Incentive formularies and changes in prescription drug spending.
OBJECTIVE
To examine the impact of incentive formularies on prescription drug spending shifts in formulary compliance, use of generic medications, and mail-order fulfillment in the year after introduction of a new pharmacy benefit strategy.


METHODS
Pre-post comparison study with matched concurrent control group (difference-indifferences analysis).


METHODS
Study subjects were continuously enrolled patients from a single large health plan in the northeastern United States. Health plan administrative data were used to determine the total, health plan, and out-of-pocket spending in the year before and the year after the introduction of 12 different benefit changes, including 1 in which copayments decreased.


RESULTS
Overall, changing from a single-tier or 2-tier formulary to a 3-tier formulary was associated with a decrease in total drug spending of about 5% to 15%. Plan spending decreased more dramatically, about 20%, whereas out-of-pocket spending that resulted from higher copayments increased between 20% and >100%. Changing to an incentive formulary with higher copayments was accompanied by a small but inconsistent decrease in use of nonformulary selections and a concomitant increase in both generic and formulary preferred utilization. Mail-order fulfillment doubled, albeit from a low baseline level.


CONCLUSIONS
Switching to incentive formulary arrangements with higher levels of copayments generally led to overall lower drug costs and vice versa. These effects varied with the degree of change, level of baseline spending, and magnitude of the copayments. Whether these effects are beneficial overall depends on potential health effects and spillover effects on medical spending.
Landon
Bruce E
BE
Department of Health Care Policy, Harvard Medical School, Boston, MA 02115, USA. landon@hcp.med.harvard.edu
Rosenthal
Meredith B
MB
Normand
Sharon-Lise T
SL
Spettell
Claire
C
Lessler
Adam
A
Underwood
Howard R
HR
Newhouse
Joseph P
JP
D000328:Adult; D015331:Cohort Studies; D003669:Deductibles and Coinsurance / Q000191:economics* / Q000706:statistics & numerical data; D017723:Drug Utilization Review; D005260:Female; D005569:Formularies as Topic; D019538:Health Care Surveys; D006801:Humans; D007356:Insurance, Pharmaceutical Services / Q000145:classification / Q000191:economics* / Q000706:statistics & numerical data; D008297:Male; D010349:Patient Compliance / Q000706:statistics & numerical data; D011306:Prescription Fees; D014481:United States