A co-payment suggests sharing the total cost between patients and payers. However, drug co-payments sometimes exceed costs, with the insurer or pharmacy benefit manager (PBM) keeping the difference.1 Furthermore, some pharmacists are contractually prevented from alerting patients when their co-payment exceeds the drug’s cash price.2 Although some have argued that the practice is uncommon, a 2016 survey of independent pharmacists indicates otherwise.3
Such overpayments have been the subject of lawsuits and state legislation, but little is known about their frequency or magnitude.
Pharmacies collect patients’ co-payments and pass them to PBMs, who reimburse the pharmacy a negotiated rate to cover drug costs, dispensing fees, and any markup. Overpayments occur when the co-payment exceeds the negotiated reimbursement. To assess the frequency of overpayments, we compared co-payments with the national average reimbursement received by pharmacies for commercially insured patients for the same prescription.
The reimbursement data came from a survey by the Centers for Medicare & Medicaid Services from January to June 2013, the national average retail price (NARP). NARP data are based on 50 million retail pharmacy transactions from independent and chain pharmacies nationwide. They measure per-unit mean reimbursement to retail pharmacies for commercially insured patients for more than 4000 common outpatient drugs and represent the total cost to the PBM, including dispensing fees and pharmacy markup.4
We compared NARP reimbursements to co-payments from pharmacy claims from a 25% random sample of Optum’s Clinformatics Data Mart from the same period. These claims come from 1.6 million commercially insured beneficiaries from 50 states, with greater representation from the south and less from the northeast compared with the US privately insured population. The data are representative in terms of sex, but overrepresent the age category of 21 to 64 years.
We identified claims in which co-payment exceeded NARP reimbursement, and the excess amount (overpayment). To ensure the excess did not simply reflect variation in reimbursements (NARP measures average reimbursement), we conservatively identified overpayments only on claims in which the co-payment exceeded the NARP by more than $2.00 for reimbursements below $20 or 10% of the NARP for reimbursements above $20. We calculated the frequency and mean size of overpayments for all claims and performed 2-sided tests of equality between these values for brand drugs vs generic drugs (α = .05). We report results for all prescriptions together, and for the 20 drugs most frequently prescribed. Confidence intervals were binomial; all analyses were performed with Stata (StataCorp), version 14.0.
Among 9.5 million claims, 2.2 million (22.94% [95% CI, 22.91%-22.97%]) involved overpayments (Table 1). The 28.17% rate (95% CI, 28.14%-28.20%) for generic drugs was significantly greater than for brand drugs (5.95% [95% CI, 5.92%-5.98%]); difference, 22.22% (95% CI, 22.17%-22.26%), P < .001. The mean overpayment was $7.69 (SD, $8.59); 17.15% (95% CI, 17.10%-17.20%) exceeded $10. Although less common, overpayments were significantly larger on brand drugs (mean, $13.46 [SD, $18.01]) than on generic drugs (mean, $7.32 [SD, $7.43]); difference, $6.14 (95% CI, $6.09-$6.19), P < .001. Aggregate overpayments totaled $135 million for 2013 or $10.51 per covered member.
The most commonly prescribed drug, hydrocodone/acetaminophen, involved an overpayment on 36.15% of claims (95% CI, 35.99%-36.31%), with mean overpayment of $6.94 (SD, $4.27) (Table 2). Twelve of the 20 most commonly prescribed drugs involved overpayment rates above 33%.
Overpayments were common in this data set, affecting 23% of all prescriptions, and 28% of generic prescriptions. Although the mean overpayment was relatively small, their widespread use on popular drugs resulted in a total cost of $10.51 per member. By comparison, 1 large PBM reported its clients spent $10.67 per member on metformin in 2016.5
Primary limitations were the use of pharmacy claims from a single, large insurer and national mean prices, which were only available for 2013 and may not represent current practice.
Cost-related nonadherence is common and associated with increased medical services use and negative health outcomes.6 By raising patient costs at the point of sale, overpayments may exacerbate these effects. To lower patient expenses, legislation addressing overpayments and gag clauses warrants further investigation.
Accepted for Publication: December 27, 2017.
Corresponding Author: Karen Van Nuys, PhD, Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, 635 Downey Way, Los Angeles, CA 90089 (email@example.com).
Author Contributions: Drs Van Nuys and Ribero had full access to all of the data in the study and take responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: All authors.
Acquisition, analysis, or interpretation of data: Van Nuys, Joyce, Ribero.
Drafting of the manuscript: Van Nuys, Ribero.
Critical revision of the manuscript for important intellectual content: All authors.
Statistical analysis: Van Nuys, Joyce, Ribero.
Obtained funding: Van Nuys, Goldman.
Administrative, technical, or material support: Van Nuys, Goldman.
Supervision: Van Nuys.
Conflict of Interest Disclosures: All authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest. Dr Van Nuys reported consulting for Precision Health Economics. Dr Goldman reported being co-founder of and consulting for Precision Health Economics. No other disclosures were reported.
Funding/Support: This work was supported by the Leonard D. Schaeffer Center for Health Policy and Economics and by grant P01AG033559 from the National Institute on Aging of the National Institutes of Health (NIH). Specific information about Schaeffer Center funding sources is available on the website at healthpolicy.usc.edu and a complete list of donors may be found in the annual report.
Role of the Funder/Sponsor: The funders had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.
Disclaimer: This study was conceived by the authors and was not supported by any particular donor. It does not necessarily represent the official views of the NIH.