Co-Payments Go Way Up for Drugs With High Costs

A new pricing structure being adopted by some insurance companies means patients taking very expensive drugs for certain conditions, including hepatitis C, some cancers, multiple sclerosis, and rheumatoid arthritis, are discovering their drug co-pays have climbed to hundreds or thousands of dollars a month.

Under a new pricing system often called tier 4, these insurers are abandoning the long-held practice of charging a flat co-pay regardless of a drug's price and are instead charging patients a percentage, usually 20 to 33 percent, of the drug's actual cost.

Tier 4 pricing is now incorporated into 86 percent of Medicare drug plans. Some enforce even higher co-pays, called tier 5. Just five years ago, tier 4 pricing was virtually nonexistent in private insurance plans, said Dan Mendelson of Avalere Health, a Washington-based research organization. Today, however, 10 percent of private insurers use tier 4 price plans.

Tier 4 pricing for these high-cost drugs is seen by employers as a way to keep premiums down, said Karen Ignagni, president of America's Health Insurance Plans.

"This is an erosion of the traditional concept of insurance," Mendelson said. "Those beneficiaries who bear the burden of illness are also bearing the burden of cost." He added that private insurers can legally change some drugs to tier 4 pricing with no advance notice. Medicare plans must give notice, he said, though many patients may not realize the change until they pick up their prescriptions.

Kaiser Permanente spokesperson Sandra R. Gregg said recently that the insurer has decided to suspend tier 4 pricing for its program involving federal employees in the mid-Atlantic region while it reviews the policy. The suspension, which will last the rest of the year, arose from discussions with the Office of Personnel Management, which has received numerous questions from patients, Gregg said.

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