Incentive formularies and changes in prescription drug spending

Area of Science:

• Health Economics
• Pharmaceutical Policy
• Health Services Research

Background:

• Pharmacy benefit strategies significantly influence prescription drug spending.
• Understanding the impact of formulary design on patient costs and medication choices is crucial.

Purpose of the Study:

• To evaluate how incentive formularies affect prescription drug spending, formulary compliance, generic medication use, and mail-order fulfillment.
• To analyze shifts in total, health plan, and out-of-pocket drug expenditures post-formulary changes.

Main Methods:

• A pre-post comparison study utilizing a matched concurrent control group design.
• Difference-in-differences analysis of health plan administrative data from continuously enrolled patients.
• Examination of 12 benefit changes, including shifts to 3-tier formularies and changes in copayments.

Main Results:

• Transitioning to a 3-tier formulary decreased total drug spending by 5%-15%, with plan spending dropping by approximately 20%.
• Out-of-pocket spending increased by 20% to over 100% due to higher copayments.
• Incentive formularies led to increased use of generic and preferred formulary drugs and doubled mail-order fulfillment.

Conclusions:

• Incentive formulary arrangements with higher copayments generally reduce overall drug costs, but increase patient out-of-pocket expenses.
• The magnitude of these effects depends on the extent of formulary changes and copayment levels.
• The overall benefit of these strategies requires consideration of potential health and medical spending spillover effects.