The Price of Health

Recent evidence appears to confirm that reducing or eliminating prescription co-pays can result in healthier employees.

Friday, May 2, 2008
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Employers looking to help keep at-risk employees healthier, and costs down, need only heed a classic four-word movie line: "Show me the money!"

Only this time, it won't be Jerry Maguire's Cuba Gooding Jr. blurting out those memorable words. They'll come from employees who have chronic medical conditions, such as diabetes, heart disease or hypertension (or all three), and who must maintain regular medication compliance to try to avoid life-threatening -- and very expensive -- hospitalizations, or worse.

Based on research findings, including a recent major study, employers -- self-insured or otherwise -- can potentially boost employee health and cut healthcare costs by simply reducing co-pays for certain classes of drugs for those at-risk employees and their dependents. In short, if you give employees a price break, they will take advantage of it, and will be more likely to take medications that ensure a longer, healthier, and more productive life.

The recent study, conducted by researchers from Harvard University Medical School and the University of Michigan and published in the journal Health Affairs under the title "Impact of Decreasing Copayments on Medication Adherence Within a Disease Management Environment," revealed a significant increase in compliance with four of five drug classes studied as a result of companies selectively lowering co-pays for certain classes of drugs for employees with chronic medical conditions. The study concluded that when these financial barriers are removed or lessened, employees and their dependents are more apt to take their medications, which in turn will lead to better health outcomes.

Todd Payne, senior benefits manager at Wabash National Corp., a Lafayette, Ind.-based manufacturer of semi-trailers, says he's not surprised by the findings.

"From an employee perspective, since we began offering reduced or zero co-pays for certain medications, the value of our benefit package went up," says Payne, whose company began using the discount strategy in 2006. "With people's personal finances today, [employees] are very happy to get a break in managing a chronic condition. For us, it's a refreshing way of doing business."

Stephen Birkland, manager of health risk management for the State of Minnesota's Department of Employee Relations, concurs.

"We're only doing some small pilot projects with reduced co-pays for certain medications right now, but we've had some dramatic results in that brief time frame, especially in terms of clinical outcomes and compliance," says Birkland, adding that he expects more organizations will adopt this approach.

More Health for the Money? 

In the study, the researchers from Michigan and Harvard used technology -- specifically, ActiveHealth Management's clinical decision-support system, called CareEngine -- to scan data and identify employees who would benefit most from lower co-pays. Using its technology, ActiveHealth, a New York-based health-management consulting firm that was recently acquired by Aetna, reviewed data for two large employee groups from 2004 to 2006.

The study involved more than 35,000 employees and dependents at an employer that reduced co-pays, and more than 70,000 employees and dependents at a second employer that did not. During the study period, co-pays at the first company went from $5 to free for generic drugs, from $25 to $12 for name-brand drugs on the company's preferred drug list, and from $45 to $22 for non-preferred name-brand drugs. Co-pays at the second employer stayed at around $29 for brand-name drugs and $16 for generics. All employees in the study participated in disease-management programs, which included regular phone contact with nurses who offered help based on each person's test results, medication use, doctor visits and other health information.

Researchers looked at the use of five classes of drugs: heart-protecting ACE inhibitors and angiotensin-receptor blockers; blood-pressure-reducing beta blockers; diabetes medicines, including blood sugar-reducing drugs and insulin; cholesterol-reducing statins; and asthma-calming inhaled steroids.

The study's results showed a significant increase in compliance with four of five drug classes studied. In fact, results showed that "nonadherence" -- a term used to describe a situation in which someone should be taking a medicine but isn't -- decreased between 7 percent and 14 percent, depending on drug class.

According to Dr. Stephen Rosenberg, senior vice president for outcomes research at ActiveHealth, while there have been similar studies in the past, the Harvard/Michigan one is believed to be the first rigorous, controlled trial of a concept called value-based insurance design.

With VBID, employers tailor their healthcare plans so people who stand to benefit the most from a particular drug or screening test actually pay the least for it. Rosenberg says that with VBID, employers might not only get more healthcare for their money, but might even save money in the long run by helping their employees avoid expensive health crises.

"This study demonstrates that a value-based insurance-design program can be effective in increasing compliance with important medications, and can complement an overall disease-management program," says Rosenberg, a co-author of the study. "It's significant, because cost-containment approaches that increasingly shift costs to patients can cause decreased compliance with potentially life-saving medications."

Today's shift to more employee cost-sharing has gotten to the point where co-pays have created financial barriers, he adds, and many people aren't taking their medications regularly because of those barriers.

"The idea that co-pays are necessary in these situations creates a false economy for employers," he says. "When people don't take their medications, it's not only bad clinically, but if those employees have a heart attack, the resulting hospitalization and/or surgical costs could be astronomical."

In the wake of the study, Rosenberg says, ActiveHealth has implemented the lower co-pay strategy with one large national employer, and this year will have about a dozen employers trying out the strategy.

"There are so many ways in which employers and health plans are trying to cut costs, but most of it is shifting costs to employees," Rosenberg says. "This [lower co-pay alternative] is a win-win situation. Employees save money and can be healthier overall, which means higher productivity and more time at work. In the long run, employers should save in hospital costs."

One Step at a Time

Wabash National began revamping its prescription strategy in 2005 by implementing a "90-day at retail" program, says Payne, adding that the company uses Wausau, Wis.-based Innoviant as its prescription-benefits management vendor. Under that program, Wabash employees got the same discounts for buying their maintenance medications at a retail pharmacy as they did for ordering them via mail order. It proved very popular, Payne says.

In 2006, Wabash, which has 3,200 employees, worked with Innoviant to formulate a reduced co-pay plan, which offered employees free diabetes medications.

"The plan was successful right from the start," Payne says. "Employees liked it a lot. They loved it, in fact. And the prescription fill-rate for those meds went up immediately."

In 2007, Wabash offered reduced co-pays for generic blood-pressure medications and zero co-pays for generic cholesterol-reducing medications. Again, the plan met with positive employee feedback.

"In terms of the company direction, we are really emphasizing wellness," Payne says. "With this, we can help avoid surgeries and hospitalizations. And our research with Innoviant showed that having to come up with co-pays is a point where people can get stuck."

Although actual savings have yet to be measured, Payne is confident that the co-pay strategy will bear financial fruit and will be a good thing for employee health and productivity.

For one, the perceived value of benefits has been greatly increased among employees, he says. And with the co-pay reductions, employers have an opportunity to improve employee health and morale, as well as medical costs.

"You may be fooling yourself into thinking if you don't lower the co-pays, utilization will remain the same," he says. "But there are statistics that show you will have a percentage of these diseases, no matter what. So reducing or eliminating co-pays makes sense if it results in higher compliance and lower utilization."

In the past few years, Wabash has been one of Innoviant's most progressive clients in terms of pharmacy-plan design and member education, says Mary Jenkins, Innoviant's vice president of clinical services.

Jenkins adds that while co-pay discounts are not a new idea, interest is on the rise as more and more research shows the value of them from a clinical perspective.

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"We try our best to help individual clients design and implement programs based on the client's workforce," she says. "Of course, this needs to be a multi-level approach." By that, she means other disease-management strategies -- discussions with pharmacists, frequent patient contact by nurses, for example -- as an added dimension to disease management.

"The key is to identify where the at-risk populations are for clients and their members, and focus in on that," she says. "It really is a long-term strategy."

In Minnesota, many of the state government's employees are unionized. While co-pay reductions for maintenance medications was on the bargaining table this year, says Birkland, it hasn't been included in the overall benefits package quite yet. He does, however, see very positive results from the small pilot projects where it is being tested.

"The state is determined to make those evidence-based healthcare decisions," he says. "And I'm personally very enthusiastic about this, because we've seen compliance go up in those pilot studies."

Data-wise, when the pilot projects began, they measured compliance in five key areas -- diabetes, blood pressure, asthma, smoking and cholesterol -- 16 percent of participants were meeting all five goals. Six months later, that number had risen to 28 percent.

And, Birkland says, there are only two variables. In one case, all of the maintenance drugs for cholesterol and blood pressure had zero co-pay; in another, participants were required to meet with a pharmacist to review medications and discuss dosages and side-effects.

"The zero co-pay has been a big incentive to participate and also to stay compliant in taking medications," he says. "I'm pretty confident we are going to see a positive ROI. "Studies show that for every five dollars taken off a co-pay, compliance goes up incrementally."

Mom's Wisdom

Tom Radloff, director of clinical pharmacy at Navitus, a Madison, Wis.-based PBM that has the State of Minnesota among its client roster, says the reduced co-pay approach is good for workers and the organizations that employ them.

"We know diabetes is a terrible disease, and very expensive to manage if it gets out of control," he says. "We also know people often don't take their meds regularly. So how do we get them to take their meds? We remove as many of the barriers as possible. It's a win-win for both employer and employee."

However, Radloff adds, the current lack of ROI data means it's still a challenge to convince some employers that being generous with maintenance medications will save them money in the long run.

"We're getting closer to be able to tell folks this," he says. "No one has those hard numbers yet on medical cost-savings, but I believe they will come."

Large insurers are also getting into the act. In October, Aetna joined with Boston-based Brigham and Women's Hospital to conduct a large, randomized study to examine the impact of co-pays on the outcomes of certain diseases. And in December, Aetna launched an incentive program in which employers can choose to pay all or part of the co-pay on certain medications for individuals enrolled in self-funded benefit plans who have high-risk clinical profiles.

"Information from the study will be considered as we refine existing programs and determine new ones," says Troyen Brennan, Aetna's chief medical officer.

One of the two senior co-authors of the Michigan/Harvard study says the results show that reduced co-pays will have a major impact on improving employee health.

"All research to this point has shown that individuals will not buy important medical services even if there's a small financial barrier: $5 or even $2," says senior author Dr. Mark Fendrick, of the University of Michigan Medical School. "This study showed that when you remove those barriers, people started using these high-value services significantly more. "

Fendrick notes that the University of Michigan itself is currently offering free or reduced-price medications and tests to the 2,000 or so of its employees and their dependents who have diabetes.

That project, called "MHealthy: Focus on Diabetes," is being managed by the Center for Healthcare Quality and Transformation and may produce its first data this year.

"When I told my mother about this study, she turned to me and said, 'I can't believe you had to spend all that money to show that if you make people pay more for something, they'll buy less of it,' " Fendrick adds. "But we needed to show, with a carefully done study, that if we did lower barriers, people would utilize these essential medical services more. And, as always, my mother was right." 

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