Drug benefit plans should be designed so that the required co-pay for a prescription medication is more than the out-of-pocket cost of an appropriate over-the-counter (OTC) alternative, if available. That was among the suggestions offered by Michael Jacobs, national clinical practice leader at Buck Consultants, speaking at the September 2010 Benefits Forum and Expo in Boca Raton, Fla.
A case in point, Jacobs said, is the treatment of chronic acid reflux. Too many prescription drug plans, he noted, make it easy for employees with heartburn to choose a prescription proton pump inhibitor (PPI)-based drug rather than an over-the-counter medication such as Prilosec OTC that, in many cases, would work just as well. But the OTC drug might be one-tenth the cost of the prescription.
"Only 3.6 percent of PPI users are diagnosed with a severe condition," Jacobs said. "Most—53.7 percent—receiving a PPI prescription are not coded with any diagnosis at all, while 32.2 percent are diagnosed with what the doctors call GERD," or gastroesophageal reflux disease (i.e., a type of heartburn).
However, in terms of cost:
• A branded prescription PPI might cost $5.99 per dose.
• A generic prescription PPI might cost $3.27 per dose.
• A branded OTC PPI might cost $0.72 per dose.
• A generic OTC PPI might cost $0.40 per dose.
Moreover, "many OTC medicines you can buy today were once available by prescription only," Jacobs noted. "Every day, millions of Americans use OTC medicines for relief. These OTC medications are effective, widely available, convenient and cost-effective."
Yet some plans provide an incentive for the consumer to request a prescription, even when the same medication is available in a nonprescription OTC version at a significantly lower cost. For instance, OTC Tagamet pills, to control heartburn, are simply one half the dose of prescription Tagamet. Cimetidine, the generic version of Tagamet, is available OTC at a still lower cost.
"You don't want people saying, 'hey, I might as well get this [expensive prescription drug]; it's covered,'" Jacobs said.
One plan design feature used to hold down drug spending is requiring authorization from the insurer prior to the purchase of a branded prescription that is among those identified as often unnecessarily prescribed (e.g., prescription PPI medications for routine heartburn). However, preauthorization protocols, which can require proof of a serious condition diagnosis (and otherwise direct the patient to use an alternative prescription generic or OTC medication) can be viewed as cumbersome and tend to be disliked by employees, Jacobs noted.
A more direct approach, he explained, is to use a tiered strategy that raises co-pays for branded prescriptions to a level that is meaningfully higher than the cost of an alternative OTC drug. "Increasingly, consumerism and design incentives are driving behavioral change," Jacobs said.
To be successful with such a strategy, he emphasized, it's important to explain to employees how and why the plan is being changed. In addition, he stressed the need to continue offering coverage for branded prescriptions when they are the best treatment for those diagnosed with a serious condition. For others, the plan could still allow them to choose the branded prescription, but at a greater cost to the employee.
OTC Drugs and Health Care Reform: New Challenges
Health care reform revised the definition of “medical expenses” as it relates to over-the-counter (OTC) drugs. Effective Jan. 1, 2011, a OTC drug is reimbursable as a medical expense only if it is obtained with a prescription. Prior law allowed the cost of OTC drugs to be reimbursed as medical expenses by medical flexible spending accounts (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs). (To learn more, see the SHRM Online article "Health Care Reform Impacts Over-the-Counter Drugs.")
While the new law is in some obvious respects a disincentive for employees to choose OTC drugs over prescription medications, it also highlights the need for plan designs that make the selection of available and effective OTC options meaningfully less expense to employees—even when purchased out-of-pocket—than prescriptions covered by the plan.
A related challenge is communicating the value of appropriate OTC alternatives to employees, despite the new limits on FSAs and other pre-tax dollar spending accounts.
Employees should also know that they can request from their doctor a prescription to purchase an OTC medication, even though these drugs don't require a prescription. With the prescription in hand, however, they should be able to use their pre-tax dollar spending accounts to purchase the OTC medication.
Stephen Miller is an online editor/manager for SHRM.
Health Care Reform Impacts Over-the-Counter Drugs, SHRM Online Benefits Discipline, October 2010
Employee Cost-Sharing Up in Prescription Drug Plans, SHRM Online Benefits Discipline, August 2009
Brand-Name Drug Costs Soar, Generics Hold the Line, SHRM Online Benefits Discipline, April 2009
SHRM Online Benefits Discipline
SHRM Online Health Care Reform web page