Humana Adding Fourth Tier To Drug List; Fewer Drugs Need Prior Authorization

Humana is replacing its three-tier drug formulary with a four-tier pharmacy benefit design.

The health service company is rolling out the "Rx4" design gradually, replacing the "Rx3" design as each employer group's health plan contract expires and is renewed.

The four-tier benefit has already taken effect for some plans. Humana expects most plans to be using it by the end of the year.

Under the old plan, drug tiers were based on generic, preferred brand and non-preferred status. The new plan places drugs in tiers based on their cost, regardless of whether it is a brand or generic. Humana said it believes its four-tier plan is the first such drug formulary.

The new benefit design was "developed to begin to bring our members into the healthcare cost equation through the use of greater cost sharing," Humana CEO Michael McCallister told the company's first quarter earnings call May 2.

"We are excited about this next logical step in our turnaround because of our success with our Rx3 benefit design and our general belief that double-digit premium increases will be difficult for employers to sustain for an extended period of time and they will turn toward greater cost sharing strategies," he added.

A recent survey showed that many health plan sponsors intend to counteract rising drug costs by shifting from copayment structures to percentage-based coinsurance (¹ (Also see "Employer-Sponsored Rx Drug Benefits Result In Quantifiable Savings - Survey" - Pink Sheet, 22 Jan, 2001.)). Humana's fourth tier uses a coinsurance model of cost sharing.

The fourth tier, comprising mostly biotech therapies, will have a 25% co-insurance requirement, although there is a maximum out-of-pocket expense of $2,500, after which the plan will cover 100% of costs.

The average copay will be $10 for tier-one drugs, $20-$25 for tier two and $40-$45 for tier three. Copays may vary from one health plan to the next.

The copays for the first three tiers approximately correspond with those in the current three-tier plan, Humana said.

While many drugs will remain in the same tier, more expensive generics (such as lorazepam), which were previously in the first tier, are moving to the second, Humana said.

In addition, inexpensive brand drugs formerly in the second tier, including Wyeth-Ayerst's Premarin and Abbott's Synthroid, are now in the first tier. Wyeth's other conjugated estrogens products, Prempro and Premphase, are still in the second tier.

In some cases, the cost-based drug tiers will result in the branded and generic versions of a drug being in the same tier, and therefore having the same copay.

For example, the recently launched generic versions of Pharmacia's Daypro (oxaprozin) and Bristol-Myers Squibb's BuSpar (buspirone) are in tier two, Humana said, the same level as the branded products.

According to average wholesale prices listed by First Data Bank, generic buspirone costs about 10% less than BuSpar ($150.28 for BuSpar 10 mg 100s vs. $134.50 for Watson's buspirone 10 mg 100s, for example).

Humana also said it expects the upcoming generic fluoxetine to be in tier two with Lilly's Prozac.

Prior authorization will be required for fewer drugs under the new formulary.

Under the three-tier plan, 5% of all scripts needed prior authorization, Humana said. Fewer than 1% will need authorization under the new plan. Most of the drugs requiring prior authorization are in the fourth tier.

Examples of third-tier drugs that will no longer need prior authorization include the COX-2 inhibitors Vioxx (Merck) and Celebrex (Pharmacia/Pfizer), as well as Boehringer Ingelheim/Abbott's NSAID Mobic.

Certain "lifestyle drugs," such as the erectile dysfunction therapy Viagra and the hair-growth product Propecia, are excluded from both the Rx3 and Rx4 plans, although an employer may request that they be covered for their employees.

Humana uses AdvancePCS as its pharmacy benefit manager.