Total Pharmaceutical Expenditure Research Articles

Free Medicines Thanks to Retirement: Moral Hazard and Hospitalization Offsets in an NHS

This paper examines the impact of coinsurance exemption for prescription medicines applied to elderly individuals in Spain after retirement. To evaluate this coinsurance change we use a rich administrative dataset that links pharmaceutical consumption and hospital discharge records for the full population aged 58 to 65 in January 2004 covered by the public insurer in a Spanish region and we follow them until December 2006. We use a difference-in-differences strategy and exploit the eligibility age for Social Security to control for the endogeneity of the retirement decision. Our most conservative results show that the uniform exemption from pharmaceutical copayment granted to retired people in Spain increases the consumption of prescription medicines on average by 9.5%, total pharmaceutical expenditure by 15.2% and the costs borne by the insurer by 47.5%, without evidence of any offset effect in the form of reduced hospitalization. The impact is concentrated among individuals who were consumers of medicines for acute and other non-chronic diseases with a previous coinsurance rate in the range 30% to 40%.

Free Medicines Thanks to Retirement: Moral Hazard and Hospitalization Offsets in an NHS

This paper examines the impact of coinsurance exemption for prescription medicines applied to elderly individuals in Spain after retirement. To evaluate this coinsurance change we use a rich administrative dataset that links pharmaceutical consumption and hospital discharge records for the full population aged 58 to 65 in January 2004 covered by the public insurer in a Spanish region and we follow them until December 2006. We use a difference-in-differences strategy and exploit the eligibility age for Social Security to control for the endogeneity of the retirement decision. Our most conservative results show that the uniform exemption from pharmaceutical copayment granted to retired people in Spain increases the consumption of prescription medicines on average by 9.5%, total pharmaceutical expenditure by 15.2% and the costs borne by the insurer by 47.5%, without evidence of any offset effect in the form of reduced hospitalization. The impact is concentrated among individuals who were consumers of medicines for acute and other non-chronic diseases with a previous coinsurance rate in the range 30% to 40%.

Explaining Prescription Drug Use and Expenditures Using the Adjusted Clinical Groups Case-Mix System in the Population of British Columbia, Canada

Given that prescription drugs have become a major financial component of health care, there is an increased need to explain variations in the use of and expenditure on medicines. Case-mix systems built from existing administrative datasets may prove very useful for such prediction. We estimated the concurrent and prospective predictive validity of the adjusted clinical groups (ACG) system in pharmaceutical research and compared the ACG system with the Charlson index of comorbidity. We ran a generalized linear models to examine the predictive validity of the ACG system and the Charlson index and report the correlation between the predicted and observed expenditures. We reported mean predictive ratios across medical condition and cost-defined groups. When predicting use of medicines, we used C-statistics to summarize the area under the receiver operating characteristic curve. The 3,908,533 British Columbia residents who were registered for the universal health care plan for 275+ days in the calendar years 2004 and 2005. Outcomes were total pharmaceutical expenditures, use of any medicines, and use of medicines from 4+ different therapeutic categories. The ACG case mix system predicted drug expenditures better than the Charlson index. The mean predictive ratios for the ACG system models were all within 4% of the actual costs when examining medical condition group and the C-stats for the 2 dichotomous outcomes were between 0.82 and 0.89. ACG case-mix adjusters are a valuable predictor of pharmaceutical use and expenditures with much higher predictive power than age, sex, and the Charlson index of comorbidity.

Prescription Data Related to the Use of Calcium Channel Blockers, ACE Inhibitors and Angiotensin II Type 1 Receptor Antagonists (Angiotensin Receptor Blockers) in Combination Identify Savings Opportunities

Background: It is now recognized that treating hypertension with combination therapy is required to achieve target blood pressure in the majority of patients. Objective: To investigate the use of ACE inhibitors, angiotensin II type 1 receptor antagonists (angiotensin receptor blockers [ARBs]) and calcium channel blockers (CCBs) within the Lombardia Region of Italy and to evaluate associated financial implications of the use of these drugs in free combinations. Methods: Prescription data in the Administrative National Health Service (NHS) Reimbursement Database of the Lombardia Region (2004-6) were analysed for ACE inhibitor, ARB and CCB use. Data included patient code, prescription date, drug class, product license number, number of packs dispensed and actual expenditure reimbursed by the NHS, and were used to calculate the mean daily cost of free combination antihypertensive treatments. Results: ACE inhibitors, ARBs or CCBs were prescribed at least once to 1.6 million patients (17% of Lombardia population) either as single therapy (51.5% of patients receiving these drugs) or in combination therapy (48.5%). Among patients who received these drugs, 22.5% received free combination therapy (primarily ACE inhibitor plus CCB or ARB plus CCB). The mean annual cost for these drugs was h342 million, representing 18% of the total annual pharmaceutical expenditure for the region. Free combinations accounted for 14.3% of treatment days, but 28.3% of annual expenditure for these drugs. Further analysis revealed that the mean expenditure for free combinations was 2.6–31.9% higher than the sum of their individual component costs (mean increase of 5.9% for the most commonly prescribed free combinations). Conclusions: Prescription of free combination of antihypertensive drugs is associated with additional financial burden to the NHS, which may be avoided by prescribing fixed combination therapy.

Budget impact analysis of use of aliskiren in hypertension on the Italian Health Care System

Cardiovascular (CV) disease management and prevention has been the leading cost driver in health care expenditures of industrialized Countries for many years, and this trend is not expected to change in the next future. Although drugs used for the treatment of arterial hypertension and heart failure account for three fourths of the total Italian pharmaceutical expenditures in this disease area, population studies indicate that only about half of all hypertensive patients are treated for this condition, and that, among treated individuals, only a minority achieves a satisfactory and stable blood pressure control. A complementary observation is that drug expenditures, as high as they seem to be, actually account for only about a fourth of the total direct cost of CV illness, as they are exceeded by costs of hospitalizations required for the acute management of the clinical events that should be, at least partially, prevented by the same cardiovascular drugs. An often pointed out corollary to these findings is that an increase in the rate of controlled hypertension in the population, although surely linked to a further increase in pharmaceutical expenditures, carries the potential to reduce overall health care costs for the management of CV patients. As far as drug treatment is concerned, there seem to be three applicable strategies capable of increasing blood pressure control rates, i.e. interventions directed toward the increase of the treated population, interventions aimed at improving compliance, and the introduction of innovative drugs to cover unmet needs. Aliskiren is the first agent of the new direct renin inhibitors drug class, and has been recently approved in Italy under strict reimbursement restrictions. In this paper, the Authors present a budget impact analysis in the perspective of the National Health Service, conducted by estimating eligible populations according to reimbursement limitations, calculating differential costs by patient subgroups and possible strategies (addition to vs substitution of ACE-Is or ARBs), and finally by applying expected market shares to the identified population. The low forecast market penetration (0.2% and 0.6% of eligible patients, in the first and second year, respectively) drives the results: the treatment of 3,274-9,821 patients induces a yearly increase of 1.5 to 4.5 million € with aliskiren added to ACE-Is or ARBs, and of 917,000 to 2,751,000 € in the substitution scenario.

“Price Management” and Its Impact on Hospital Pharmaceutical Expenditure and the Availability of Medicines in New Zealand Hospitals

Objectives In 2002, the Pharmaceutical Management Agency (PHARMAC) began negotiating new price contracts for 90% of hospital pharmaceuticals on behalf of all New Zealand (NZ) public hospitals (“price management” [PM]). The present study was undertaken to examine the impact of 3 years of PM on hospital pharmaceutical expenditure, and the impact of the new contracts on the availability of medicines. Methods Annual savings for 29 major public hospitals (financial years 2003/4 to 2005/6) were calculated from the data from 11 hospitals and data from PHARMAC. Inpatient and total hospital pharmaceutical expenditure (IPE, THPE) (2000/1 to 2005/6) were calculated from the data from 23 hospitals. Hospital pharmaceutical expenditure (2000/1 to 2005/6) was compared with community pharmaceutical expenditure (CPE) in NZ, and with THPE in the UK, Canada, Norway, and Sweden. Surveys were undertaken (2004, 2005) to examine any changes in medicine availability resulting from the new contracts. Results Annual savings were NZ$7.84 million (m) to NZ$13.45m (2003/4 to 2005/6). Growth in IPE slowed for all hospitals in 2003 to 2004. Mean growth was higher for IPE and THPE than for CPE (8.8%, 9.7% vs. 1.9%). Mean growth in THPE appeared slightly lower in NZ (9.6%) and Norway (7.3%) than in the UK 14%, Sweden 12.5%, or Canada 10.2%. Some availability problems occurred with new contract items (“out-of-stocks”; products perceived as inferior). Problems were usually resolved in weeks, but some took more than a year. Conclusion PM was moderately successful saving NZ$8m to NZ$13m (6–8%) in 2003/4 to 2005/6 and slowing growth in IPE in 2003/4. Further research should examine whether the favorable economic effects can be sustained while unfavorable effects are minimized.

The influences of Taiwan's generic grouping price policy on drug prices and expenditures: Evidence from analysing the consumption of the three most-used classes of cardiovascular drugs

BackgroundControlling the growth of pharmaceutical expenditures is a major global challenge. Promotion of generic drug prescriptions or use is gaining increased support. There are substantial contextual differences in international experiences of implementing pharmaceutical policies related to generic drugs. Reporting these experiences from varied perspectives can inform future policy making. This study describes an experience of Taiwan, where patients with chronic (long-term) conditions are usually managed in hospitals and drugs are provided in this setting with costs reimbursed through the National Health Insurance (NHI). It investigates the effects of Taiwan's reimbursement rate adjustment based on chemical generic grouping in 2001. This research also demonstrates the use of micro-level longitudinal data to generate policy-relevant information. The research can be used to improve efficiency of health care resource use.MethodsWe chose the three most-used classes of cardiovascular drugs for this investigation: beta blocking agents, calcium channel blockers mainly with vascular effects, and plain ACE inhibitors. For each drug class, we investigated changes in daily expense, consumption volume, and total expenditures from a pre-action period to a corresponding post-action period. We compared an exposure or "intervention" group of patients targeted by the action with a comparisonor "control" group of patients not targeted by the action. The data sources are a longitudinal database for 200,000 NHI enrolees, corresponding NHI registration data of health care facilities, and an archive recording all historical data on the reimbursement rates of drugs covered by the NHI. We adopted a fixed effects linear regression model to control for unobserved heterogeneity among patient-hospital groups. Additional descriptive statistics were applied to examine whether any inappropriate consumption of drugs in the three classes existed.ResultsThe daily drug expense significantly decreased from the pre-action period to the post-action period for the exposure group. The average magnitudes of the decreases for the three classes of drugs mentioned above were 14.8%, 5.8% and 5.8%, respectively. In contrast, there was no reduction for the comparison group. The number of days of the prescription increased significantly from the pre- to the post-action period for both exposure and comparison groups. The total expense also significantly increased for both patient groups. For the exposure group, the average magnitudes of the growth in the total expenditure for the three classes of drugs were 47.7%, 60.0% and 55.3%, respectively. For the comparison group, they were 91.6%, 91.6% and 63.2%, respectively. After the action, approximately 50% of patients obtained more than 180 days of prescription drugs for a six-month period.ConclusionThe 2001 price adjustment action, based on generic grouping, significantly reduced the daily expense of each of the three classes of cardiovascular drugs. However, in response to this policy change, hospitals in Taiwan tended to greatly expand the volume of drugs prescribed for their regular patients. Consequently, the total expenditures for the three classes of drugs grew substantially after the action. These knock-on effects weakened the capability of the price adjustment action to control total pharmaceutical expenditures. This means that no saved resources were available for other health care uses. Such expansion of pharmaceutical consumption might also lead to inefficient use of the three drug classes: a large proportion of patients obtained more than one day of drugs per day in the post-action period, suggesting manipulation to increase reimbursement and offset price controls. We recommend that Taiwan's government use the NHI data to establish a monitoring system to detect inappropriate prescription patterns before implementing future policy changes. Such a monitoring system could then be used to deter hospitals from abusing their prescription volumes, making it possible to more effectively save health care resources by reducing drug reimbursement rates.

Pharmaceutical pricing and reimbursement reforms in Greece

Pharmaceutical price regulation in Greece is centralized. The National Drug Organization (EOF) is the main regulatory authority functioning under the auspices of the Ministry of Health and Social Solidarity. In 2004, total pharmaceutical expenditure in Greece reached the level of 2.9 billion euro, of which 77.9% were public expenditure and the remaining 22.1% private. According to Organization for Economic Cooperation and Development (OECD) data the total per-capita expenditure on pharmaceutical care in Greece is among the lowest in Europe, representing 58% of the EU-12 average. In 1998, Greece introduced a reimbursement list, and the lowest reference pricing system among the 15 European Union member states with the purpose of controlling the growth of pharmaceutical expenditure. The measures proved to be ineffective since pharmaceutical expenditure, after a short-term reduction, continued to increase at similar rates to those before the introduction of price control mechanisms. The average annual increase of pharmaceutical expenditure in Greece over the period 1998-2003 was 7.9%, which is among the highest in the OECD countries (average 6.1%). New pharmaceutical legislation, no. 3457, was enacted on May 8th 2006, aiming at greater access to medicines, improvements to citizens' quality of life, effective and efficient utilization of health resources, transparency in public management, protecting public health, and maintaining long-term financial viability of the insurance system. The innovative aspect of the new legislation is the abolition of the positive list and the establishment of a rebate system granting the National Insurance Funds a rebate rate paid by the pharmaceutical companies. The purpose of this paper is twofold. First to assess the effectiveness of the positive list introduced in 1988 in Greece, using simple econometric models. Second to present the recent pharmaceutical reforms aimed at the introduction of a rebate system and establishing reimbursement pricing based on the average of the three lowest European prices.

Pharmaceutical regulation in Greece at the crossroad of change: Economic, political and constitutional considerations for a new regulatory paradigm

This paper examines the economic, political and legal characteristics of the Greek pharmaceutical market, which is largely affected by the paradox of state intervention: while pharmaceutical regulation is mainly directed towards a rationalisation of total pharmaceutical expenditure, all measures taken to date aim at exhaustive pricing controls, i.e. interventions on the supply side alone, disregarding the “balloon” effect of shrinking prices on the expanding volume of consumption. As a result, pharmaceutical expenditure has been steadily rising, adding a disproportional burden on both social insurance and private income. The “unconstitutionality” of current pricing regulations exerted further pressure for a comprehensive reform. The paper proposes an alternative regulatory paradigm, which is loosely founded on European experience with regulating pharmaceutical markets. The conclusions of the economic, political and constitutional analysis help formulate a proposal for a comprehensive pharmaceutical policy that could assure the financial viability of the system as well as adhere to the principle of “legality”, as the latter is constitutionally defined.

Impacts of Cost Containment Strategies on Pharmaceutical Expenditures of the National Health Insurance in Taiwan, 1996???2003

Pharmaceutical expenditure (PE) of the National Health Insurance (NHI) programme in Taiwan grew from 62.2 billion Taiwan new dollars (NT dollars) in 1996 to NT94.5 dollars billion in 2003.The government has been introducing many strategies to control PE since the inception of NHI including price adjustment based on the prices of international products or existing products (inter-brands comparison), or market price and volume survey; delegation of financial responsibility to regional bureaux; co-payment for outpatient drugs; generic grouping (the reference pricing scheme based on chemical equivalence); a global budget payment system for clinics and hospitals; and reduction in the flat daily payment rate of the drugs for clinics. The aim of this study was to evaluate the impact of these cost containment strategies on the PE of the NHI programme from 1996 to 2003. To take the growth and seasonal trends of monthly PE into consideration, Box and Tiao's time-series event intervention analysis based on the Box-Jenkins auto-regressive integrated moving-average model was applied to evaluate the impact of various cost containment strategies on total and subsector (outpatient, inpatient, clinic and hospital sectors) PE. Monthly data of PE of the NHI programme from 1996 to 2003 (the dependent variables) were obtained from the Bureau of the NHI. Drugs prescribed by dentists and Chinese medical doctors at outpatient departments were excluded. After fitting the patterns of time series and controlling for the calendar effect of the Chinese New Year and the severe acute respiratory syndrome outbreak in 2003, three strategies (generic grouping, delegation of financial responsibility and reduction of the flat payment rate of clinics) were significantly associated with a reduction in PE. However, the hospital global budget strategy offset partial savings from these three strategies. Cumulative savings during the study period were estimated to be NT25.442 dollars billion (US0.80 dollars billion). Of all the strategies, generic grouping was the most effective although it had less effect on the clinic subsector. Neither drug co-payment nor price adjustment based on the international or inter-brand price comparison had significant impacts on PE. Generic grouping, reduction of the flat payment rate and delegation of financial responsibility were effective in controlling PE. A global budget alone would be unable to control PE without other direct financial incentives. Neither drug co-payment nor brand-specific price adjustment based on prices of international/existing products had a significant impact on PE.

Reference-based pricing schemes: effect on pharmaceutical expenditure, resource utilisation and health outcomes.

Pharmaceutical expenditure is rising more rapidly than the general inflation rate in most advanced countries. One strategy that has been introduced to control pharmaceutical costs is reference-based pricing (RBP). Its potential is restricted to those specific segments of the drug market where several drugs (and/or their generic forms) exist without substantial evidence that any particular agent is superior. Three broad approaches have been adopted. These involve the aggregation of drugs into generic groups, related drug groups (e.g. ACE inhibitors) or drugs grouped by therapeutic indication (e.g. antihypertensives). For each drug group, a single reimbursement level or reference price is set. Drugs above the reference price require part or total payment by the patient. The experience with RBP ranges from over 10 years in Germany (involving all levels of RBP) to the more recent implementation of RBP for related drug groups in Australia. This review summarises the current state of knowledge on RBP from the published experiences in the countries where RBP has been adopted. The published systematic reviews of RBP from the countries that have implemented it suggest that RBP has been successful at temporarily capping drug prices for the RBP drug groups and achieving short term cost savings. However, other factors influencing total pharmaceutical expenditure have often occurred simultaneously and make it difficult to isolate specific effects of RBP. Further investigation is required before any valid conclusions can be drawn about the net effect of RBP on healthcare costs. RBP has withstood the initial legal challenges of pharmaceutical companies and the criticisms of some clinicians. Where the reference price is based on the lowest priced drug(s) in the group, RBP appears to be one of the few strategies likely to be effective at encouraging doctors to use the least expensive agents as first-line therapy and utilise more expensive agents in those who experience side effects or poor efficacy.

Effect of highly active antiretroviral therapy on outcomes in Veterans Affairs Medical Centers.

Effect of highly active antiretroviral therapy on outcomes in Veterans Affairs Medical Centers.

Pharmaceuticals and medicare managed care: pharmacoeconomic considerations

This supplement includes papers from a conference titled Pharmaceuticals and Medicare Managed Care: Pharmacoeconomic Considerations, held January 19-21, 1998, in Tucson, Arizona. The topic was selected because of the rapidly expanding enrollment of Medicare beneficiaries in managed care plans and the fact that the majority of these plans provide an outpatient prescription drug benefit. Although data indicating large disparities in satisfaction levels with Medicare health maintenance organizations (HMOs) are emerging, 1 the number of enrollees has increased by more than 100% since 1993, with 5 million individuals enrolled as of February 1997. 2 The implications of this shift for managed care organizations and the pharmaceutical industry have not been adequately explored. Enrollment in managed care plans by Medicare beneficiaries has been attractive partly because of the expanded services provided. In addition to the basic Medicare services, most of the managed care plans enrolling Medicare patients also provide some level of coverage for prescription drugs and preventive health services such as eye exams, routine physicals, and immunizations. Coverage for outpatient prescription drugs is especially appealing given that a majority of these costs are paid out of pocket by Medicare beneficiaries) It has been estimated that approximately 80% of HMOs with Medicare contracts offer outpatient prescription drug coverage and that most plans offering drug coverage use copayments, closed formulades, and/or annual dollar limits, or caps, to manage benefit costs. 4 However, prescription drug benefits for Medicare beneficiades are being eliminated or significantly reduced by some HMO plans. 5 Given that Medicare recipients account for a disproportionate share of total pharmaceutical expenditures, cost-effective prescription drug use in this population is essential. Questions being asked include: What are the procedures, programs, and policies that could be implemented to ensure access to and promote the appropriate use of prescription drugs by Medicare beneficiaries? How can the prescription

Prescription drug spending: the impact of age and chronic disease status.

The purpose of this study was to examine how pharmaceutical expenditures vary by age and the presence of chronic health problems. Data from the 1987 National Medical Expenditure Survey were used to obtain nationally representative estimates of outpatient prescription drug expenditures for the noninstitutionalized population and the fraction of total health expenditures used to purchase medications for age-chronic disease population subgroups. Although the elderly make up 12% of the population, they account for 34% of total pharmaceutical expenditures. Pharmaceutical expenditures are 9% of total expenditures for children, 13% for nonelderly adults, and 23% for the elderly. Among nonelderly adults, approximately one third have at least one chronic condition and account for over two thirds of drug expenditures. Among the elderly, 36% have three or more chronic conditions and account for 57% of drug expenditures for this group; 41% of total drug expenditures are for cardiovascular or renal drugs. Significant pharmaceutical spending is for treatment of chronic conditions, which subjects insurance coverage to adverse selection and could affect the design of prescription drug benefit packages. Current enrollees in Medicare risk management plans who have drug benefits may face significantly higher out-of-pocket expenses for pharmaceuticals if capitation rates are cut as a means of controlling Medicare program expenditures.