NU Online News Service, June 19, 10:45 a.m. – Health Industries Research Companies, Santa Cruz, Calif., says health maintenance organizations are rapidly adopting the “three-tier copay” system for encouraging HMO members to use generic drugs and brand-name drugs on the HMOs’ preferred drug lists.

Three-tier copay programs now cover about 35% of HMO members, Health Industries says.

The proportion will rise to more than 47% of all beneficiaries by year-end 2002, Health Industries predicts.

HMOs and other health plans that use three-tier copay programs usually charge low out-of-pocket fees for members who buy generic drugs; slightly higher fees for members who buy brand-name drugs on the preferred drug lists; and high fees for members who buy brand-name drugs that are not on the preferred drug lists.

Copay levels have increased steadily in most sectors during the last year.

Health Industries predicts average out-of-pocket costs will approach $10 for the first tier, $25 for the second tier and $40 for the the third tier within the next twelve months.

The average difference in the copay fee for a brand-name drug on the HMO’s preferred drug list and other brand-name drugs has also increased.

The average penalty for buying brand-name drugs off the preferred list, rather than brand-name drugs on the preferred list, was $10.15 in 1999, $14.85 in 2000, and $16.25 in 2001, Health Industries says.

HMOs and employers are also experimenting with three-tier percentage copays that require consumers to pay a fixed percentage of drug costs, Health Industries says.