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CAPITOL PERSPECTIVES Raising Co-Pays On Low-Income Beneficiaries' Drugs Not A Solution R aising the cost of a good or service results in less therapeutic class when the prescribed brand-name drug has consumption of that good or service. That fun- no generic available. damental economic principle makes it hard to For example, although most drug classes for treating understand why the Medicare Payment Advisory psychiatric conditions include generics, beneficiaries with Commission (MedPAC), which advises Congress on Medicare these conditions are particularly vulnerable to treatment payment policy, has recommended increasing cost-sharing disruptions. A study by Morden et al. published in Health on low-income Medicare beneficiaries for their brand name Affairs found that "In treating mental illnesses, patients and drugs dispensed through the Part D program. physicians typically work through trial-and-error processes MedPAC proposes doubling co-pays for preferred brand to identify the best medication or medication combination." name drugs from about $3 per prescription to As such, formulary enforcement that requires over $6, on the argument that low-income subpatients to be switched off a brand-name drug sidy (LIS) beneficiaries – those with incomes that is working for them to a chemically differbelow $17,000 — do not have sufficient incenent generic drug would create serious safety and tives to choose generic drugs. But that premefficacy concerns. ise is unfounded: Generic utilization between For decades the Congressional Budget Office LIS beneficiaries and non-LIS beneficiaries (CBO) adopted a static view of preventive is similar — 75 percent versus 79 percent in benefits when evaluating the fiscal impact of 2011 (the most recent year data is available). legislation. For example, CBO only counted And generic utilization has soared for both the increased costs of covering prescription John McManus, groups since the inception of the Medicare drugs when Medicare Part D was enacted The McManus Group drug benefit. jmcmanus@mcmanusgrp.com and making preventive benefits free when the The real impact would be less patient adherAffordable Care Act was enacted. The reduced ence to needed drugs that do not yet have costs or savings from keeping patients on drug a generic substitute on the market. Harvard economist regimens and out of hospitals and other acute settings was Michael Chernew (now vice chairman of MedPAC) pub- not considered. lished a study a few years ago that demonstrated medicaA sea change occurred in November of last year, when CBO tion adherence is more likely to decline when co-payments released a pivotal white paper which acknowledged that increase for individuals in low-income areas. Since con- a 1 percent increase in the number of prescriptions filled siderable research suggests that adherence to medications by beneficiaries would cause Medicare's spending on other is an important driver of good clinical outcomes and key medical services, such as hospital care, to fall by roughly onedriver of total costs, for patients with chronic diseases, fifth of 1 percent. Conversely, a policy that resulted in a drop Chernew concludes that "increases in patient out-of- in prescriptions filled would result in a medical cost increase pocket expenditures for prescription drugs is likely to of the same proportion. The estimate applies only to policies exacerbate health disparities." that directly affect the quantity of prescriptions filled. Even small increases in cost-sharing can significantly Raising co-pays on low-income beneficiaries for their brandreduce prescription drug adherence for low-income ben- name prescription drugs should certainly trigger this more eficiaries for two reasons: dynamic view of the world! Thus, increasing LIS co-payments 1. Low-income beneficiaries tend to be sicker and would not only put safety of low-income patients at risk therefore need more prescription drugs. but result in higher medical spending per Congress' offi2. Any cost increase for patients with very limited cial scorekeeper. resources makes it much more likely they forgo their prescriptions because they are least able to afford them. WHAT ARE THE ALTERNATIVES TO PRODUCE Whether patients should be dispensed a generic drug when SAVINGS FROM DRUGS PROVIDED TO LIS a physician prescribes a substitutable brand-name drug is not BENEFICIARIES? really in debate. A more complicated challenge is whether The Obama Administration has proposed applying Medicaid a patient should be coerced into taking a generic drug in a rebates to drugs provided to LIS Medicare beneficiaries. As 10 LifeScienceLeader.com October 2013