Myopic and Forward Looking Behavior in Branded Oral Anti‐Diabetic Medication Consumption: An Example from Medicare Part D

Abstract

We evaluate consumption responses to the non-linear Medicare Part D prescription drug benefit. We compare propensity-matched older patients with diabetes and Part D Standard or low-income-subsidy (LIS) coverage. We evaluate monthly adherence to branded oral anti-diabetics, with high end-of-year donut hole prices (>$200) for Standard patients and consistent, low (≤$6) prices for LIS. As an additional control, we examine adherence to generic anti-diabetics, with relatively low, consistent prices for Standard patients. If Standard patients are forward looking, they will reduce branded adherence in January, and LIS-Standard differences will be constant through the year. Contrary to this expectation, branded adherence is lower for Standard patients in January and diverges from LIS as the coverage year progresses. Standard-LIS generic adherence differences are minimal. Our findings suggest that seniors with chronic conditions respond myopically to the nonlinear Part D benefit, reducing consumption in response to high deductible, initial coverage and gap prices. Thus, when the gap is fully phased out in 2020, cost-related nonadherence will likely remain in the face of higher spot prices for more costly branded medications. These results contribute to studies of Part D plan choice and medication adherence that suggest that seniors may not make optimal healthcare decisions. Copyright © 2016 John Wiley & Sons, Ltd.

Decreased Antihyperglycemic Drug Use Driven by High Out-of-Pocket Costs Despite Medicare Coverage Gap Closure

“…Ours is the first study to demonstrate how out-of-pocket payments for patients with diabetes influence the decision to reinitiate discontinued, branded antihyperglycemic medications at the beginning of the calendar year, thereby illustrating forward-looking behavior of patients within a narrow time span. This is in agreement with a previous study that observed reduced monthly medication adherence as the calendar year progressed in response to the donut hole in 2009 (26). It is also interesting to note that while no strong temporal patterns of reinitiation were observed for sulfonylureas, the HRs of reinitiation among nonsubsidized patients were still lower in the last few calendar months of the year.…”

Quality provision in hospital markets with demand inertia: The role of patient expectations

“…Drug purchases are initially constant and drop sharply once the coverage gap is reached, implying an estimated discount rate that is consistent with full myopia (i.e., equal to zero). A similar pattern of drug consumption under Medicare Part D may be found in Sacks et al (2017), Einav et al (2015), and Abaluck et al (2018). In the latter two studies, however, the estimated discount rates indicate some degree of forward-looking behaviour, which is considerably higher in Einav et al (2015).…”