By GREGORY N. HEIRES

Rapidly rising prescription prices are forcing employers and unions nationwide to increase workers’ co-payments and take other drastic steps to avoid closing drug benefit plans.

Employees and covered retirees are paying more out of pocket as the drug plans restructure benefits under the unremitting pressure of the cost crunch.

Three-tiered co-payment programs — similar to that of the DC 37 prescription drug benefit — are perhaps the most common response by benefit plans trying to cope with skyrocketing costs.

Other reactions include mandatory mail-order programs; “closed formularies” in which plans provide no coverage at all for brand-name drugs that are not on preferred medication lists; close monitoring of patients with especially high drug expenses; shrinking caps on coverage; and eliminating drugs for cosmetic or medically unnecessary purposes, such as treating toenail fungus or baldness.

DC 37 is not alone. Typically, tiered systems have raised co-pays to $10 for generics, $20 for brand-name drugs on a preferred list, and $40 for other brand-name medications, according to the Kaiser Family Foundation.

On July 1, the new co-pays for the DC 37 benefit for 30-day purchases at pharmacies will be $5 for generics, $15 for preferred drugs and $35 for brand-name medicine that is not on the preferred list. The union’s mandatory mail-order program for maintenance drugs will also have a new co-pay structure (see box on page 5).

U.S. expenditures on drugs tripled from 1990 to 2001. The increasing usage of drugs, the use of more costly new medications and rising prices account for the cost crisis that is hammering drug benefits.

Companies in the pharmaceutical industry — perhaps the most profitable in the country — get away with excessive price hikes thanks to savvy marketing, the political sway they hold in Congress, and their near-monopoly control over life-or-death products.

In 2002, the largest drug companies poured 31 percent of their revenues into advertising, compared with 14 percent for research and development. But when the industry is attacked for its outrageous prices, executives always blame their high research and development costs.
The political power of the industry was demonstrated last year when President Bush signed legislation that created the new Medicare prescription drug benefit. Pressure from the industry led to provisions requiring the benefit to be provided by private insurers and HMOs outside the traditional Medicare structure and prohibiting price controls. In 2002, the industry spent $91 million on lobbying, according to Public Citizen’s Congress Watch. It used 675 lobbyists — seven for each U.S. senator.

“In light of the power of pharmaceutical companies to set prices as they please, it appears that this situation will continue until consumers demand help — especially by voting out the Bush administration — and legislators stop protecting business profits as they forge solutions,” DC 37 Executive Director Lillian Roberts said. With prices continuing to rise, public and political support is growing for purchasing pools and importing cheaper drugs from Canada.