Narrowing Choice

The American Journal of Pharmacy Benefits, January/February 2015, Volume 7, Issue 1

Narrowing consumer choice is the big issue for 2015.

Choice in healthcare can seem cyclical, and at this point in time we are in a period of “narrowing the playing field,” where healthcare consumers have real (or sometimes perceived) reductions in choice within the structure of their pharmacy benefit.

If you look at the 2015 plan designs in pharmacy benefit, you can see a reduction of choice in a number of areas, including point of distribution and drug choice. Choice of distribution has been a part of benefit design as far back as 2000, in the form of mandatory mail rules that were put in place for certain chronic condition medications. However, it is also worth noting that this feature of plan design was most commonly found in large and mid-size employers that were utilizing pharmacy benefit managers that owned their own mail order facilities (eg, Caremark, Medco, and Express Scripts [ESI]).

More recently, the choice of using a retail store for medication pickup has also come into play as part of plan design. Many other payers utilized a less stringent model of design by allowing consumers the choice of retail or mail routes for receiving medications, though the choice was somewhat influenced by the mail order option being made to be more financially attractive with a reduction in out-of-pocket costs.

Discussions regarding narrow retail networks began around 2005—it was not unusual for a consumer to find that one of the local pharmacies in their neighborhood was not within their pharmacy benefit network—and in 2007, the discussion gained momentum when Caremark was acquired by CVS. Many Caremark clients were concerned that the new CVS Caremark would preclude Walgreens from being in their retail network; CVS reassured its clients, meanwhile creating an out-of-pocket differential and other advantages such as maintenance choice (90-day supply at retail) for the consumer, hoping to “gently” steer their choice to CVS.

Further, in 2011, a contract argument between Walgreens and ESI resulted in Walgreens being cut out of most of the ESI client retail networks for a period of time. In order to decrease dissatisfaction for those affected clients, ESI offered price concessions in return for the ability to narrow the retail network. What occurred was an initial test to see how the consumer would react to this type of plan design and reduction of choice—the initial change was a disruption that caused neither significant angst for the consumer nor a significant long-term decrease in medication adherence rates. This episode, and the subsequently learned lesson that consumers are not overly concerned about this type of design, was the beginning of an era of narrowed retail choice that not only continues today, but has been on the rise.

In addition to decreasing choice regarding where a consumer receives their medications, the choice of the medication itself has also narrowed. Initially, we saw 2-tier plan designs, but during the last 15 years we have seen an increase in the number of medication tiers, with some pharmacy plan designs having as many as 5. Furthermore, the consumer cost responsibility has increased, and likewise has the cost differential between tiers, with differentials of $35 or more. This out-of-pocket model has been utilized as a means of continuing to grant the consumer some level of choice while still steering them to the most cost-effective medication.

We have begun to see a new, narrower plan design emerge with closed formularies and the exclusion of certain drugs. Historically, we have only seen these closed formularies in a minority of plan designs, including the VA pharmacy benefit and a few other payer organizations. Over the last 3 years, PBMs, such as ESI and CVS Caremark, began to create exclusion lists—the 2015 lists for these 2 PBMs include approximately 100 drugs not covered by these organizations’ clients. In the last 2 or 3 months, these exclusion lists, which come about through exclusivity contracts with manufacturers, have received a great deal of attention due to the recent decisions to cover only certain hepatitis C drugs: ESI only offers the new hepatitis C drug from Abbvie, and CVS Caremark only the hepatitis C drug from Gilead.

Why are we seeing this narrowing of choice within pharmacy benefit? Although it may be over-simplifying the issue, it comes down to one word: cost. As healthcare costs continue to increase, payers are looking harder and harder for ways to take some level of control. Initially, we saw employers and health plans passing increasing costs onto the consumer, but we have come to a point where we cannot increase the cost share much more than we already have. Therefore, it is necessary to look at other methods of cost control. By narrowing choice in both the point of distribution to the consumer, and the choice of medication, payers and their PBM partners are able to reduce some of the costs through contractual arrangements with retail pharmacies and pharmaceutical companies. An example of this includes the aforementioned recent exclusivity arrangements in regard to the highly effective, but extremely expensive, hepatitis C medications. By negotiating exclusive contracts, payers and PBMs have been able to bring down the costs of these drugs to a more manageable level.

One may ask whether we truly know the implications of these types of plan design. I would argue both yes and no: we do know that generics and preferred brand tiering have been utilized for over 15 years with no known significant negative implications. In fact, experts such as Will Shrank1 have found that in some cases, these plan designs actually improved medication adherence and health outcomes. We also know that pharmacy and therapeutics committees within both PBMs and health plans review these formularies as clinicians look to ensure that appropriate medications are included. Finally, all players have appeal processes in place to make certain that necessary medications are available to the consumer.

However, we do not know how far is too far regarding narrowing the choice of pharmacy networks and medication formularies, and it seems we are at the point where if consumers want choice, they will need to pay for it. I would like to see a thoughtful, non-biased study on this topic to assure us all that we are not achieving short-term savings at the price of significant long-term health and cost implications. I do understand that cost responsibility transfers from one payer to another in the US system— unlike in many other countries—and I am not advocating a single payer system, but we need to fully understand the implications of our plan design decisions. What are your thoughts on recent changes in pharmacy plan designs? I look forward to hearing from you.