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New Survey: Consumer-Directed Health Plan Growth Levels Off Among Employers; Plan Sponsors Embrace Generics

Posted on: Tuesday, 12 June 2007, 00:00 CDT

FRANKLIN LAKES, N.J., June 12 /PRNewswire-FirstCall/ -- Predictions that consumer-directed health plans (CDHPs) such as health savings accounts (HSAs) would continue their steep growth appear to be overstated according to a national survey of health plan sponsors covering between 1,000 and 15,000 lives. In fact, the survey shows that most employers and health plan sponsors of this size are not considering offering CDHPs as a benefit option in the next few years.

While approximately one in four organizations (24 percent) polled indicated they currently offer a CDHP option, of those that don't, only 11 percent intend to adopt such an option within the coming three years, based on the survey's results released today by Medco Health Solutions, Inc.'s Systemed Group. The survey also revealed that many plan sponsors do not agree with the CDH savings proposition. More than half (53 percent) believe CDH plans are the approach least likely to have an impact on controlling their organization's prescription drug costs, as compared to generic and mail-order strategies and disease management approaches. Additionally, nearly 30 percent believe that CDH plans will do more damage by discouraging patients from getting the care they need.

The national peer study was conducted by ReedHaldyMcIntosh for Medco's Systemed Group. The research firm polled 200 plan sponsors with 1,000 to 15,000 employees including private and public sector employers and labor unions to gauge their perspectives on prescription drug cost control measures they currently use, and those they plan to employ in the future.

"This survey indicates that for this particular size audience, the bloom may be off the proverbial consumer-driven health rose," said Mike Romanzo, R.Ph, president of Medco's Systemed Group. "Health care consumerism isn't a flawed theory, and for very large employer groups it may be a valid plan offering. But for now, educating members to be savvier shoppers within more traditional prescription plan designs seems to be the route of choice for the majority of our plan sponsors."

Promoting generic drugs is one approach that plan sponsors agree will make a difference; nearly 70 percent of respondents believe stronger incentive programs, including those that require or encourage the use of generics, will have the greatest impact on controlling plan costs - a reflection of the $49 billion savings boon that lies ahead with the pending patent expirations for a number of blockbuster prescription drugs in the next few years. Virtually every plan sponsor (98 percent) currently employs methods that encourage the use of generics and plan preferred brands, while 90 percent also utilize strategies that promote the use of mail order pharmacies.

In 2007 alone, 10 brand-name medications with revenue exceeding $8.1 billion are expected to lose patent exclusivity. The widely prescribed sleep medication Ambien and the popular antihypertensive Norvasc were the first two blockbuster medications to reach the market in generic versions this year.

"The potential opportunity presented by the collection of pending generic blockbusters is not lost on plan sponsors - they see the possibilities, understand the impact on their drug costs, and are planning to take full advantage when those billions of dollars in savings become available," said Romanzo.

Further details on these and other survey findings will be published in the report, The Nine Leading Trends in Rx Plan Management. Some additional survey highlights include:

-- Taking the mail route Mail order pharmacy also scores high marks among plan sponsors. Ninety percent of respondents currently use strategies that encourage the use of mail order and 38 percent have rules that require it. According to a study by the Lewin Group, mail-order pharmacies provide savings of 10 percent compared to retail pharmacies and could save the health care system nearly $80 billion in drug expenditures between 2006-2015. -- Shift from broad coverage to balance There has been a dramatic shift in plan sponsors' benefit priorities in the last few years. Five years ago, the majority of surveyed organizations (63 percent) were most concerned with providing the broadest coverage possible to their beneficiaries; today, only 13 percent indicate that is their priority, while 73 percent are now most concerned with balancing cost and care. Survey responses reflect the difficulty employers face in providing broad coverage to their workers. When asked to identify top priorities when designing their plan for the coming year, 89 percent stated that maintaining the same level of benefit coverage was important to critically important; but 44 percent also responded that it was just as important that they shift a greater cost share to their employees. -- Tiered plans are key to cost share success: When it comes to the world of cost-share strategies, three-tiered plan designs lead the way. Three-tiered plan designs are most common among for profit (80 percent) and non-profit (80 percent) organizations, while two-tiered plans are more often selected by unions (56 percent) and public sector (40 percent) organizations. Only six percent of plan sponsors employ a four-tier co-pay plan design. More than half of plan sponsors surveyed have flat-dollar co-payments. -- Divided perceptions on drug plan cost drivers: While there seems to be no definitive consensus on what truly drives plan drug costs, nearly 40 percent of employers' blame direct-to-consumer advertising for branded products. An additional 25 percent identify the increased use of specialty medications as the cost driver and another 21 percent cited price inflation of branded meds. -- Holistic healthcare taking hold: The survey revealed the continued emergence of a holistic approach to health benefits: 82 percent of respondents say that adding wellness or disease management programs is either important to critically important, while 78 percent believe integrating medical and prescription drug data is critically important in designing their health plan options for the coming year. -- Health benefits preferred to pay raises, 401ks: The survey also revealed that the majority of employers believe health benefits are the most important employer-sponsored benefits in the minds of employees: 54 percent of those surveyed believe that an employer sponsored health plan is the most valuable to employees, outranking a $5,000 pay raise, five additional vacation days, participating in a 401(k) plan and paid-for life and disability insurance coverage.

To obtain a free copy of the report, Nine Leading Trends in Rx Plan Management, send requests to systemedinfo@medco.com.

About Medco

Medco Health Solutions, Inc. is the nation's leading pharmacy benefit manager based on its 2006 total net revenues of more than $42 billion. Medco's prescription drug benefit programs are designed to drive down the cost of pharmacy health care for private and public employers, health plans, labor unions and government agencies of all sizes, and for individuals served by the Medicare Part D Prescription Drug Program. Medco's technologically advanced mail-order pharmacies and award-winning Internet pharmacy have been recognized for setting new industry benchmarks for pharmacy dispensing quality. Medco serves the needs of patients with complex conditions requiring sophisticated treatment through its specialty pharmacy operation, which became the nation's largest with the 2005 acquisition of Accredo Health, Incorporated. Medco is the highest-ranked pharmacy benefit manager on the 2006 Fortune 500 list. On the Net: http://www.medco.com/.

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward- looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this press release should be evaluated together with the risks and uncertainties that affect our business, particularly those mentioned in the Risk Factors section of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Medco Health Solutions, Inc.

CONTACT: Ann Smith of Medco Health Solutions, Inc., +1-201-269-5984, orAnn_Smith@medco.com, or Janet Schiller or Melissa Mackey, both of Coyne PublicRelations, +1-973-316-1665, for Medco Health Solutions, Inc.

Web site: http://www.medco.com/

Source: PRNewswire-FirstCall

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