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Varying Pharmacy Benefits With Clinical Status: The Case of Cholesterol-lowering Therapy
Dana P. Goldman, PhD; Geoffrey F. Joyce, PhD; and Pinar Karaca-Mandic, PhD

Varying Pharmacy Benefits With Clinical Status: The Case of Cholesterol-lowering Therapy

Dana P. Goldman, PhD; Geoffrey F. Joyce, PhD; and Pinar Karaca-Mandic, PhD

Having established a relationship between copayments and compliance, the question arises whether compliance is associated with use of medical services. Table 2 shows the predicted number of hospitalizations and ED visits for different levels of compliance and CHD risk. Like WOSCOPS16 and Wei et al,17 we focused on the effects of full compliance. Better compliance has less impact on use of medical care for those at low risk for CHD than for those at high risk. For each 1000 CL users at high risk of CHD, there would be 643 hospitalizations and 413 ED visits per year among those who fully complied with drug therapy in prior years. Those rates increased to 1000 and 581, respectively, for partial compliers and noncompliers. The medium-risk CL users showed similar patterns. In contrast, the number of hospitalizations and ED visits among the groups at low risk of CHD decreased only modestly with full compliance. These findings suggest that lowering copayments for those at high risk for CHD and raising copayments for those at low risk could reduce aggregate medical-care utilization and expenditures.


Table 3 shows the effects on the sample of 6.3 million CL users of 2 designs for BBCs. The base case is a $10 copayment for all patients. Under scenario 1, high- and medium-risk patients faced no copayment and low-risk patients had copayments of $22. Compared with the base case, full compliance increased 9 percentage points among the high-risk group (62% to 71%) and 10 percentage points among the medium-risk group (59% to 69%), and decreased from 52% to 44% among the low-risk group. There was no change in aggregate health plan payments for drugs because reduced use by the low-risk group was offset by increased use by the high-risk group. The high-and medium-risk groups had no out-of-pocket payments, but out-of-pocket payments by the low-risk group increased $280 million (from $272 million to $552 million). This scenario averted 79 837 hospitalizations overall, even after accounting for an additional 10 406 hospitalizations among the low-risk group. Similarly, ED use was reduced in aggregate by 31 411. Scenario 2 eliminated copayments for high- and medium-risk patients with no change in copayments for low-risk patients. This benefit increased prescription drug spending by health plans ($486 million) and lowered spending by patients ($311 million). Scenario 2 resulted in 90 243 fewer hospitalizations and 36 493 fewer ED admissions compared with the base case.


The additional $486 million health plans paid for drugs in scenario 2 should be gauged against the savings associated with reduced hospitalizations. Our data showed that the average hospitalization of a high-risk CL user cost $10 093; costs for medium- and low-risk hospitalizations were somewhat lower ($8177 and $7041, respectively). Applying these costs to the hospitalization reductions from scenario 2 yields inpatient savings of around $1 billion, not including savings from reduced ED visits.


Improving compliance with therapy is a primary goal of public health, and many interventions exist. In this study, we considered how financial incentives could be better used as a public health tool. We found that a BBC design can reduce hospitalizations and ED visits among patients initiating CL therapy. Perhaps more importantly, these benefits can be achieved without increasing a health plan's pharmacy costs. The benefits are achieved by lowering copayments for those who benefit most for treatment (ie, those at the greatest risk of a CHD event), thereby improving their compliance with treatment and reducing use of costly medical services.

Our scenarios with BBCs (Table 3) reduced the number of hospitalizations by approximately 80 000 to 90 000 annually and the number of ED visits by 30 000 to 35 000, resulting in net aggregate savings of more than $1 billion. These savings would largely accrue to health plans initially, but ultimately they would be passed back to beneficiaries in the form of reduced premiums (or, more realistically, premiums that do not rise annually by as much as they otherwise would have). However, these savings could be used in other ways. In particular, the savings could be used to compensate the low-risk patients (who faced higher copayments in scenario 1).

The effects we saw are qualitatively similar to the benefits of compliance reported elsewhere and anecdotal evidence from the private sector.13,18-20 The Pitney Bowes company lowered cost-sharing for diabetes and asthma medications to increase access and compliance. Overall spending among these employees fell by about 12%, primarily due to large reductions in ED use and hospitalizations.

Several issues need to be addressed before implementing a BBC design. First, our study only looked at patients who had already initiated therapy. Changing copayments also would affect the number of patients who start therapy. However, it is clear that lower copayments for high-risk patients also would be likely to improve initiation rates, with an attendant improvement in population health. On the other hand, higher copayments for low-risk patients would adversely affect initiation. Because the benefits of CL therapy are attenuated for this risk group, a lower rate of initiation of therapy may not be a large problem.

Second, the relevant risk groups need to be refined. We experimented with many different risk classifications and benefit designs. Some were less complex (eg, low and high risk based on disease only). Others were more complicated, including estimated 10-year CHD risk using the Framingham point system and data from the 1999-2000 National Health and Nutrition Examination Survey. In all cases, we found that BBC designs could improve aggregate health outcomes without raising health plan pharmacy payments.

Third, by charging more to patients in relatively better health, a BBC design could attract patients in worse health and discourage those in better health. In reality, such concerns are likely to be modest. Most firms offer their employees a choice of medical plans, but a single drug benefit. Thus, selection is largely determined by the generosity of the medical plan. Nonetheless, BBC plans need to be careful about penalizing healthy behavior. Patients with elevated cholesterol who do not have other risk factors do not want to be told that their drugs are expensive because they are so healthy. One way to offset these incentives is to reward low-risk members who take preventive measures, such as by offering them financial or other rewards if they have their cholesterol monitored regularly and stay under a target level for low-density lipoprotein cholesterol.

Finally, not all classes of drugs are amenable to a BBC design. Clearly, information is needed on how treatment efficacy differs across patients, and these data must be inexpensive to collect. Cholesterol-lowering therapy is a useful prototype because CHD risk and cholesterol levels are easily monitored and reported at low cost. However, if risk stratification required an expensive genetic test or medical procedure, the cost savings from a BBC design might not justify the collection of the clinical information (and would certainly alienate patients if it was done solely for the purposes of determining copayments).

One limitation of this study is that the relationships observed here among compliance, copayments, and service use may not reflect true causal effects. For example, patients who develop new comorbid conditions may be reluctant to continue their medications, and they also are more likely to be hospitalized. This situation would induce a spurious negative correlation between hospital use and compliance. Our use of longitudinal data with a lagged compliance measure mitigates some of this concern. Furthermore, the relationship between compliance and copayments remained strong even at the plan level (Figure 1). Poor compliance often can be attributed to perceived ineffectiveness, side effects, high costs, and simple forgetfulness. Although a BBC design directly addresses the cost issue, it indirectly signals to a patient the importance of long-term drug therapies to treat conditions with few or no physical symptoms.


The challenge for the healthcare system is to make patients more sensitive to the cost of treatment without encouraging them to forego cost-effective care. Health plans increasingly recognize the need to differentiate coverage based on demonstrated value. For example, some health plans have eliminated copayments for some generic drugs, while others now assign drugs to tiers based on their cost effectiveness. The problem with these approaches is that clinical efficacy of any drug varies across patients.

We showed that strategically reducing copayments for patients who are most at risk can improve overall compliance and reduce use of other expensive services. In an era of consumer-directed healthcare and improved information technology, tailoring copayments to a patient's expected therapeutic benefit can increase the clinical and economic efficacy of prescription medications.

From the RAND Corporation, Santa Monica, Calif.

This research was sponsored by the National Institute on Aging through its support of the RAND Roybal Center for Health Policy Simulation (grant P30AG024968) and the UCLA Claude D. Pepper Older Americans Independence Center (grant AG16677).

Address correspondence to: Dana P. Goldman, PhD, RAND Corporation, 1776 Main St, Santa Monica, CA 90407-2138. E-mail:

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