Extensions of intellectual property rights and delayed adoption of generic drugs: effects on medicaid spending

Rising prescription drug costs present a critical policy issue for Medicaid. Generic substitution can reduce costs, but the effects are undercut by extensions of intellectual property (IP) protection, elevated generic prices, and low substitution rates. Using Medicaid prescription data for amoxicillin/clavulanate, metformin, and omeprazole, we calculated the savings that could have been realized if generic drugs had been available and fully substituted at their lowest cost when IP protection first expired (an average delay of twenty-six months). The delay in availability, elevated prices, and slow uptake of generic alternatives for these three drugs alone cost Medicaid 1.5 billion dollars in 2000-2004.

Health spending projections through 2016: modest changes obscure part D's impact

Growth in national health spending is projected to slow slightly from 6.9 percent in 2005 to 6.8 percent in 2006, marking the fourth consecutive year of a slowing trend. The health share of gross domestic product (GDP) is expected to hold steady in 2006 before resuming its historical upward trend, reaching 19.6 percent of GDP by 2016. Prescription drug spending growth is expected to accelerate to 6.5 percent in 2006. Medicare prescription drug coverage has dramatically changed the distribution of drug spending among payers, but the net effect on aggregate spending is anticipated to be small.

Effect of local competition on the willingness of community pharmacies to supply medication therapy management services

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) provides a prescription drug benefit for Medicare-eligible seniors that includes access to medication therapy management services (MTMS) through pharmacists. We theorize that local community pharmacy market competition affects the decision of individual community pharmacies to provide MTMS. Our model suggests that MTMS services are more apt to be supplied in markets at the extremes of community pharmacy concentration (very low and very high). We found that local community pharmacy competition affected the service choices made by the pharmacy decision-makers willing to provide MTMS in a manner consistent with our theory. As a result, patient access to MTMS services depends on both (1) patient access to pharmacies willing to provide MTMS and (2) the level of local community pharmacy competition.

Booming Prescription Drug Expenditure

BACKGROUND

Prescription drug expenditures in North America have nearly doubled in the past 5 years, creating intense pressure for all public and private benefits managers and policymakers.

OBJECTIVE

The objective of this study was to describe age-specific drug expenditure trends from 1996 to 2002 for the Canadian province of British Columbia.

STUDY DESIGN

This study shows changes in expenditures per capita quantified for 5 age categories: residents aged 0 to 19, 20 to 44, 45 to 64, 65 to 84, and 85 and older. The cost impacts of 7 determinants of prescription drug expenditures are quantified.

DATA

This study describes population-based, patient-specific pharmaceutical data showing the type, quantity, and cost of every prescription drug purchased by virtually all residents of British Columbia.

RESULTS

Population-wide expenditures per capita grew at a rate of 11.6% per annum. Growth was primarily driven by the selection of more costly drugs per course of treatment and increases in the number concomitant treatments received per patient. Population aging did not have a major impact on expenditures. However, expenditure per capita grew most rapid among residents aged 45 to 64, the cohort that expended most over the period. The aging of this demographic cohort may threaten the financial viability of age-based drug benefit programs.

Do Drug Prices Reflect Development Time and Government Investment?

BACKGROUND

Lengthy development times are cited by the pharmaceutical industry as one reason for high drug prices.

OBJECTIVE

We compared the prices of different groups of drugs after accounting for development time, government support, market size, and other drug characteristics.

DESIGN

We conducted a retrospective study of 180 human therapeutic drugs categorized into 8 drug groups by assembling data on drug development times, government support, drug characteristics, and prices.

MEASURES

First, we compared the development time and level of government support across the 8 drug groups. Second, we assessed the independent effect of drug group on median price per day in a multivariable analysis, controlling for development time and all other variables.

RESULTS

Thirty percent of antiretroviral drugs had government patents compared with 16% of other infectious disease drugs, 6% of cancer drugs, and less than 6% of any other drug group (P < 0.002). Fifty percent of antiretrovirals had NIH trials listed in the new drug application for approval by the Food and Drug Administration compared with less than 6% of any other drug group (P < 0.001). More antiretroviral and cancer drugs received fast track status and accelerated review during regulatory review by the Food and Drug Administration (P < 0.001). The median price of antiretrovirals was 8 US dollars per day more, cancer drugs 11 US dollars per day more, than the reference group after adjustment for other variables (P < 0.001). Development time was not associated with drug price.

CONCLUSIONS

Antiretroviral and cancer drugs, even after accounting for development time, are among the most highly priced medications. Notably, drugs with rapid development and more government support did not have lower drug prices.

Current and future forecasts of service use and expenditures of Medicaid-eligible schizophrenia patients in the state of Georgia

This study linked all claims data for reimbursable medical services and drugs of a cohort of 16,227 Medicaid-eligible recipients diagnosed with schizophrenia residing in the State of Georgia, with the treatment history file and Hospital Medical Information System file of each of the ten Georgia State psychiatric hospitals (Georgia Department of Human Resources [DHR]), which do not routinely bill Medicaid for services rendered. This provided a comprehensive picture of the medical resources consumed for each schizophrenia patient, allowing determination of expenditure use patterns, as well as forecast of future medical costs. Patient-level data were aggregated by category of service and reported as costs per member per month (PMPM). Autoregressive integrated moving average time series models described the temporal pattern of expenditures for 8 years of total cost data and were used to forecast expenditures 5 years into the future. From 1990 to 1997, total cumulative expenditures were over 1.09 billion dollars, expressed in 1995 constant dollars. DHR institutional care dominated the cost of care, but expenditures significantly decreased over time. Apparently offsetting this decrease was an increase in prescription drug cost between 1990 and 1995, from 5.7 percent of total expenditures to 10.5 percent. Total Medicaid and Medicare expenditures in 1995 dollars were relatively constant at approximately 700 dollars PMPM. Prescription expenditures increased from 50 dollars in 1990 to 100 dollars PMPM in 1997 and were projected to increase to 150 dollars in 2002. Expenditures were lower for persons continuously eligible for Medicaid than for the total cohort. Trends include a significant increase in prescription expenditures over time concurrent with decreases in inpatient expenditures and relatively stable changes in community mental health center expenditures.

Why did drug spending increase during the 1990s? A decomposition based on Swedish data

OBJECTIVE

To decompose drug spending in Sweden between the years 1990 and 2000. This paper updates a previous study, which looked at the period 1990-1995, by providing an additional 5 years of data (1995-2000) and extending the previous analysis in a number of ways.

METHODS

The paper builds on the earlier work that showed that changes in drug spending could be decomposed into three components: price, quantity and a residual. The size of the residual is a measure of the impact of changes in drug treatment patterns on drug spending. The data set used in this paper was collected from Apoteket AB (The National Corporation of Swedish Pharmacies) and was based on comprehensive information (inpatients as well as outpatients) on drug deliveries from wholesalers to pharmacies. Data were obtained for aggregate drug spending (from 1990-2000) and for spending according to anatomical therapeutic chemical (ATC) classification system group.

RESULTS

Real drug spending increased by 119% during the study period. The residual rose by 67% indicating the switch from cheaper to more innovative and expensive drug therapies was a major cost driver. Real drug spending would have increased by about 31% if there had been no changes in treatment patterns. The second driver of drug spending was the quantity of drugs consumed, which increased by 41%. The main reason for the larger quantity sold appears to be increases in the intensity of medication in terms of defined daily doses per patient, rather than a larger number of patients starting drug treatment. Real prices decreased during the 10-year study period. We found large differences between ATC groups in terms of spending growth. The ATC groups that have contributed the most to the increase in spending are: drugs that affect the CNS (N), the alimentary tract and metabolism (A) and the cardiovascular system (C), which are also the three largest groups in terms of sales. For all three groups, it was the residual that mainly drove costs.

CONCLUSION

This study indicates very clearly that the main driving force behind the increase in drug costs in Sweden between 1990 and 2000 was the change in drug therapy from old to new and more innovative and expensive drug therapies. This shows the importance of carrying out economic evaluations of new more costly drugs in order to make an assessment of the social benefits of a switch from a cheaper to a more expensive drug.

Trends in psychotropic medication costs for children and adolescents, 1997-2000

OBJECTIVE

To examine trends in psychotropic medication utilization and costs for children and adolescents between January 1, 1997, and December 31, 2000.

METHODS

Pharmacy claims were analyzed for mental health users 17 years and younger (N = 83 039) from a national database covering 1.74 million privately insured youths. Utilization rates and costs for dispensed medications were compared across psychotropic drug categories and individual agents over time.

RESULTS

Overall use of psychotropic drugs increased from 59.5% of mental health outpatients in 1997 (a 1-year prevalence of 28.7 per 1000) to 62.3% in 2000 (33.7 per 1000), a 4.7% increase. The largest changes in utilization were seen for atypical antipsychotics (138.4%), atypical antidepressants (42.8%), and selective serotonin reuptake inhibitors (18.8%). The average prescription price increased by 17.6% (7.90 US dollars per prescription), a change in turn attributed to a shift toward costlier medications within the same category (55.1% of the increase, or 4.35 US dollars) and to pure inflation (44.9% of the increase, or 3.55 US dollars; P for trend <.001 for all comparisons). Almost half (46.7%) of the 2.7 million US dollars gross sales differential was accounted for by only 3 of the 39 drugs identified (amphetamine compound, risperidone, and sertraline), and 75% was accounted for by 7 drugs (the previous 3 and bupropion, paroxetine, venlafaxine, and citalopram).

CONCLUSIONS

Psychotropic drug expenditure increases during the late 1990s resulted from more youths being prescribed drugs, a preference for newer and costlier medications, and the net effects of inflation. The impact of managed care and pharmaceutical marketing effects on these trends warrants further study.

Topical corticosteroid prescribing patterns following changes in drug benefit status

OBJECTIVE

To examine changes in prescribing patterns for topical corticosteroid products dispensed to elderly patients in Nova Scotia, Canada, after all but 2 combination topical corticosteroid products were removed from the Nova Scotia Seniors' Pharmacare Program benefit list.

METHODS

Administrative prescription claims from the Nova Scotia Seniors' Pharmacare Program were used to identify the number and costs of topical corticosteroid, antifungal, antibiotic, and combination corticosteroid products dispensed. Time-series analysis was used to compare the periods before (April 1, 1999-March 31, 2000) and after (April 1, 2000-March 31, 2001) the delisting.

RESULTS

In 1999-2000, 26,031 of 103 400 eligible elderly patients (25%) and in 2000-2001, 22,837 of 95,550 eligible elderly (24%) received a prescription for a defined topical product. Nova Scotia Seniors' Pharmacare Program expenditures for all topical products decreased from 11.88 to 10.60 Canadian dollars per beneficiary per year (11%) after the policy revision. Topical combination products decreased from 18% of all topical products dispensed to 14%, while the percentage of potent corticosteroid products dispensed increased from 24% to 27% over the study period. Pre- and post-policy time-trend analysis showed statistically significant increasing trends in cost per beneficiary for all topical products and potent corticosteroid products. Combination corticosteroid products showed no change in trends for costs per beneficiary before, and a slight increasing trend after, the policy revision.

CONCLUSIONS

Prescribing of topical corticosteroid combination products in Nova Scotia decreased following the formulary revision. There was an increase in potent topical corticosteroid prescribing. Future study involving evaluation of patient outcomes would be useful.

Approaches to pharmacy benefit management and the impact of consumer cost sharing

BACKGROUND

Numerous mechanisms have been introduced to deliver prescription drug benefits while controlling pharmaceutical costs. An understanding of the most prominent mechanisms of benefit management is an important step in determining the most effective approach to take in future years.

OBJECTIVES

The aims of this review were to illustrate the mechanisms by which managed care has attempted to efficiently and equitably deliver pharmacy benefits and to discuss the impact of such programs, including consumer cost sharing.

METHODS

A review of the literature was conducted using the PreMedline and MEDLINE databases from the years 1966 to 2002, reference lists from relevant articles, and online sources, including news releases, conference materials, and pharmacy benefit management reports.

RESULTS

Numerous pharmacy benefit management tools and their impact on utilization, expenditures, and health outcomes are reviewed, including disease state management; utilization management (ie, quantity limitations and prior authorization); drug utilization review; formulary management (ie, open and closed); delivery systems (ie, retail and mail order); and mechanisms for implementing consumer cost sharing (ie, generic incentives, multitiered copayments, and co-insurance). Although there is some evidence to suggest that certain benefit management tools have been successful in reducing health plan expenditures, a more thorough investigation of their potential unintended consequences is needed.

CONCLUSIONS

Implementing adequate levels of consumer cost sharing is necessary if employers and health plans are to continue offering prescription drug benefits. It is important to remember, however, that quality health care cannot be forfeited for the sake of short-term cost savings.

Statistical comparison of consumer drug expenditures and discretionary purchases to assess drug affordability

BACKGROUND

Affordability may be defined as the absence of economic barriers to a good or service. There are 2 frequently observed measures of affordability: a consumer's ability to pay and his or her physical access to a good or service. Thus, most programs designed to subsidize consumers' health care costs, especially state programs that address prescription drug expenditures for people aged > or =65 years, base eligibility on measures of income as a proxy for a consumer's ability to pay. These measures do not explicitly include a consumer's willingness to pay for medications. For example, it is possible that some Medicare beneficiaries may be resistant to paying for medication because other major health care expenditures are typically covered by insurance. This resistance could be exacerbated by the keen awareness among the general population of the rising costs of medications. Because medications are considered a necessity, expenditure levels are usually compared with expenditures for other necessities, such as housing and medical services.

OBJECTIVE

In an attempt to assess consumers' potential willingness to pay for medications, this article draws on data from the US Bureau of Labor Statistics' Consumer Expenditure Surveys to compare pharmaceutical expenditures with out-of-pocket expenditures for discretionary purchases, such as dining outside the home.

RESULTS

Personal out-of-pocket expenditures for medications have ranged from 0.8% to 1.0% of consumer unit income since 1985. These expenditures are relatively small compared with those for necessities, such as housing (33%) and food (13.5%). They are also less than the share of income dedicated to many nonessentials.

CONCLUSION

Assessing inability versus unwillingness to pay for medication remains a problem for both researchers and health care policy makers attempting to determine the affordability of medications.