Beyond survey data: A claims-based analysis of drug use and spending by the elderly

Health Affairs

Volumn 19, Issue 2, 2000, Pages 198-211

  Stcinberg, Earl P ^a,b   Gutierrez, Benjamin ^c   Momani, Aiman ^c   Boscarino, Joseph A ^c   Neuman, Patricia ^d   Deverka, Patricia ^e  

^a UK   (United States)

^b JOHNS HOPKINS UNIVERSITY SCHOOL OF MEDICINE   (United States)

^c Ctr Outcomes Msrmt Perf Assess   (United States)

^d HENRY J KAISER FAMILY FOUNDATION   (United States)

^e COMPA ^*

Author keywords

[No Author keywords available]

Indexed keywords

AGE DISTRIBUTION; AGED; AMBULATORY CARE; ARTICLE; CHRONIC DISEASE; COST OF ILLNESS; DRUG COST; DRUG UTILIZATION; ECONOMICS; FEMALE; FINANCIAL MANAGEMENT; HEALTH CARE COST; HEALTH INSURANCE; HUMAN; INSURANCE; MALE; MEDICARE; PRESCRIPTION; SEX RATIO; STATISTICS; UNITED STATES; UTILIZATION REVIEW;

AGE DISTRIBUTION; AGED; AGED, 80 AND OVER; AMBULATORY CARE; CHRONIC DISEASE; COST OF ILLNESS; DRUG COSTS; DRUG UTILIZATION; FEMALE; FINANCING, PERSONAL; HEALTH EXPENDITURES; HUMANS; INSURANCE BENEFITS; INSURANCE CLAIM REPORTING; MALE; MANAGED CARE PROGRAMS; MEDICARE; PRESCRIPTIONS, DRUG; SEX DISTRIBUTION; UNITED STATES;

EID: 0034146644     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.19.2.198     Document Type: Article

References (33)

1. M. Davis et al., "Prescription Drug Coverage, Utilization, and Spending among Medicare Beneficiaries," Health Affairs (Jan/Feb 1999): 231-243; J. Poisal et al., "Prescription Drug Coverage and Spending for Medicare Beneficiaries," Health Care Financing Review (Spring 1999): 15-27; M. Gluck, A Medicare Prescription Drug Benefit, Medicare Brief No. 1 (Washington: National Academy of Social Insurance, April 1999); and M. Gibson et al., How Much Are Medicare Beneficiaries Paying Out-of-Pocket for Prescription Drugs? (Washington: AARP Public Policy Institute, September 1999).
2. M. Davis et al., "Prescription Drug Coverage, Utilization, and Spending among Medicare Beneficiaries," Health Affairs (Jan/Feb 1999): 231-243; J. Poisal et al., "Prescription Drug Coverage and Spending for Medicare Beneficiaries," Health Care Financing Review (Spring 1999): 15-27; M. Gluck, A Medicare Prescription Drug Benefit, Medicare Brief No. 1 (Washington: National Academy of Social Insurance, April 1999); and M. Gibson et al., How Much Are Medicare Beneficiaries Paying Out-of-Pocket for Prescription Drugs? (Washington: AARP Public Policy Institute, September 1999).
3. M. Davis et al., "Prescription Drug Coverage, Utilization, and Spending among Medicare Beneficiaries," Health Affairs (Jan/Feb 1999): 231-243; J. Poisal et al., "Prescription Drug Coverage and Spending for Medicare Beneficiaries," Health Care Financing Review (Spring 1999): 15-27; M. Gluck, A Medicare Prescription Drug Benefit, Medicare Brief No. 1 (Washington: National Academy of Social Insurance, April 1999); and M. Gibson et al., How Much Are Medicare Beneficiaries Paying Out-of-Pocket for Prescription Drugs? (Washington: AARP Public Policy Institute, September 1999).
4. M. Davis et al., "Prescription Drug Coverage, Utilization, and Spending among Medicare Beneficiaries," Health Affairs (Jan/Feb 1999): 231-243; J. Poisal et al., "Prescription Drug Coverage and Spending for Medicare Beneficiaries," Health Care Financing Review (Spring 1999): 15-27; M. Gluck, A Medicare Prescription Drug Benefit, Medicare Brief No. 1 (Washington: National Academy of Social Insurance, April 1999); and M. Gibson et al., How Much Are Medicare Beneficiaries Paying Out-of-Pocket for Prescription Drugs? (Washington: AARP Public Policy Institute, September 1999).
5. Davis et al., "Prescription Drug Coverage"; Poisal et al., "Prescription Drug Coverage and Spending"; and M.L. Berk, C.L. Schur, and P. Mohr, "Using Survey Data to Estimate Prescription Drug Costs" Health Affairs (Fall 1990): 146-156.
6. Davis et al., "Prescription Drug Coverage"; Poisal et al., "Prescription Drug Coverage and Spending"; and M.L. Berk, C.L. Schur, and P. Mohr, "Using Survey Data to Estimate Prescription Drug Costs" Health Affairs (Fall 1990): 146-156.
7. Davis et al., "Prescription Drug Coverage"; Poisal et al., "Prescription Drug Coverage and Spending"; and M.L. Berk, C.L. Schur, and P. Mohr, "Using Survey Data to Estimate Prescription Drug Costs" Health Affairs (Fall 1990): 146-156.
8. We used Specific Therapeutic Class (STC) and Hierarchical Ingredient Code List (HICL) codes to identify persons who had specific diseases. The STC is used to classify drugs according to the most common intended use. The HICL is used to identify a unique combination of ingredients, irrespective of manufacturer, package size, dosage form, drug strength, or route of administration. A summary of the mapping algorithm we used can be obtained from the authors by contacting Benjamin Gutierrez via e-mail, Benjarnin_Gutierrez@merck.com
9. We chose to report total drug spending in terms of AWP, rather than actual transaction price, because we believe that it provides a more useful reference point for readers than would actual transaction prices. The latter, of course, would reflect the discounts obtained by MMMC from pharmaceutical manufacturers and retail pharmacies. Numerous factors influence those discounts, including whether both brand-name and generic products are available and, if so, which is being purchased; the number of drugs available (that is, the amount of competition between drugs) in the relevant therapeutic class; whether the drug is being obtained from a retail or mail-order pharmacy; and the negotiating strength of the payer (buyer), which tends to be related to the degree of formulary control. The discount rates obtained by MMMC thus are not necessarily representative of those that others would obtain, and the actual weighted average discount obtained by MMMC for a given population will depend on purchasing behavior (generic-use rate and mail-order use). It also will vary over time because of the introduction of new pharmaceutical products. Managed care organizations are reported to have obtained a weighted average discount of 14.3 percent off of AWP for drug purchases in 1998. See "Drug Benefit Design," Novartis Pharmacy Report (Totowa, N.J.: Emron, 1999). Others have estimated that the overall average discount off of manufacturer's list price was 16 percent in 1992 and as high as 30 percent for mail-order purchases. See J. Bobula, "A New Era in Pharmaceutical Pricing," Journal of Research in Pharmaceutical Economics 7, no. 1/2 (1996): 89-99. PBMs obtain discounts of 14-20 percent for brand-name drugs and 14-90 percent for generic drugs. Based on the distribution of brand-name versus generic, and retail versus mail-order, purchases by persons in our study, we estimate that the weighted average discount for our sample was 14-30 percent. The MCBS applied various pricing factors to AWP to estimate the actual prices paid by respondents who purchased drugs but did not recall their price. The MCBS assumed that retail prices were as high as 272 percent of AWP and that managed care organizations paid 86.1 percent of AWP, on average. See Health Care Financing Administration, Office of Strategic Planning, Information and Methods Group, "Medicare Current Beneficiary Survey CY 1996 Cost and Use, Public Use File Documentation" (Baltimore: HCFA, 1999).
10. We chose to report total drug spending in terms of AWP, rather than actual transaction price, because we believe that it provides a more useful reference point for readers than would actual transaction prices. The latter, of course, would reflect the discounts obtained by MMMC from pharmaceutical manufacturers and retail pharmacies. Numerous factors influence those discounts, including whether both brand-name and generic products are available and, if so, which is being purchased; the number of drugs available (that is, the amount of competition between drugs) in the relevant therapeutic class; whether the drug is being obtained from a retail or mail-order pharmacy; and the negotiating strength of the payer (buyer), which tends to be related to the degree of formulary control. The discount rates obtained by MMMC thus are not necessarily representative of those that others would obtain, and the actual weighted average discount obtained by MMMC for a given population will depend on purchasing behavior (generic-use rate and mail-order use). It also will vary over time because of the introduction of new pharmaceutical products. Managed care organizations are reported to have obtained a weighted average discount of 14.3 percent off of AWP for drug purchases in 1998. See "Drug Benefit Design," Novartis Pharmacy Report (Totowa, N.J.: Emron, 1999). Others have estimated that the overall average discount off of manufacturer's list price was 16 percent in 1992 and as high as 30 percent for mail-order purchases. See J. Bobula, "A New Era in Pharmaceutical Pricing," Journal of Research in Pharmaceutical Economics 7, no. 1/2 (1996): 89-99. PBMs obtain discounts of 14-20 percent for brand-name drugs and 14-90 percent for generic drugs. Based on the distribution of brand-name versus generic, and retail versus mail-order, purchases by persons in our study, we estimate that the weighted average discount for our sample was 14-30 percent. The MCBS applied various pricing factors to AWP to estimate the actual prices paid by respondents who purchased drugs but did not recall their price. The MCBS assumed that retail prices were as high as 272 percent of AWP and that managed care organizations paid 86.1 percent of AWP, on average. See Health Care Financing Administration, Office of Strategic Planning, Information and Methods Group, "Medicare Current Beneficiary Survey CY 1996 Cost and Use, Public Use File Documentation" (Baltimore: HCFA, 1999).
11. We chose to report total drug spending in terms of AWP, rather than actual transaction price, because we believe that it provides a more useful reference point for readers than would actual transaction prices. The latter, of course, would reflect the discounts obtained by MMMC from pharmaceutical manufacturers and retail pharmacies. Numerous factors influence those discounts, including whether both brand-name and generic products are available and, if so, which is being purchased; the number of drugs available (that is, the amount of competition between drugs) in the relevant therapeutic class; whether the drug is being obtained from a retail or mail-order pharmacy; and the negotiating strength of the payer (buyer), which tends to be related to the degree of formulary control. The discount rates obtained by MMMC thus are not necessarily representative of those that others would obtain, and the actual weighted average discount obtained by MMMC for a given population will depend on purchasing behavior (generic-use rate and mail-order use). It also will vary over time because of the introduction of new pharmaceutical products. Managed care organizations are reported to have obtained a weighted average discount of 14.3 percent off of AWP for drug purchases in 1998. See "Drug Benefit Design," Novartis Pharmacy Report (Totowa, N.J.: Emron, 1999). Others have estimated that the overall average discount off of manufacturer's list price was 16 percent in 1992 and as high as 30 percent for mail-order purchases. See J. Bobula, "A New Era in Pharmaceutical Pricing," Journal of Research in Pharmaceutical Economics 7, no. 1/2 (1996): 89-99. PBMs obtain discounts of 14-20 percent for brand-name drugs and 14-90 percent for generic drugs. Based on the distribution of brand-name versus generic, and retail versus mail-order, purchases by persons in our study, we estimate that the weighted average discount for our sample was 14-30 percent. The MCBS applied various pricing factors to AWP to estimate the actual prices paid by respondents who purchased drugs but did not recall their price. The MCBS assumed that retail prices were as high as 272 percent of AWP and that managed care organizations paid 86.1 percent of AWP, on average. See Health Care Financing Administration, Office of Strategic Planning, Information and Methods Group, "Medicare Current Beneficiary Survey CY 1996 Cost and Use, Public Use File Documentation" (Baltimore: HCFA, 1999).
12. Poisal et al., "Prescription Drug Coverage and Spending."
13. The two clients that did not impose copayments in 1998 have instituted them since then. Increased beneficiary cost sharing is an industrywide trend.
14. K. Levit et al., "Health Spending in 1998: Signals of Change," Health Affairs (Jan/Feb 2000): 124-132.
15. The source for the 18 percent estimate is Congressional Budget Office, The Economic and Budget Outlook, 1999-2008 (Washington: U.S. Government Printing Office, 1999). The source for the 15.4 percent estimate is Levit et al., "Health Spending in 1998."
16. The source for the 18 percent estimate is Congressional Budget Office, The Economic and Budget Outlook, 1999-2008 (Washington: U.S. Government Printing Office, 1999). The source for the 15.4 percent estimate is Levit et al., "Health Spending in 1998."
17. M. Lashchober and G. Olin, "Health and Health Care of the Medicare Population: Data from the 1992 Medicare Beneficiary Survey" (Rockville, Md.: Westat, November 1996); and Poisal et al., "Prescription Drug Coverage and Spending."
18. M. Lashchober and G. Olin, "Health and Health Care of the Medicare Population: Data from the 1992 Medicare Beneficiary Survey" (Rockville, Md.: Westat, November 1996); and Poisal et al., "Prescription Drug Coverage and Spending."
19. See Note 4.
20. Davis et al., "Prescription Drug Coverage"; Poisal et al., "Prescription Drug Coverage and Spending"; and Berk et al., "Using Survey Data to Estimate Prescription Drug Costs."
21. Davis et al., "Prescription Drug Coverage"; Poisal et al., "Prescription Drug Coverage and Spending"; and Berk et al., "Using Survey Data to Estimate Prescription Drug Costs."
22. Davis et al., "Prescription Drug Coverage"; Poisal et al., "Prescription Drug Coverage and Spending"; and Berk et al., "Using Survey Data to Estimate Prescription Drug Costs."
23. S. Soumerai and D. Ross-Degnan, "Inadequate Prescription-Drug Coverage for Medicare Enrollees - A Call to Action," New England Journal of Medicine (4 March 1999): 722-727.
24. Ibid.
25. Poisal et al., "Prescription Drug Coverage and Spending."
26. Ibid.; and Davis et al., "Prescription Drug Coverage."
27. Ibid.; and Davis et al., "Prescription Drug Coverage."
28. Ibid.
29. Gibson et al., How Much Are Medicare Beneficiaries Paying?
30. Davis et al., "Prescription Drug Coverage"; and Poisal et al., "Prescription Drug Coverage and Spending."
31. Davis et al., "Prescription Drug Coverage"; and Poisal et al., "Prescription Drug Coverage and Spending."
32. R. Winslow, "Co-payments Rise for Prescriptions,"Wall Street Journal, 12 January 1999, B1.
33. M. McClellan, I.D. Spatz, and S. Carney, "Designing a Medicare Prescription Drug Benefit: Issues, Obstacles, and Opportunities," Health Affairs (Mar/Apr 2000): 26-41.