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The Impact of Differential Cost Sharing of Non-Steroidal Anti-Inflammatory Agents on the Use and Costs of Analgesic Drugs

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  • Paul V. Grootendorst
  • John K. Marshall
  • Anne M. Holbrook
  • Lisa R. Dolovich
  • Bernie J. O'Brien
  • Adrian R. Levy

Abstract

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.

Suggested Citation

  • Paul V. Grootendorst & John K. Marshall & Anne M. Holbrook & Lisa R. Dolovich & Bernie J. O'Brien & Adrian R. Levy, 2004. "The Impact of Differential Cost Sharing of Non-Steroidal Anti-Inflammatory Agents on the Use and Costs of Analgesic Drugs," Social and Economic Dimensions of an Aging Population Research Papers 115, McMaster University.
    • Handle: RePEc:mcm:sedapp:115
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    References listed on IDEAS

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    1. Fiona M. Scott Morton, 1997. "The Strategic Response by Pharmaceutical Firms to the Medicaid Most-Favored-Customer Rules," Yale School of Management Working Papers ysm58, Yale School of Management.
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    4. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
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    Cited by:

    1. Tom Stargardt, 2010. "The impact of reference pricing on switching behaviour and healthcare utilisation: the case of statins in Germany," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(3), pages 267-277, June.
    2. Schneeweiss, Sebastian, 2007. "Reference drug programs: Effectiveness and policy implications," Health Policy, Elsevier, vol. 81(1), pages 17-28, April.
    3. Simone Ghislandi & Patrizio Armeni & Claudio Jommi, 2013. "The impact of generic reference pricing in Italy, a decade on," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(6), pages 959-969, December.
    4. Matteo Galizzi & Simone Ghislandi & Marisa Miraldo, 2011. "Effects of Reference Pricing in Pharmaceutical Markets," PharmacoEconomics, Springer, vol. 29(1), pages 17-33, January.
    5. Paul Grootendorst & David Stewart, 2006. "A re‐examination of the impact of reference pricing on anti‐hypertensive drug plan expenditures in British Columbia," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 735-742, July.
    6. Hokkanen, Joni & Kangasharju, Aki & Linnosmaa, Ismo & Valtonen, Hannu, 2012. "Generic substitution policy, prices and market structure: evidence from a quasi-experiment in Finland," Working Papers 35, VATT Institute for Economic Research.

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    More about this item

    Keywords

    Reference pricing; generic substitution; prescription drugs; drug cost containment; NSAIDs.;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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