Patients who join the new Medicare prescription drug plan gain much needed assistance but still have to pay a substantial portion of their medication costs through deductible and coinsurance payments. Those cost-sharing mechanisms give patients a financial incentive to use less expensive therapies because they pay more for higher priced drugs. Drug plans that use cost sharing typically require patients to pay some portion of a prescription regardless of whether the drug is relatively expensive or inexpensive. One exception is a reference pricing (RP) policy in which the drug plan pays fully for the lowest cost brand among therapeutically equivalent drugs, and requires patients who use more expensive brands to pay the difference.1
In this sense, RP is similar to a tiered copayment (copay) plan where the lowest tier, consisting of the least expensive drug, does not require a copay.
Previous studies have examined the effects of copays, tiered copays, and RP on drug spending by plans and patients,2–4
and drug stopping.5–7,10–12
Some studies have estimated the effect of cost-sharing policies on health-related outcomes other than prescription drug use.11,13,14
RP of angiotensin-converting enzyme inhibitors was found to reduce net health plan spending in British Columbia (BC).3
In 2005, a review of 30 studies concluded that cost sharing reduces the consumption of prescription drugs but may have unintended effects on the process and outcomes of therapy.15
Although patient and societal consequences of cost-sharing policies are also important, from a health plan’s perspective it is important to understand how changes in prescription drug cost sharing between patients and the plan causes changes in spending on other insured services.
It is plausible that cost containment measures that focus on price or reimbursement level, but unlike RP do not fully reimburse therapeutically equivalent alternatives, may result in a higher risk of reduced drug utilization that could lead to increased health care utilization and adverse health outcomes. The publicly funded drug plan in the Province of BC, Canada, has provided an opportunity to study this effect in a natural experiment involving most residents of BC over 65 years of age. In January 2002, after 28 years of paying all eligible prescription ingredient costs for residents over 65 years of age, BC Pharmacare, the provincial drug plan operated by the Ministry of Health (MOH), introduced a copay policy for older residents of $25 per prescription. Sixteen months later the copay policy was replaced with an income-based deductible plus coinsurance policy (IBD).
Older patients with asthma or chronic obstructive pulmonary disease were at particular risk of reducing their use of inhaled medications in response to cost sharing because their drugs are relatively expensive. Before this study we estimated a 6% reduction in use of inhaled β2
agonists and a 13% reduction in use of inhaled steroids during the 16 months of the copay policy and the first 14 months of the IBD policy.10
To determine if the policies adversely affected health outcomes we conducted a cohort study of older chronic users of inhalers who likely had chronic obstructive pulmonary disease, asthma, or emphysema (CAE). Both policies were associated with significant increases in physician visits (3% during the copay policy, 7% during the IBD policy), and the IBD policy was associated with a significant increase of 29% in emergency hospital admissions for CAE in the first 10 months. We found no evidence of a significant change in CAE mortality or all-cause mortality.16
The objective of this study was to estimate the net change in health plan spending by the BC MOH from the copay and IBD policies compared with the previous policy of full coverage in patients over 65 years of age who chronically used inhaled medications. In a secondary analysis, we estimated the impact of the policy changes on patient out-of-pocket spending for inhalers.