Implementation of 3-tier formularies are intended to help control prescription drug costs by encouraging enrollees and their physicians to select drugs that are preferred by the plan. By moving prescription volume toward a subset of drugs in a class, the plan may negotiate larger rebates from manufacturers, further lowering drug costs.
The employer we studied made a major change in its pharmacy benefits by moving from a 1-tier to a 3-tier formulary and implementing an across-the-board copayment increase. These changes resulted in a decrease in expected total ADHD medication expenditures per enrollee and a substantial shifting of ADHD medication costs from the plan to the family. Three-tier adoption also resulted in a decrease in the probability of using an ADHD medication but did not lead to higher rates of medication use discontinuation, which suggests that the decrease in probability of use may be driven by lower rates of medication initiation. An important question to consider is whether such reduction in use was clinically appropriate. We were unable to make this determination using claims data. The results also indicate that 3-tier adoption led to a higher rate of medication changes for pre-period medication users in the intervention group (P = .08), but the absolute proportion of patients who changed medication (11%) was relatively low. The ability to shift demand is important because manufacturers are otherwise unlikely to be willing to negotiate large rebates.
Only 1 brand-name drug, Adderall, was assigned tier 2 status at the same time as the 3-tier formulary implementation, and this drug had a generic version available in tier 1. Since there was a generic version available, this policy may have primarily been intended to provide incentives for patients who took Adderall to switch to the generic amphetamine mixture and pay an $8 copayment instead of $15.
The April 2001 tier changes added 3 longer-acting drugs to tier 2 for which there was not a comparable generic alternative available in tier 1. Although the tier changes resulted in an increase in plan spending and a small decrease in enrollee spending for intervention group users relative to comparison group users, these changes did not appear to affect rates of medication change or discontinuation of use.
These results differ from the results of a similar analysis of 3 drug classes used to treat chronic conditions in adults (angiotensin-converting enzyme inhibitors, proton pump inhibitors, and 3-hydroxy-3-methylglutaryl coenzyme A reductase inhibitors or statins).6
Although only 18% of children who used a tier 3 ADHD medication in the 6 months before 3-tier adoption (and thus faced the largest increase in copayments) changed to a lower-tier medication, between one third and one half of pre-period tier 3 users of the 3 adult drug classes changed to a lower-tier medication; the rate of changing medications was significantly higher for the intervention than for the comparison group. One potential explanation is that parents of ongoing users of ADHD medications may be reluctant to request a medication change in response to the cost-sharing increases if the current treatment regimen has proven effective for the child.
Our study had several limitations. We were unable to obtain proprietary data on changes in the magnitude of manufacturer rebates that may have resulted from the formulary changes. As a result, our estimates of the effect of the changes on plan and total spending are likely to be underestimated. The study lacked the statistical power to determine precise differences in patterns of use when using relatively restrictive criteria for identifying a medication user. Ideally, we would compare drugs used to treat ADHD with other classes of long-term–use medications used commonly by children to determine whether parents and physicians are particularly reluctant to change ADHD medications (or perhaps psychotropics more generally) or whether results would be similar for all medications used for children. However, many drug classes often given to children, like antibiotics, are used to treat episodic or acute conditions. The only other class of drugs used to treat chronic conditions with use rates that are high enough to study with our sample is asthma medications. However, the drugs in this class are often not included in incentive formularies since the therapeutic substitutability of different types of agents is considered to be limited. This study examines the experience of a single employer with a primarily hourly workforce that made a dramatic change to its pharmacy benefits and a comparison group of employers with stable pharmacy benefits. Our findings may not be generalizable to other employers, particularly those who make less dramatic changes in formulary and benefit design. We cannot be sure that the groups do not differ in terms of unobservable characteristics, such as income, that could influence the effect of the policy changes. However, the study design was chosen to protect against such Influences if they are stable over time. Finally, the study period ended before the introduction of Strattera (Eli Lilly and Co, Indianapolis, Ind), a nonstimulant medication used to treat ADHD, so we were unable to assess the effect of formulary changes on use of this drug.
In conclusion, the relatively dramatic change in cost-sharing requirements resulting from 1 employer’s adoption of a 3-tier formulary reduced the rate of growth in use of ADHD medications but did not cause most ongoing users to substantially change their patterns of medication use, relative to the comparison group. The overall result of the changes was to shift costs onto families of children receiving ADHD medication therapy. The subsequent movement of 3 longer-acting medications from tier 3 to tier 2 reversed a portion of the cost shifting by increasing plan spending and somewhat decreasing family spending but had no effect on continued medication use. Because incentive formularies differ on a number of key dimensions that are likely to influence drug use and spending patterns for children with ADHD, case studies of other incentive formularies are needed to understand the impact of these arrangements on children with ADHD and their families. These studies should examine the effect of incentive formularies on drug use and spending patterns, as well as other important outcomes including educational outcomes, self-esteem, and relationships with family and peers.