Drug costs under Humana's "RxImpact" formulary are running 45% less than the insurer's traditional four-tier plan, Clinical Programs Director Betsy Warren said at the National Managed Health Care Congress in Washington, D.C. March 9.

During 2004, Humana plans using the insurer's four-tier "Rx4" formulary paid $33 per member per month, compared to $18 for RxImpact members.

"You can see an incredible savings and cost to the plan for that plan design," Warren declared.

Unlike a traditional tiered formulary based on drug cost, drugs on the RxImpact formulary are placed into four groups according to their expected ability to prevent a significant medical event, and how they will impact health over time (see chart: " ¹ Humana Sheds Tiers ").

"What RxImpact did was group drugs fundamentally differently. It took away the notion of brand or generic, formulary, non-formulary [and] preferred" drugs, Warren explained.

Instead, drugs are tiered "according to how they impact medical events and how they impact medical events over what time period - is it an immediate time period, is it an extended time period, or does it in fact not even impact medical costs?"

Instead of paying co-pays, RxImpact patients receive an "allowance" that reduces the drug price by a certain amount of money, depending on the group. If the cost of the drug is less than the allowance, the patient pays nothing and the excess is rolled into a personal care account.

RxImpact members receive the highest allowance when they purchase drugs in group A ("short-term impact") and the smallest allowance for drugs in group D ("lifestyle").

"Some people may be quick to criticize and say 'Oh, you're just cost-shifting. This is a plan design that shifts cost.' Well, 59% of the time the member has paid nothing for their prescription drugs," she said.

"There are a lot of people, like the pharmacy benefit managers, that like the rebate model. That is what drives business, and we're very comfortable with formulary versus non-formulary and rebated versus not rebated. This really challenges that," Warren said.

The RxImpact design creates a consumer-centric model that encourages patients to be more sensitive to drug costs and budget accordingly.

"We think the consumers are ready to be engaged, so we don't want to be condescending to them to say we'll make the decisions for you."

RxImpact was initially offered only to Humana employees, but was made available to clients starting on Jan. 1, 2005. Eighteen companies have signed up to date, and Humana hopes to have 10% of its members on RxImpact by year-end.

To help facilitate responsible decision-making, the insurer has developed a number of online tools to help patients compare drug prices and find the best price available in area pharmacies.

"On Humana.com, you have the ability as a member to search the lowest-cost pharmacy in your area" by zip code, Humana Commercial Sales and Innovation Center representative Jarrod Helms noted.

Such tools help members choose drugs that are nearly always covered by the allowance and the maximum out-of-pocket expense, Humana said.

The company has experimented with the out-of-pocket cap in the two years the program has been available to Humana employees.

"The first year we had out-of-pocket protection of $200 per prescription, and we realized that was a little high and made some people uncomfortable," Warren said.

"The second year we rolled out, we had $75 out-of-pocket protection and, in fact, over 99% of the claims were less than the $75 range. That was a nice comfort zone for members."

In addition, Humana's "Maximize Your Benefit" program educates members in a "very soft manner" after they have purchased a drug for which a cheaper option is available, Helms said.

"If you picked up Zocor , five to seven days after you paid that out-of-pocket money...Humana will reach out and help you understand: 'Did you know there's Lipitor , there's Crestor , there's lovastatin, that you can pay less and less out of pocket?'" he said.

The statin market share distribution under Rx4 was 62% for Merck's Zocor, 25% for Pfizer's Lipitor and less than 1% for AstraZeneca's Crestor, Humana said. Under RxImpact, Lipitor's share increased to 44%, Crestor's share increased to 7% and Zocor's share decreased to 27%.

Warren described each of the four drug groups under RxImpact for conference attendees.

Drugs in group A, which include those for asthma, depression and diabetes, are used to prevent serious medical conditions and tend to have a high return on investment within the same plan year, Warren said.

"Who wouldn't want to spend more money on an oral prescription antibiotic if it would keep [employees] out of the hospital or if it would get them home from the hospital sooner," she asked. "Spending a $100 on an antibiotic is well worth your investment."

During the two years Humana offered the plan to employees, the average out-of-pocket expenses for group A drugs was $10.97, with 64% of prescriptions dispensed at no cost to the member.

Group B drugs are used to treat chronic conditions such as heart disease, cancer and multiple sclerosis. The average out-of-pocket expense for group B drugs is $13.45, with 58% of members receiving the drugs at no cost, Humana said.

The economic impact of a group B drug typically is not realized for many years. "No one took a cholesterol drug this year to prevent a heart attack in six months," Warren said. "You're taking it for five, 10, 15, maybe 20 years before you're preventing any sort of medical events."

"Group C is a grouping of drugs that's really not about medical costs or events," but "may be very important to an employer for a difference reason," Warren said. "These are drugs that may allow an employer to keep their employees productive at work. They prevent absenteeism."

Examples of group C drugs are arthritis agents, allergy medications and gastrointestinal therapies. Members pay an average $19.86 out-of-pocket, with 51% of prescriptions dispensed at no cost.

Group D drugs "are often not covered under the traditional pharmacy benefit design," Warren said. "I classify this as a perk that an employer might want to pass along to his employees." Group D drugs include those to treat sexual dysfunction, obesity and acne.

Group A drugs represent about 45% of the drugs dispensed and 33% of the cost, Humana said.

"That means a full two-thirds of the cost of prescription drugs is being spent on something other than this year. That's a good indication of why pharmacy trends continue to escalate the way they are and are not impacting medical costs," Warren said.

Group B and C drugs each represent about 33% of total cost spent on Rx drugs. Group D expenses are "very minor" as they are usually not covered, she added.

Humana RxImpact Formulary Lowers Drug Costs 45% Vs. Four-Tier Plan

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