Benefit design and specialty drug use

Health Affairs

Volumn 25, Issue 5, 2006, Pages 1319-1331

  Goldman, Dana P ^a   Joyce, Geoffrey F ^a   Lawless, Grant ^b   Crown, William H ^c   Willey, Vincent ^d  

^a RAND CORPORATION   (United States)

^b AMGEN INC   (United States)

^c i3 Global   (Canada)

^d HEALTHCORE INC   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; DRUG COST; ECONOMICS; HEALTH CARE COST; HEALTH INSURANCE; HUMAN; KIDNEY DISEASE; MULTIPLE SCLEROSIS; NEOPLASM; RESOURCE ALLOCATION; RHEUMATOID ARTHRITIS; UNITED STATES;

ARTHRITIS, RHEUMATOID; DRUG COSTS; HEALTH EXPENDITURES; HUMANS; INSURANCE, PHARMACEUTICAL SERVICES; KIDNEY DISEASES; MULTIPLE SCLEROSIS; NEOPLASMS; RESOURCE ALLOCATION; UNITED STATES;

EID: 33749343314     PISSN: 02782715     EISSN: 02782715     Source Type: Journal    
DOI: 10.1377/hlthaff.25.5.1319     Document Type: Article

References (17)

1. C. Smith et al., "National Health Spending in 2004: Recent Slowdown Led by Prescription Drug Spending," Health Affairs 25, no. 1 (2006): 186-196.
2. Specialty Pharmacy News, January 2004.
3. Additional detail on our methods and results is contained in an online technical appendix at http://content.healthaffairs.org/cgi/content/full/25/5/ 1319/DC1.
4. Not every health plan was available in both years; in total there were ninety-one plan-years.
5. The cause of anemia cannot be ascertained in claims data, so all patients with anemia are included in this category. This aggregation is consistent given that specialty drugs used to treat anemia also do not vary with underlying disease. Sensitivity analysis demonstrated that the subsequent elasticities are similar when anemia patients are excluded.
6. P. Pinsonault, "Understanding Formularies: Formulary Strategies Evolve in Response to New Trends and Issues," Pharmaceutical Representative 34, no. 3 (2004): 20-23.
7. This index is similar in spirit to the market basket approach employed by D.P. Goldman et al., "Pharmacy Benefits and the Use of Drugs by the Chronically Ill," Journal of the American Medical Association 291, no. 19 (2004): 2344-2350. A true market basket could not be constructed for biologics, since the quantity of drug supplied is not recorded in medical claims.
8. The arc elasticity was computed as a quotient, where the numerator was one-half of the ratio between (1) the magnitude of the difference between the average predictions across the entire sample with the condition and (2) the sum of those averages; and the denominator was one-half of the ratio between (1) the magnitude of the difference between the twenty-fifth and seventy-fifth quartiles of our plan-generosity measure and (2) the sum of those quartiles.
9. The actual parameter estimates are available upon request. Contact Dana Goldman, dgoldman@rand.org.
10. This is shown in the online technical appendix; see Note 3.
11. M.E. Chernew, W.E. Encinosa, and R.A. Hirth, "Optimal Health Insurance: The Case of Observable, Severe Illness," Journal of Health Economics 19, no. 5 (2000): 585-609.
12. A.M. Fendrick et al., "A Benefit-based Copay for Prescription Drugs: Patient Contribution Based on Total Benefits, Not Drug Acquisition Cost," American Journal of Managed Care 7, no. 9 (2001): 861-867.
13. Although the fraction of users is low, that number is expected to greatly increase in the near future, as new drugs enter the market for the treatment of diabetes, osteoporosis, and other diseases that affect much larger populations.
14. J.P. Newhouse and the Insurance Experiment Group, Free for All? Lessons from the RAND Health Insurance Experiment (Cambridge, Mass.: Harvard University Press, 1994), Table 4.18.
15. M. Kremer, "Patent Buyouts: A Mechanism for Encouraging Innovation," Quarterly Journal of Economics 113, no. 4 (1998): 1137-1167.
16. T.J. Philipson and A.B. Jena, "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," Forum for Health Economics and Policy, 2005, Article 3, http://www.bepress.com/fhep/biomedical_research/3 (accessed 15 June 2006).
17. As long as insurance markets are competitive and production costs are low, then lower patient cost sharing will improve welfare in a static setting. M. Gaynor, D. Haas-Wilson, and W.B. Vogt, "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second-Best in Health Care Markets," Journal of Political Economy 108, no. 5 (2000): 992-1005. See also A.M. Garber, C.I. Jones, and P. Romer, "Insurance and Incentives for Medical Innovation," Forum for Health Economics and Policy, 2006, Article 4, http://www.bepress.com/fhep/biomedical_research/4 (accessed 15 June 2006), for a different approach to this issue that might justify limits on monopoly pricing.