Publication
Article
Author(s):
The authors comment on the growth of drug plans with tiers for "non-preferred" generics, and argue that most are inconsistent with established principles of formulary design.
Many patients are now encountering much higher co-pays for generic drugs that have
been designated “non-preferred” by their insurers, including those recommended as
first-line treatment in evidence-based guidelines. For some diseases, in fact, many insurers
have no “preferred” generic medicines, effectively rendering the diseases themselves
“non-preferred.” Designation of clinically important generic medicines as “non-preferred”
without ensuring that patients have access to therapeutically equivalent “preferred”
drugs runs counter to established principles of formulary design, may increase other
healthcare costs, and ultimately may undermine emerging payment reform initiatives.
The new blockbuster drug sofosbuvir (Sovaldi)
is offering hope to many patients with hepatitis
C, but treatment is expensive and many insurers
are demanding that patients shoulder a large portion
of the cost. The demand that patients pay a larger share
of their drug costs, however, is not limited to expensive
new medicines. In fact, many patients are now facing
substantially higher co-pays for various generic drugs
that their insurers have designated “non-preferred,” often
including those recommended as first-line treatment
in evidence-based guidelines for hypertension, diabetes,
epilepsy, schizophrenia, migraine headache, osteoporosis,
Parkinson’s disease, and human immunodeficiency
virus (HIV). We are concerned about this relatively recent
development.
For many years, most insurers had formularies that consisted
of only 3 tiers: Tier 1 was for generic drugs (lowest
co-pay), Tier 2 was for branded drugs that were designated
“preferred” (higher co- pay), and Tier 3 was for “nonpreferred”
branded drugs (highest co-pay). Generic drugs
were automatically placed in Tier 1, thereby ensuring that
patients had access to medically appropriate therapies at
the lowest possible cost. In these 3-tier plans, all generic
drugs were de facto “preferred.” Now, however, a number
of insurers have split their all-generics tier into a bottom
tier consisting of “preferred” generics, and a second
tier consisting of “non-preferred” generics, paralleling the
similar split that one typically finds with branded products.
Co-pays for generic drugs in the “non-preferred” tier are
characteristically much higher than those for drugs in the
first tier.
To better understand coverage policies in plans with 2
tiers for generic drugs, we identified several such offerings,
including both commercial plans and those under the
Medicare Part D program, via an informal search of the
Internet. For 6 such plans, we examined coverage policies
for 10 widely used drugs—all generically available—
that are recommended as first-line treatment in current
evidence-based guidelines (
).
Click to enlarge
While 2 of the plans provide access on a “preferred”
basis to all of the medicines we considered, 1 or more
of the drugs are “non-preferred” in all of the remaining
plans. Metformin, for example, is a “non-preferred” drug
in 1 plan, despite being a first-line treatment for type 2
diabetes mellitus. Two plans have no “preferred” generic
anticonvulsant drugs; 3 plans have no “preferred” generic
antipsychotic medicines; levodopa is designated a
“non-preferred” agent in 3 plans; 4 plans have no “preferred”
generic triptans (for migraine headache); and all
generic antiretrovirals are Tier 2 agents in 4 plans. When
there are no “preferred” generics from which clinicians
and patients with particular diseases can choose, it may
be argued that the diseases themselves effectively are
“non-preferred.”
We think it is apparent that designation of these generic
drugs as “non-preferred” was based on cost considerations
alone; indeed, a number of insurers unabashedly
refer to their second tiers as consisting of “higher-cost
generic drugs.” It also is difficult to imagine what criteria
other than cost could have led to the exclusion of
highly effective and widely used generic drugs from the
“preferred” tier. If cost was indeed the reason for designating
these medications “non-preferred,” it would be
inconsistent with all accepted principles and standards
of formulary design and management, including guidelines
jointly endorsed in 2000 by 7 professional groups,
representing physicians, pharmacists, business, and other
constituencies.1
It is sometimes argued that patients should have “skin
in the game” to motivate them to become more prudent
consumers. One must ask, however, what sort of consumer
all
behavior is encouraged when generic medicines
for particular diseases are “non-preferred” and subject
to higher co-pays. The answer is informed, we believe,
by a 2007
JAMA
study of cost sharing by researchers at
RAND, which was based on a review of 132 published
studies. The authors report that “(i)ncreased cost sharing
is associated with lower rates of drug treatment,
worse adherence among existing users, and more frequent
discontinuation of therapy” and that “for certain
conditions, the evidence clearly indicates that more cost
sharing is associated with increased use of other medical
services, such as hospitalizations and emergency department
visits.”2
We believe this is the most likely scenario when patients
confront substantially higher co-pays for generic
medicines that have been designated “non-preferred”
and there are no therapeutically equivalent “preferred”
drugs from which to choose. Fortunately, such coverage
policies have not been universally adopted. In fact,
recognizing the impact that high co-pays can have on
adherence with therapy, some insurers
now offer drug coverage with
low—or even zero—co-pays for generic
medicines for diseases such as
diabetes, heart failure, high blood
pressure, and high cholesterol, consistent
with the principles of valuebased
insurance design.3
When insurers designate clinically
important generic medicines “nonpreferred”
and there are no therapeutically equivalent
“preferred” alternatives from which to choose, it cannot
be argued that patients are thereby motivated to become
more prudent consumers. The existence of clinically sound
therapeutic choices is a precondition for any meaningful
effort intended to make patients put “skin in the game.”
Without choice, such policies are simply punitive and
run counter to established principles of formulary design
and management. They also may increase utilization and
costs elsewhere in the healthcare system, and ultimately
may undermine emerging payment reform initiatives designed
to reward physicians for attaining disease-specific
performance metrics (eg, A1C, blood pressure).
The policy implications are clear—only when there
are therapeutically equivalent medicines on formulary
that are “preferred” should insurers designate first-line,
guideline-recommended therapies “non-preferred” and
therefore subject to higher co-pays. Not all “skin in the
game” is fair game.
Acknowledgments
We would like to express our sincere appreciation to Arnold Epstein,
MD, MA, and Sean Sullivan, BSc (Pharm), PhD, for their helpful
comments and suggestions on earlier drafts of our paper, and to Lewis
Lipstiz, M.D., Troy Brennan, MD, MPH, David Himmelstein, MD, and
Jerry Avorn, MD, for their guidance and insights at various stages of
our work. We also would like to thank Vinh Pham for his assistance
with our research, and Amanda Silvia and Shayna Camp for their editorial
assistance.
Author Affiliations: Policy Analysis Inc, Brookline, MA (GO); University
of Michigan Center for Value-Based Insurance Design, Ann
Arbor (AMF).
Address correspondence to: Gerry Oster, PhD, Policy Analysis Inc, 4
Davis Ct, Brookline, MA 02445. E-mail: goster@pai2.com.
1. Principles of a Sound Drug Formulary System. Formulary Management—
Endorsed Document. http://www.ashp.org/DocLibrary/Best-
Practices/FormEndPrinciples.aspx. Accessed July 24, 2014.
2. Goldman DP, Joyce GF, Zheng Y. Prescription drug cost sharing: associations
with medication and medical utilization and spending and
health.
JAMA
. 2007;298(1):61-69.
3. Chernew ME, Rosen AB, Fendrick AM. Value-based insurance design.
Health Aff (Millwood).
2007;26(2):w195-w203.