Pharmacy Benefit Management Institute (PBMI) helps industry professionals manage pharmacy benefit programs through research-based drug benefit education.

Cingular Wireless (Cingular) was facing increasing drug expenditures for its employee population. The company’s three-tier plan design was adequately controlling costs but the company wanted to bring employees into a partnership to better manage drug expenditures.

The target audience is 19,500 non-bargained employees and 8,100 bargained employees of Cingular. Cingular’s employees are widely dispersed across the country and younger in average age than most commercially insured groups. The group also had a low mail-order pharmacy utilization rate.

Cingular’s goal was to manage the rate of increase in prescription drug expenditures by changing drug purchasing behavior while preserving the quality of the drug benefit program. To achieve this, an effective drug benefit plan design needs to:
• Create sustained employee behavior change to purchase the lowest-cost, effective medication;
• Keep most prescriptions affordable with a maximum coinsurance per script and an annual out-of-pocket limit; and
• Encourage adherence to maintenance medication regimens.

Cingular implemented a four-tier coinsurance plan design with a minimum and maximum cost per script and an annual out-of-pocket limit. The Personal Choice tier allows plan members to purchase personal choice drugs such as hair loss products, wrinkle treatment drugs, and depigmenting agents at the plan’s discounted cost. The table below shows the coinsurance structure:

The annual out-of-pocket limit is $1,500 per person and $3,000 per family.

The new coinsurance plan design was implemented January 1, 2004 for non-bargained employees. In plan year 2004, Cingular’s cost per employee per month (PEPM) decreased by $6.07 or 8% with the new plan design. Per member per month (PMPM) costs decreased by $3.01 or 8.9%. The non-bargained employees’ share of prescription costs only increased 4% with the new plan design. The effectiveness of the plan design in changing purchasing behavior is underscored by a 4.6% increase in the generic dispensing rate and 4.4% increase in generic substitution rate. The plan design improved compliance with drug regimens for chronic conditions as shown below:

The annualized savings resulting from changed Cingular member behavior in 2004 was $2,821,500. Bargained employees began using a similar coinsurance plan design in 2005. The 2005 PEPM cost for bargained employees was $61.40, a decrease of $20.65 or 25.2% from 2004.

In January 2006, 24,000 AT&T employees joined the Cingular benefit design. Cingular knows from experience the savings trend will continue. For more information about changing behavior through coinsurance plan designs, contact Jerrell Riley, CEBS, at jerrell.riley@cingular.com.