Cut Co-Pays for Prescription Drugs to Zero? Are You Crazy? No, and Here’s Why.

The tagline to a recent article in the Wall Street Journal [subscription required] reads: Employers, Insurers Bet That Covering More of the Cost of Drugs Can Save Money Over the Long Term for Chronic Conditions

Desperate for ways to curb soaring health-care costs, a groundswell of employers and health insurers are turning to a radically different approach: motivate patients to take not just the cheapest medicines, but the ones they need the most….

Behind the about-face is mounting evidence that higher copayments may not make long-term economic sense. While they’ve curbed drug spending in the short run, studies show they’ve also discouraged some people from taking essential medicines. A 2004 Rand Corp. study of more than 80 corporate and commercial health plans, for instance, showed that chronically ill people used to taking regular drugs cut their medications by between 8% and 23% when their copays were doubled.

Early experiments with providing free drugs for chronic disease have produced results — reducing costs and helping people stay out of the hospital and emergency rooms. Pitney Bowes says it now spends 19% less annually for each asthma patient than it did six years ago, before it eliminated those copays.

Peter Lucas at All Business Blog explains why this makes sense:

Evidence has been mounting that prescription drugs improve outcomes in the long term and cut costs in the long term. Some of the quality measurement initiatives look at patient compliance. Raising co-pays decreases compliance, as patients either forgo the drug or cut the dosage to save money. Put together, real savings with better outcomes are a lost opportunity, and no one comes out ahead.