More on incentives from Newswire

Tools of the trade

Coinsurance is a valid tool for using financial incentives to help patients focus on selecting less costly therapies, according to Lou Hutchison, president of HealthTrans in Greenwood Village, Colo. "Applying a percentage of the cost of the drug, as opposed to a flat amount, drives the point home even more directly that the patient should be aware of the cost of the drug and participate in making cost-effective decisions," he says. "As an effective cost-containment tool, coinsurance will continue to gain in popularity."

Coinsurance is a technique that Phil Patrick, president of PharmaStrat Inc., a pharmaceutical market research and consulting firm focused on reimbursement, believes will gain broader use by payers, as it requires, by its nature, that patients know the full cost of every medication they take; with copayments this is not the case, he says. "According to our research, many early experiments with reference pricing have led to confusing tradeoff decisions and calculations for patients and physicians, and have limited the use of this cost control technique," Patrick says.

Maximum Allowable Cost (MAC) lists are a form of reference pricing and have been in place for years. "However, MAC lists usually have no impact on a patient's copay amount," Hutchison says. "Reference pricing for brand drugs, where the patient then pays the difference between the reference price and the reimbursement rate does have an impact on the patient's out of pocket costs, but is tremendously more confusing than a coinsurance plan.

"For example, it is fairly easy to understand the concept that I will have to pay 20% of any prescription I have filled, but I would be hard pressed to describe what I would have to pay as a consumer under a reference-based pricing benefit. There are also the issues of determining which drugs get categorized together and what the reference pricing point is. There are a lot of moving parts to a reference pricing benefit and because of the complexity involved, I don't believe that reference pricing for brand drugs will gain much more momentum," Hutchison concludes.

Pharmaceutical companies are focusing increasing resources at studying and clearly explaining the pharmacoeconomic value of their products to today's increasingly sophisticated and demanding payers, Patrick says. "Products which demonstrate clear value and proven track records for payers will thrive in the years ahead, while products offering limited or unmeasurable benefits will struggle for market uptake," he says.

Using financial incentives has proven to be an effective tool, but financial incentives in a vacuum are not enough, according to Hutchison. "Other dynamics that affect patients' decisions include patient education and access to information, access to benefit information so that physicians can understand the financial decisions their patients will need to make so that they can help during the prescribing process, and how to effectively deal with pharmaceutical manufacturer's efforts in persuading physicians and consumers to select more expensive brand drugs regardless of need. It is important to realize that raising the non-preferred drug copay to $100 or more is only addressing one aspect of an overall cost-containment strategy."