As the nation’s employers continue to struggle with the ever-increasing costs of prescription drugs for their employees, there is much confusion about what is the right co-pay for their company’s health plan design. Employers must balance offering competitive employee benefits while maintaining a program that is affordable.

A plan sponsor’s benefit design is vital to the program’s cost-effectiveness. A resourceful plan design focuses on quality and balances efforts to create a plan that is attractive to prospective employees and simultaneously controls costs.

There are a number of co-pay strategies available to consider. Not long ago, it was unusual to see co-pays of $25 or more. Gradually more employers are setting co-pays for higher cost brand name drugs ranging from $40 up to $100. Our research indicates that more than 40% of employers have co-pays set at $30 or more.

“Many employers have increased co-pays to the point where it actually equates to employees paying about 35% of the cost of drugs,” says Debbie Martin, a consultant at Mercer.

The state of Georgia has recently set their co-pay structure at $10 for generics, $30 for preferred brand name drugs and $100 for non-preferred brand name drugs. The state’s goal is to encourage the use of lower cost alternatives. Some plan sponsors have opted to eliminate the co-pay altogether for generic drugs or generic drugs used to treat certain chronic conditions such as diabetes.

The vast majority of plan sponsors have incorporated such three-tier co-pay structures over the past several years. Providing that the co-pays are set appropriately, this plan design is extremely effective as it promotes the use of lower cost drugs.

Some plan sponsors have incorporated alternatives to co-pays, including co-insurance. With co-insurance a member pays a percentage of the drug cost, say 20%, rather than a flat co-payment. The advantage to this approach is that the design automatically keeps pace with inflation and eliminates the need to change co-pays over time.

Reference pricing is a new co-pay strategy that is being developed and implemented by employers. In reference pricing, a reference price is determined for a category of drugs, such as cholesterol lowering drugs, and the member pays a percentage of the reference price plus the difference if they choose a more expensive drug. For example, if the reference price for cholesterol lowering drugs is $75.00 and the plan design contemplates a 25% cost-share, a patient would pay $18.75 for a 30-day supply of the drug used to set the price (e.g. Lipitor). If they choose a higher cost option, such as a statin that costs $95, they would pay $18.75 plus the difference in price of $20.

There are a number of cost containing strategies that plan sponsors must consider in order to design and maintain a high quality, cost-effective pharmacy program. Member cost share is the foundation of such a program.

There are many factors that need to be considered when developing the plan design. Arxcel specializes in helping clients design and customize a program that will work for them. If you would like more information on plan design strategies, please contact us at (716) 646-9292.

FDA Scrutiny

In September 2005, the FDA is set to review several new potential blockbuster drugs. Three of the new drugs, including Exubera, an inhaled insulin; Pargluva, for adult-onset diabetes and Orencia, for the treatment of rheumatoid arthritis, are each expected to generate annual sales of $1 billion should they receive FDA approval.

The FDA’s approval process incorporates the knowledge of independent experts who are members of an advisory committee developed to evaluate prospective drugs for approval. Each advisory committee analyzes the data at hand to determine whether or not the drug’s benefits outweigh its risks. The agency generally, but not always, accepts the recommendation of this committee.

In the wake of the recent Vioxx verdict, which resulted in the jurors’ opinion that Merck had withheld pertinent information from patients regarding the risks associated with the painkiller, we expect the immediate focus on the upcoming meetings to be on the risk factors.

Exubera, an inhalable form of insulin is no more effective in controlling blood sugar levels than traditional insulin. Its claim to fame is that it can be administered without an injection. However, concerns have been raised about potential lung damage. Exubera’s application was delayed for three years due to issues raised with respect to lung damage. The drug’s manufacturer, Pfizer, expects to convince the panel that the effects on the lung are minimal and reversible.

Another anti-diabetic prospect, Pargluva, is targeted at individuals with type 2 diabetes. Pargluva is an exciting new product because it controls blood sugar while simultaneously reducing fats in the blood known as triglycerides. Preliminary studies have indicated that Pargluva is effective in reducing LDL (bad cholesterol) and increasing HDL (good cholesterol) levels. On the flip side, there have also been studies that Pargluva may promote fluid retention, which can result in congestive heart failure.

Bristol-Myers is looking to introduce Orencia, a drug developed for the treatment of rheumatoid arthritis. While drug trials have not revealed any significant side effects, Orencia faces review by the same committee that examined Vioxx and its entire class of drugs.

The FDA review and approval process for new drugs to market has not changed. It will be interesting to see whether or not the advisory committees will succumb to the public pressure and increase their scrutiny of the pharmaceutical manufacturers attempting to introduce new drugs to market. The fact remains that every drug has potential side effects. We do not want to see the approval process become so difficult that manufacturers shy away from developing new drugs that are needed but not potential blockbusters. Balance is the key to walking this fine line.

FDA Updates

The FDA issued the following alert for adults and children being treated for depression:

"Patients with depression or other mental illnesses often think about or attempt suicide. Closely watch anyone taking antidepressants, especially early in treatment or when the dose is changed. Patients who become irritable or anxious, or have new or increased thoughts of suicide or other changes in mood or behavior (or their care givers) should contact their healthcare professional right away."

Following is a list of antidepressants currently on the market. It should be noted that while many of these are prescribed for children, the FDA has approved only three for use in children.

Drug Name	Approved for use in adults	Approved for use in children
Celexa
Cymbalta
Effexor
Lexapro
Fluvoxamine
Paxil
Fluoxetine
Remeron
Serzone
Wellbutrin
Zoloft

On July 13, 2005 the FDA asked Purdue, the manufacturer of Palladone, a narcotic pain killer, to withdraw the drug from the market. Palladone has been found to have very serious, sometimes lethal, ramifications when taken with alcohol.