The microeconomic assumption that price and demand are inversely related applies to prescription drug consumption, and price sensitivity obtains even for patients with employer-sponsored healthcare coverage, economists working with the Rand Corp. have concluded.
Yet, employers and the health plans they hire would do well to look closely for possible adverse effects of higher or multitiered copayment plans aimed only at curbing drug costs, the study authors suggest.
The blunt trauma of higher co-pays, particularly on covered employees with chronic conditions, could produce more harm and higher healthcare outlays, according to the study.
Researchers analyzing claims from 530,000 privately insured nonelderly adults from 1997 to 2000 found that when plan members' out-of-pocket costs doubled, diabetic patients cut back 23% on drugs (except insulin) to treat their conditions; asthmatics cut back 22% on their medications, and patients with gastric disorders trimmed their drug usage 17%.
The study, sponsored by the not-for-profit California Healthcare Foundation, pharmaceutical manufacturer Merck & Co., and the federally funded Agency for Healthcare Research and Quality, appears in today's Journal of the American Medical Association.
Copays aim to squeeze out what economists refer to as moral hazard, the human tendency to consume more of anything -- including healthcare -- when consumers are insulated from the cost.
According to economist Geoffrey Joyce, co-author of the study, copays are effective when it comes to name brand prescription pain control medications such as Vioxx and Celebrex. Usage dropped 45% when copays doubled for those drugs, Joyce said.
"That's because there are lots of over-the-counter substitutes," Joyce said. "That gives you the extent of moral hazard, because you're not worried about health consequences."
And while the drop in usage is not nearly so high with drugs for chronic conditions, "we find significant price sensitivity in this population," Joyce said. "We think there are adverse health consequences."
For patients with diabetes, asthma and gastric acid diseases, emergency room visits climbed 17% and hospital stays rose 10% as the use of prescription drugs dropped, according to the research.
What to do is a question of balance when creating a formulary, according to Joyce, who warned against using increase in copays as a "blunt tool."
"I think there is this herd mentality to control drug costs without fully considering their overall healthcare costs," Joyce said. "You can design it to make people price-sensitive without creating adverse consequences."
