Consumer response to dual incentives under multitiered prescription drug formularies.
OBJECTIVE
To decompose the overall effect of multitiered formularies on drug utilization and spending into the following 2 observed effects on consumer behavior: first, higher copayments on drug equivalents create an incentive to reduce the number of prescriptions, and, second, wider differential copayments between drug equivalents create an incentive to use a greater proportion of generics.


METHODS
We merged drug claims for 352,760 retired Medicare enrollees having employer-sponsored health insurance with benefit information. Our unit of analysis was the enrollee. We used cross-sectional variation in incentive-based formularies to compare the effects of increased copayment amounts for drug equivalents with those of increased copayment differentials between drug equivalents. The study sample may not be representative of the Medicare population.


METHODS
Multivariate regression analysis using the 2002 MarketScan Medicare Supplemental and Coordination of Benefits database and Benefit Plan Design database.


RESULTS
A 10% increase in copayments for drug equivalents was associated with a 1.3% reduction in total drug spending, a 16.0% increase in out-of-pocket expenditures, a 2.0% reduction in the number of prescriptions filled, and a 0.7% reduction in proportion of prescriptions filled with generics. A 10% increase in copayment differentials between drug equivalents was associated with a 1.0% reduction in total drug spending, a 4.1% increase in out-of-pocket expenditures, a 1.0% reduction in the number of prescriptions filled, and a 0.7% increase in proportion of prescriptions filled with generics.


CONCLUSIONS
Increasing copayment differentials between drug equivalents is as effective a strategy for reducing total drug spending as increasing copayment amounts for drug equivalents but better maintains access to prescription medications.
Gilman
Boyd H
BH
Mathematica Policy Research, Inc, Cambridge, MA 02139, USA. bgilman@mathematica-mpr.com
Kautter
John
J
D017677:Age Distribution; D000368:Aged; D000369:Aged, 80 and over; D003258:Consumer Behavior / Q000191:economics* / Q000706:statistics & numerical data; D003669:Deductibles and Coinsurance / Q000191:economics* / Q000706:statistics & numerical data; D017723:Drug Utilization Review; D005260:Female; D005569:Formularies as Topic; D019538:Health Care Surveys; D006304:Health Status; D006801:Humans; D007356:Insurance, Pharmaceutical Services / Q000145:classification* / Q000191:economics* / Q000706:statistics & numerical data; D008297:Male; D006278:Medicare / Q000706:statistics & numerical data; D015999:Multivariate Analysis; D011306:Prescription Fees; D012044:Regression Analysis; D017678:Sex Distribution; D014481:United States