To our knowledge this is the first national study of variation in outpatient prescription spending among adults in the VA, and the first study to assess variation of this kind in a large nationwide sample. We found widespread variation in yearly drug spending for two commonly used categories of prescription drugs. This variation in outpatient prescription spending and use exists in the VA despite a closely-managed formulary with uniform drug prices, a commitment to a uniform prescription benefit, and clinical guidance for the appropriate use of non-formulary medications.20
Moreover, VAMCs with higher spending per patient for these medication classes performed no better on quality measures.
Our findings on variation in VA prescribing are relatively consistent with prior studies in the VA system that addressed variation in outpatient prescribing, although previous studies were limited to small segments of the VA or examined variation only across VISNs.12, 14, 15
Gao and Campbell used 2003 VA data to look at trends in prescription costs and touched briefly on regional variation in prescription spending, although they did not separate inpatient and outpatient spending and did not assess the relationship between spending and quality.13
In the only other study we are aware of examining facility-level variation in outpatient prescription use in the entire VA, Aspinall et al. reported regional variation in rates of antibiotic prescribing for Veterans with upper-respiratory infections.9
Health outcomes associated with medication treatment were not examined.
Variation in prescription drug spending within the VA cannot be attributed to differences in prices paid for drugs. Prices (i.e., unit costs) are generally negotiated at the national level and vary only slightly across VAMCs, unlike prescription prices outside of the VA which vary markedly across institutions and classes of payer (e.g., uninsured, Medicaid, private insurer).30-32
Prescription prices can also vary over short time intervals, even days, in the private sector and true prices are difficult to obtain because of undisclosed manufacturer rebates, which would affect the measurement of prescription spending variation outside the VA.
Nor can these differences in use and spending be attributed to differences in VAMC formularies. We found significant differences across VAMCs in the use of brand-name non-formulary agents despite the presence of a national formulary and guidance for the use of non-formulary drugs. One explanation for this variation may be that although the formulary is the same across the VA, the procedures for adjudicating non-formulary requests (the process by which providers ask to use non-formulary agents) may vary by VAMC. We found that VA facilities that spent more per patient for one drug class were more likely to spend more on the other class as well. The VA may consider disseminating throughout the system best practices in formulary management from VAMCs with low pharmacy costs who perform well on quality of care measures.
Patient-level factors could explain variation in prescribing if patients at certain facilities are more or less likely to require non-formulary medications, either because of more severe comorbid illness or differences in risk of side-effects. When we repeated our analysis using only VAMCs with the highest complexity rating, our results were similar; however, our use of aggregate data means we cannot control for individual-level factors that might affect the need for more expensive agents. Differences in facility characteristics across quartiles of spending do not seem large enough to explain the level of variation we observed. In fact, the lower percentage of patients using insulin at VAMCs in the most expensive quartile argues against the idea that sicker patients are leading to higher costs at these VAMCs. In addition, regression analyses adjusting for facility level factors did not change the relationship, or lack thereof, between spending and quality.
Provider prescribing patterns differ by specialty, practice setting, level of training, age, and academic affiliation and these factors could explain some of the documented variation. Studies show that much of the variation in medication choice and choice of generic vs. brand name drugs is related to unobserved physician factors.33
It is unclear to what extent pharmaceutical promotion to physicians, for example, influences the prescribing behavior of VA physicians. VA ethics rules prohibit acceptance of significant gifts from the pharmaceutical industry and generally VAs do not accept free samples, although there is variation across VAMCs in the level of access to pharmaceutical sales representatives. Of note, VA has no authority to limit interactions with industry representatives for those providers who have dual affiliations with non-VA organizations.
In addition, because of the fluid way in which VA providers cross in and out of the VA system, especially in academic centers, local area practice patterns (the same ones that affect private practice physicians) may affect VA physicians.34
VA physicians may, in fact, prescribe similarly to non-VA physicians in the same region. Additionally, some VA patients bring prescriptions from private physicians to the VA and ask VA providers to “re-prescribe” them, suggesting that the effect of local area practice patterns on patients may be as important to the VA as the effect on providers.
Our work has important limitations. Our data are aggregated at the facility-level, and, as discussed above, we cannot risk adjust each facility’s prescription use to understand how differences in patient or provider factors may affect facility-level variation. In addition, there can be legitimate reasons why patients require brand name drugs in the VA, and our data do not allow us to focus on the appropriateness of use. Second, we cannot account for non-VA prescription use in our analysis, although we believe that Veterans who fill prescriptions in the VA (and thus are included in our sample) often do so because of the lower copay for these medications and thus would be unlikely to fill the same prescriptions outside the VA. There are some Veterans who fill prescriptions outside the VA using the $4 generic programs from large pharmacy retailers; the VA does not, however, have data on use of these programs by Veterans. We believe the overall impact of these low-cost generics for Veterans who are filling prescriptions in the VA was likely small in FY 2008. Third, variation in spending across VAMCs might be related to differences in patient refill adherence. Given that the degree of variation in cost per patient was similar to cost per prescription, we are confident that differences in adherence are not driving our findings. Fourth, we believe that HEDIS measures for diabetes and hyperlipidemia are important facility-level measures of quality of care and thus use them in our analysis; however, there are factors aside from prescription use that would affect these quality scores and the use of two quality measures may not adequately assess overall quality of care for patients with diabetes or hyperlipidemia.