By GREGORY N. HEIRES

Prescription drug benefit co-payments will increase in July as the DC 37 Health and Security Plan confronts the escalating cost of medications.

The plan’s trustees voted May 5 to adopt the new co-pays, which will protect the benefit by saving the plan over $24 million a year.

“Members can be assured of the soundness of the benefit and the fiscal responsibility that has been exercised on their behalf by those managing the fund,” said DC 37 Executive Director Lillian Roberts, who chairs the board of trustees. “No one wants to raise co-pays, but this fund is of vital importance to the health of our members. We must protect it and make sure it is well managed and secure.”

Beginning July 1, the co-pays for purchases of 30-day orders at pharmacies will rise from

• $3 to $5 for generic drugs,
• $8 to $15 for brand-name drugs on the plan’s preferred list of medications, and
• $15 to $35 for brand-name drugs not on the preferred list.

The co-pays for 90-day orders through the mail-order program (which is mandatory for maintenance drugs) will increase from $6 to $10 for generics, from $16 to $30 for drugs on the preferred list, and from $30 to $70 for brand-name drugs not on the preferred list.

“Members realize we have to increase co-pays and want us to be as responsible as possible in doing so,” Ms. Roberts said. “We will continue to examine all avenues for savings, and we will, of course, be closely monitoring the results of the co-pay changes.”

As they addressed the skyrocketing cost of prescription drugs, the trustees considered a number of other options in addition to increasing co-pays. The options, which may be reconsidered in the future with other changes, included

• lowering the $100,000 annual cap on coverage,
• raising co-pays higher,
• instituting upfront deductibles, and
• requiring step therapy, in which patients try traditional and less costly medications before using newer, more expensive drugs.

The plan also considered a “closed formulary,” or a mandatory preferred list program. Drug plans can reduce costs by using their purchasing power to negotiate lower prices for medications on preferred lists with selected numbers of covered drugs.

The drug benefit will cost over $165 million in the 2004 fiscal year, that ends June 30, representing 77 percent of the plan’s $215 million annual expense for all benefits. Over the years, drugs have been eating up a growing portion of all the benefits offered by the plan. In 1998, prescription drugs accounted for only 60 percent of the plan’s expenditures.

Besides prescriptions, the plan offers dental care, eye exams and glasses, hearing tests, disability benefits, podiatry and legal services. The reason for the pressure on the drug benefit is quite simple,” said Rosaria R. Esperon, administrator of the DC 37 Health and Security Plan.

“The pharmaceutical industry is very powerful, and it continues to raise prices rapidly, creating a crisis for working people, retirees and union and employer drug plans nationwide. There is no solution unless consumers pressure government into action.”

Over the past several months as the trustees considered new co-pays, the plan struggled with a projected annual gap of $50 million. Fortunately, reserves helped keep the plan afloat. Besides bringing in $24 million with the new co-pays, the plan expects to get an additional $9 million from the city in the fall to help reduce the gap still further.

“With the new city funds, the co-pay changes and the reserves, the plan will be able to continue to provide the same level of benefits,” Ms. Roberts said. The $9 million would be due under a health-care agreement that the city and municipal unions negotiated late last year. Under the agreement, the city agreed to increase its welfare fund contributions by $100 for each covered city worker and retiree. The plan will receive $65 and the remaining amount will cover the new $35 administrative fee that the city would have otherwise directly charged employees and retirees.

In the deal with the Municipal Labor Committee, the unions and the city also saved the PICA drug program by increasing its co-pays for psychotropic, injectable, chemotherapy and asthma drugs on April 1.

Effective July 1, the DC 37 plan will implement new co-pays for members and retirees who are not eligible for the city PICA program and instead receive those medications from the union plan. This group includes individuals who don’t qualify for the city’s health-care plan, such as part-timers who work less than 20 hours a week and Medicare-eligible retirees.

The plan’s PICA co-pays for 30-day retail purchases will increase from

• free coverage for generics to $5,
• $6 to $15 for preferred brand-name drugs, and
• $6 to $35 for brand drugs not on the preferred list.

The co-pays for mail-ordered PICA drugs will increase from no charge to $10 for generics, $12 to $30 for the preferred list and $12 to $70 for drugs not on the preferred list. The changes match those implemented in the city PICA program in April.

Plan officials recommend that members and retirees save money by using generic drugs whenever possible, asking doctors for sample medications when they get new prescriptions, and avoiding brand-name medications that are not on the preferred list. Participants who don’t use available generic equivalents must pay the difference between the cost of the brand-name medication and the generic drug in addition to the applicable co-pay.