Generic utilization and cost-sharing for prescription drugs

Area of Science:

• Health Economics
• Pharmaceutical Policy
• Pharmacoeconomics

Background:

• Rising healthcare costs necessitate strategies to manage prescription drug expenditures.
• Patient cost-sharing is a common tool used by health plans to influence drug utilization.
• Understanding price elasticity is crucial for designing effective cost-sharing policies.

Purpose of the Study:

• To estimate the own- and cross-price elasticity of brand-name outpatient prescription drug cost-sharing for maintenance medications.
• To assess the impact of changes in the price differential between generic and brand-name drugs on utilization.

Main Methods:

• Literature review on the effects of increased brand-name drug patient cost-sharing.
• Analysis of two empirical examples of patient filling behavior under increased brand-name cost-sharing in employer-sponsored health plans.

Main Results:

• The own-price elasticity of demand for brand-name drugs was found to be inelastic.
• Cross-price elasticity results were inconsistent in sign.
• Increased brand-name cost-sharing did not consistently lead to higher generic prescription fills.

Conclusions:

• The common strategy of increasing brand-name drug cost-sharing to promote generic use may be ineffective.
• Higher brand-name cost-sharing might lead to patients discontinuing chronic therapies rather than switching to generics.
• Findings are limited to patients with employer-sponsored health insurance.