Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Incentives to Dispense Low-Cost Drugs: A Case Study of British Columbia Pharmacare

Contents:

Author Info

  • Paul Grootendorst

    (Centre for Evaluation of Medicines, St. Joseph's Hospital)

  • Laurie Goldsmith

    (Department of Clinical Epidemiology & Biostatistics, Centre for Health Economics and Policy Analysis, McMaster University)

  • Jeremiah Hurley

    (Department of Clinical Epidemiology & Biostatistics, Centre for Health Economics and Policy Analysis, McMaster University)

  • Bernie O'Brien

    (Centre for Evaluation of Medicines, St. Joseph's Hospital, Department of Clinical Epidemiology & Biostatistics, McMaster University)

  • Lisa Dolovich

    (Centre for Evaluation of Medicines, St. Joseph's Hospital, Faculty of Pharmacy, University of Toronto)

Abstract

All provincial governments in Canada reimburse some portion of the cost of out-of-hospital prescription drugs consumed by groups such as the elderly or those with low incomes. A characteristic shared by all programs in recent years has been rapid growth in expenditures. In an effort to control costs, policy makers have directed cost-containment policies at patients (e.g., introducing or increasing co-payments), drug prescribers (e.g., bulletins, academic detailing), and pharmacists (e.g., drug pricing policies). This study examines two policies that targeted financial incentives to pharmacies to encourage prescribing of lower cost or “generic” bio-equivalent drugs. The setting of our case study is British Columbia Pharmacare – a publicly funded drug insurance program that assists certain British Columbia residents in paying for prescription drugs and medical supplies received out-of-hospital. BC Pharmacare is responsible for 40-45% of drug expenditures in British Columbia. The specific initiatives we examine are the Product Incentive Plan (PIP), introduced by Pharmacare in 1990, and the Low Cost Alternative (LCA) program, which replaced in the PIP in 1994. Before PIP, when a pharmacy filled a prescription covered by the Pharmacare program, the pharmacy was reimbursed for the drug acquisition cost and paid a professional dispensing fee. Under PIP, for drugs that fell into designated multi-sourced therapeutic classes, the pharmacy also received a bonus payment for dispensing drugs whose prices were less than a pre-set “base” price. The PIP bonus payment was 20% of the difference between the base price and the actual price. The LCA eliminated the bonus payment scheme and reimbursed a pharmacy cost at a rate no greater than the average cost of the generic drugs in the drug class. This analysis applies a conceptual framework which poses funding changes – and their “financial incentive” properties – as part of a communication process between the funding source and affected organizations. The following issues were addressed: First, why were the PIP and LCA introduced? Second, how were the PIP and LCA policies interpreted by pharmacies and pharmacists? This raises issues of both the adequacy with which the policies were disseminated and the characteristics of these policies which were most important to the affected organizations. Third, what was the response to the policy? In this case study we are able to address both whether the policies were successful in achieving its stated objectives and how and why certain stakeholders in the system responded to the financial incentives.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.chepa.org/Files/Working%20Papers/WP%2096-08.pdf
File Function: First version, 1996
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada in its series Centre for Health Economics and Policy Analysis Working Paper Series with number 1996-08.

as in new window
Length: 40 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:hpa:wpaper:199608

Contact details of provider:
Postal: CRL Building, 282, 1280 Main Street West, Hamilton, Ontario L8S 4K1
Phone: (905) 525-9140, extension 22122
Fax: (905) 546-5211
Email:
Web page: http://www.chepa.org/
More information through EDIRC

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ernst R. Berndt & Margaret Kyle & Davina Ling, 2003. "The Long Shadow of Patent Expiration. Generic Entry and Rx-to-OTC Switches," NBER Chapters, in: Scanner Data and Price Indexes, pages 229-274 National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hpa:wpaper:199608. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lyn Sauberli).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.