management (also known as disease management), tools and educational resources (including a Web portal with a prescription-drug component), a PBM/formulary program and care coordination for employees who need help managing their illnesses.

"Our approach makes it difficult to tease out any single element when it comes to compliance," Sepulveda says. "Compliance is linked to so many other things we do. We try to enable good health-care decision-making by reinforcement, repetition and making connections in people's minds."

Sepulveda says IBM recognizes the importance of medications in maintaining health -- so much so that the company's health-benefits strategy emphasizes three major components: primary care, prevention and prescription drugs.

"Those three aspects represent the foundation of well-being," he says. "Today, for example, prescription drugs are not just about managing disease and much more about maintaining health. Increasingly large numbers of people are taking medications to manage risk factors, as opposed to treating established diseases."

Another critical aspect of IBM's compliance strategy is its effort to remove financial barriers through its prescription-drug-plan design, mainly by keeping out-of-pocket costs low for employees and their dependents.

"Finally, we track what is happening to utilization rates for drugs used to either manage risk factors or treat common diseases, such as diabetes and asthma," Sepulveda says. "We're very encouraged with the patterns we are seeing, and the levels we see for expenditures in our health plan suggest people are making more informed choices. Most of all, we're not seeing declines in expenditures in areas where we don't want to see declines. That would worry us, because it would mean people aren't getting or taking their medications."

Attacking the compliance issue with an array of approaches is turning out to be a win-win situation for IBM and its employees, he says.

"People are getting and taking their meds, so our design is working," says Sepulveda, adding that compliance also has an impact on the bottom line in areas such as productivity and talent retention.

Blue Cross/Blue Shield of Minnesota's Heaton says employers looking to reduce health costs by using drug-compliance efforts within a disease-management program are making the right move, but the entire issue is so complex that it may take what seems like a "leap of faith" to make the move. Plus, he says, encouraging prescription compliance among employees is one thing; just getting them on the medications in the first place is quite another.

"We worry about compliance, but in a disease-management scenario, it isn't just taking the medications daily, but getting people on the meds to begin with," Heaton says. "Many people are not on proven drug therapies, even though they need to be."

Many employees may try non-medication approaches -- such as diet and exercise -- instead of medication, or, in many cases, they simply aren't aware of their condition due to a lack of symptoms or because they don't get regular check-ups, he adds.

According to Medco's Epstein, the reasons for poor medication compliance include costs, side effects, forgetfulness, or a lack of symptoms that lead employees to prematurely stop taking medications. Employees with chronic conditions that show no visible symptoms, such as high cholesterol or high blood pressure, may think they're fine and don't require medication, even as their health deteriorates.

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"Drugs have become increasingly complex and people are being prescribed more of them, which places greater demands on health-care providers to educate patients and ensure proper medication use," Epstein says.

Generic drugs can ease some of the burden, due to ongoing patient cost concerns (and the corresponding rise of consumer-driven health plans). Drugs with total U.S. sales of approximately $46 billion are scheduled to lose patent protection between now and 2010, he adds, making way for much more cost-effective choices in a variety of therapeutic categories such as hypertension, diabetes and high-cholesterol medications -- the "big three" diseases in terms of value for dollars spent.

The Co-Pay Factor

Employers that try to get a handle on just how much noncompliance is costing them often face a hurdle because prescription-related costs aren't always easily identifiable.

"The reality is, employers don't really know what they are spending on drugs," says Randy Vogenberg, a national practice leader for Chicago-based Aon Consulting who works with Fortune 500 companies.

"There are silos in the delivery system, so the cost question is hard to answer," he says. "Billions of dollars in health-care costs may be piling up because people are not taking meds as they should be taking them. But understanding the magnitude of the problem is difficult."

What can employers do? For one, Vogenberg says, employers must think about how to align benefits plans that not only makes sense to them, but also to employees. For example, prescription-drug-benefit plans must have sensitivity to the variable income levels among employees.

"A single benefit structure -- when it comes to prescription drugs--may not always work," he says. "You have to look at the entire value proposition." Vogenberg adds that employers should work with their health plans and pharmacy benefits managers to find ways of getting medications to lower-paid employees at lower out-of-pocket costs.

"You have to remove the barriers to compliance," he says, adding that, in addition to giving employers better value for their benefit dollars, such strategies may also provide them with a competitive advantage. "People are happier and healthier, so labor costs could be lower."

Within the past year or so, rising co-pays and other out-of-pocket costs have had a direct effect in decreasing compliance rates among employees, according to Dr. Ricardo Guggenheim, vice president of InterQual, the products and clinical-development division of Newton, Mass.-based McKesson Corp. He points to numerous studies indicating that compliance rates begin to plummet once those costs reach $40 per month.

"When employers are designing health plans that have disease management with a drug-compliance component, cost has got to be dead center in how to figure out to make the program work," Guggenheim says.

Vandenberg says employers could try building in slight differences in what an employee might pay in premiums, so senior managers would pay a little more in medication co-pays, for instance, while lower-paid employees would pay less.

"It could be something that simple," he says.

A more sophisticated approach might combine income adjusting with finding ways to make taking medications easier, including reminder phone calls, letters and/or e-mails, and improving drug-delivery methods. These methods might include encouraging providers to find easier-to-swallow medications, or medications that can be taken once a day rather than several times a day (as was done in the Blue Cross/Blue Shield project).

"When you have to take something several times a day, it's a problem," Vogenberg says. "For each additional time you need to take a medication, there is a decrease in compliance. Three times a day is a big drop-off, four times is a huge drop-off."

Blue Cross/Blue Shield of Minnesota's Heaton says his organization is taking a serious look at a hybrid approach, one that combines a "zero dollar" co-pay for patients who use generic drugs to manage their hypertension, diabetes, cholesterol and other conditions.

"Employers and health plans need to create incentives that say 'We want you on these medications and we want to keep you on them,' " he says. "Today, employers are getting a sense of realism about drug-compliance programs. If you go back five to 10 years ago, there were a lot of return-on-investment promises, and many of them never materialized. They were just too broad. Any compliance program has to be focused on where it can have the most effect. Employer groups are getting the sense that compliance programs work, but not as broadly as one would like them to work. They have to be focused on where they can make the most difference."

The results will improve the bottom line, not to mention employee health, says IBM's Sepulveda.

"As an employer that needs a workforce to be creative, talented and on the job every day, if you create incentives for bad health care, you will pay the price," he says. "Especially for a company like ours, given the competition to recruit, retain and motivate top technology talent."

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