Pay for Performance? Incentives Gone Awry

Previous articles have dealt with the “bonuses” that physicians get from pharmaceutical companies. These include not only free samples and promotional trinkets (mugs, key chains, etc.) but also lavish trips, the sponsorship of meals and medical meetings, and even the payment of professional organization dues for doctors finishing their residencies. These practices, and the conflicts of interest that they engender, are particularly insidious because of their lack of transparency: patients have no way of knowing the extent to which doctors are paying back a company for past favors, and may therefore be unsuspecting pawns in a game whose rules they do not know.

But it turns out that some of the same techniques of providing incentives are being used by health insurers and HMOs who want providers to change their behaviors in some way. Payers have a vested interest in controlling costs, and one way to do this is to lower the amounts spent on prescription medicines. Some payers have therefore adopted strategies to encourage physicians to prescribe lower-priced over-the-counter and generic medications.

Although the health plans began with subtle incentives akin to the drug companies’ trinkets, they have now switched to cash. Under an overall strategy called Generic Advantage, Health Net, Inc. of California joined three other large state HMOs to provide educational materials for doctors and discount coupons they could give to patients to purchase generics. Later, Health Net offered the group 40 percent of the savings based on a quarter-toquarter comparison of generic utilization. The rest of the savings was shared between the company (40 percent) and the employer (20 percent), the latter in the form of reduced copays or premiums. The effects of this were soon felt: by the second year, generic prescribing had I risen 7 percent. Because each percentage increase saves Health Net $3.5 million, the pay-off is evident.

One of the participating physician groups earned $30,000 to $40,000 in bonuses, which it distributed among the top generic prescribers. In the words of the group’s medical director, the dollar incentives were not chickenfeed: “… not enough to buy a yacht, but enough for a nice vacation.” Health Net considered the program successful enough to warrant expanding it. In Michigan, Blue Care Network instituted incentives to get 2400 doctors in the state to switch patients from brand-name to generic cholesterollowering drugs, which is the category on which insurers spend the most. Between January 1 and March 31, 2007, doctors got $100 for each patient that filled a generic prescription. Many primary care doctors in one 600-member physician group received bonuses of $1500 to $2000 for making the switch. Patients were not told about the physician incentives; instead, they were told that brand-name co-payments would increase.

Last August, the news that health insurers were giving incentives to doctors in Massachusetts to switch their patients from brand names to generics was the subject of both press and TV coverage, eliciting concern from patients whose medication was switched with little explanation. The switch involved the cholesterol drug Lipitor, which is a major best-seller. Patients were surprised to find out that the change was motivated at least in part by the fact that the physician was getting kickbacks for prescribing a generic drug. For their part, doctors claimed that they were also saving patients money, because the copays are lower for generics. Moreover, they did not know which patients they were getting a bonus payment for, since they did not know who was covered by what insurer. This, however, does not get doctors off the hook: they need to disclose their conflict of interest, because their prescribing may be responding to financial incentive. Failure to disclose their interest in making the switch is therefore unethical.

While we support the use of generics and urge consumers to save money by asking for the generic version of any prescribed drug, we are equally adamant in exposing and condemning medical conflicts of interest. Doing the right thing for the wrong reason is not acceptable. Neither is keeping patients in the dark when the doctor is swallowing the bait and the patient is left with the switch.