Clinically Sensitive Cost-Sharing for Prescription Drugs

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Abstract
Drugs is relatively unambiguous, extending back to the HIE. 8 Specifically, increases in drug copays and shifts to tiered formularies result in decreased use of medications and lower treatment adherence. Consequently, higher cost sharing for prescription drugs lowers pharmaceutical spending. However, many observers have noted that reduced spending on prescription drugs does not necessarily imply lower spending on health care because prescription drugs are important components of chronic disease management. Medications keep patients healthy. Healthy patients are less likely to use expensive nondrug services such as hospitalizations. Thus, the extent to which higher cost sharing for prescription drugs lowers overall health care spending (and is therefore an effective cost-containment strategy) crucially depends on the magnitude of any cost-offsetting effects in other sectors of health care. These offsets imply that the net savings will be smaller than the savings within the pharmaceu- tical sector. In the extreme case, the offsets may exceed prescription drug savings, resulting in higher overall spending associated with higher copays. The article by Dormuth et al (2009), adds to the growing literature on this topic, examining changes in Ministry of Health spending in British Columbia following the introduction of 2 cost-shifting strategies on a population of elderly users of inhaled medications: the introduction of copayments and a system with income-based deductibles and coinsurance. Both strategies were found to decrease prescription drug spending, while substantially increasing net health plan spending. Specifically, the copayment introduction was associated with a C$1.98 million annual spending increase, and the IBD system cost the plan an additional C$ 5.76 million in its first 10 months of implementation. This result is consistent with other related studies which suggest cost-offsetting effects do occur, particularly among those with chronic disease. For example, several studies report increases in inpatient and emergency medical services among patients with lipid disorders, 9,10 congestive heart failure, 11 schizophrenia, 12 and diabetes following benefit caps or increases in copayments or cost sharing. Several studies investigate the extent to which increases in utilization of nondrug services offset reduced spending on prescription drugs. For example, Chandra, Gruber & McKnight (2007) studied the effects of an increase in cost sharing for physician visits and prescription drugs for retired public employees in California and found large offset effects
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