OBJECTIVE: To estimate the effect of differential cost sharing (DCS) schemes for non-steroidal anti-inflammatory drugs (NSAIDs) on drug subsidy program and beneficiary expenditures. DATA SOURCES/STUDY SETTING: Monthly aggregate claims data from Pharmacare, the public drug subsidy program for seniors in British Columbia, Canada over the period 1989-11 to 2001-06. STUDY DESIGN: DCS limits insurance reimbursement of a group of therapeutically similar drugs to the cost of the lowest priced drugs, with beneficiaries responsible for costs above the reimbursement limit. Pharmacare introduced two different forms of DCS, generic substitution (GS) and reference pricing (RP), in April 1994 and November 1995, respectively, to the NSAIDs. Under GS, generic and brand versions of the same NSAID are considered interchangeable, whereas under RP different NSAIDs are. We extrapolated average reimbursement per day of NSAID therapy over the months before GS and RP to estimate what expenditures would have been without the policies. These counterfactual predictions were compared to actual values to estimate the impact of the policies; the estimated impacts on reimbursement rates were multiplied by the post-policy volume of NSAIDS dispensed, which appeared unaffected by the policies, to estimate expenditure changes. DATA COLLECTION: The cleaned NSAID claims data, obtained from Pharmacare’s databases, were aggregated by month and by their reimbursement status under the GS and RP policies. PRINCIPAL FINDINGS: After RP, program expenditures declined by $22.7 million, or $4 million annually, cutting expenditure by half. Most savings accrued from the substitution of low cost NSAIDs for more costly alternatives. About 20% of savings represented expenditures by seniors who elected to pay for partially-reimbursed drugs. GS produced one quarter the savings of RP. CONCLUSIONS: RP of NSAIDs achieved its goal of reducing drug expenditures and was more effective than GS. The effects of RP on patient health and associated health care costs remain to be investigated.
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