Bargain Based

My father had many admirable personality traits, but he also had his quirks. He was buying in bulk at warehouse stores well before it was “cool” to do so (and before many of the current generation of such stores existed), and he was an earlier adopter of generic food brands. And, yes, sometimes he bought generic food and paper stocks in bulk. While the quality of such offerings has doubtless improved dramatically over the years, I still shudder at the memory of my first sip of generic cola.

My childhood encounters with generic products notwithstanding, I’ve generally not been as particular about generic drugs. Oh, sure, when you have a migraine, there’s still something to be said for the confidence (if not reality) in reaching for the name brand pain reliever. But when it comes to prescription drugs, if there’s a cheaper, generic alternative, I’m generally amenable to the switch.

A greater sensitivity to cost is, in fact, one of the aspects of consumer-directed health plans (CDHP) touted by proponents, who contend that providing participants with an account and subjecting their health insurance claims to high deductibles will induce enrollees who would likely be spending more of their own money (than might be the case with traditional health coverage) to make more cost- and quality-conscious health care decisions. On the other hand, CDHP skeptics caution that these individuals lack the kind of information they need to make good decisions—and, worse, might make cost-centric choices that aren’t the best health care choices, and might even prove to be less cost-efficient (and even more expensive) over the longer term.

Using data from a large employer that implemented a CDHP, fully replacing traditional managed-care health insurance with a health savings account (HSA), new research[i], conducted through the EBRI Center for Research on Health Benefits Innovation (EBRI CRHBI)[ii], found that moving to the HSA-eligible plan reduced the number of brand name prescriptions filled. However, it also found that the move reduced the number of generic prescriptions filled. Previous EBRI research showed that while prescription drug use went down, it also resulted in decreased use of maintenance medications for chronic disease and a worsening of adherence.

As the EBRI report explains, while reductions in prescription-drug utilization can result in pharmacy expenditure savings for employer plan sponsors, increases in downstream medical costs may eclipse those benefits. In view of the potential for these kinds of unintended offsets, it notes that CDHPs and other plan designs that raise patient cost-sharing for prescription drugs might want to consider some alternative strategies that can bolster adherence and mitigate the potential impact.

Sometimes less is more – but only after you take into account all the costs. And sometimes you find that “less” is no bargain.

• Nevin E. Adams, JD

[i] “Brand-Name and Generic Prescription Drug Use After Adoption of a Full-Replacement, Consumer-Directed Health Plan With a Health Savings Account” was published in the March EBRI Notes, available online here.

[ii] The following organizations provide the funding for EBRI CRHBI: American Express, Ameriprise, Aon Hewitt, Blue Cross Blue Shield Association, Boeing, Deseret Mutual, Federal Reserve Employee Benefits System, General Mills, Healthways, IBM, JP Morgan Chase, Mercer, and Pfizer.