Healthcare payers use a variety of pharmacy benefit management tools to control drug expenditures. Tradition tools have included closed formularies and differential copayments for generic and brand products. One tool that is increasingly replacing these traditional approaches is the three-tier (three level) drug copay, typically consisting of: Tier 1. Generic; Tier 2. Preferred brand: and Tier 3. Non-preferred brand. Despite widespread use of the three-tier copay, no research has examined its effect on pharmaceutical utilization or use of other health care services. A recent study found that closed formularies were associated with significantly lower compliance with chronic medications. Specifically, when faced with the elimination of a product from the formulary, some patients discontinued therapy altogether rather than switching to the covered product. Since copays are typically much higher for tier 3 than for tier 1 or tier 2 drugs, often exceeding $25 per prescription, it must be questioned whether a similar effect is seen with the implementation of a three-tier copay. Does a very high copayment encourage patients to forgo important medications, or to substitute tier l or tier 2 medications in place of the tier 3 product? Furthermore, what is the impact on overall medical costs? Do patients substitute other types of services for pharmaceuticals and/or experience adverse health consequences which lead to increased use of more expensive services, and met such as emergency room visits or inpatient hospitalizations? The purpose of this study is to examine the effect of a three-tier copay on pharmaceutical utilization and expenditures, medication compliance, and utilization and expenditures for other health services. A quasi-experimental, pre/post with control group design will be used. The treatment group will include subjects enrolled in a preferred provider plan that had a differential copay for generic and brand medications in 1997 and implemented a three-tier copay in January of 1998. The control group will consist of enrollees in a preferred provider plan that had a brand/generic differential copay structure throughout both 1997 and 1998. Subjects will be followed from 1/1/97 through 12/31/98. Multivartiate analyses will be used to examine whether the three-tier copay is associated with differences in each of the dependent variables mentioned above controlling for age, gender, chronic morbidity, and other potentially important predictors. Multivariate techniques with adjustments for censored data will be used to examine length of therapy (i.e., compliance) with chronic medications. Session Results will provide guidance to healthcare policy-makers facing the double dilemma of rapid increases in both pharmacy expenditures and the number of cost containment options.
