Pharmacy Utilization and the Medicare Modernization Act

Abstract

To control expenditures and use medications appropriately, the Medicare drug coverage program has established pharmacy utilization management (PUM) measures. This article assesses the effects of these strategies on the care of seniors. The literature suggests that although caps on drug benefits lower pharmaceutical costs, they may also increase the use of other health care services and hurt health outcomes. Our review raises concerns regarding the potential unintended effects of the Medicare drug program's PUM policies for beneficiaries. Therefore, the economic and clinical impact of PUM measures on seniors should be studied further to help policymakers design better drug benefit plans.Key Words: Pharmacy utilization management, seniors, cost-sharing mechanisms, administrative restriction tools. P harmacy utilization management (PUM) measures are used extensively in health care delivery systems throughout the industrialized world Bloor, Maynard, and Freemantle 1996;Freemantle and Bloor 1996). The most widely used strategies are policies that require financial contributions from patients (e.g., copayments, coinsurance, deductibles, and drug benefit caps) and policies that restrict the number and particular kinds of medications prescribed (e.g., formularies and (Soumerai et al. 1993;Thomas et al. 2002). The intentions and benefits for such policies are to control expenditures on drugs and to improve their efficiency by reducing inappropriate prescriptions, overutilization, and iatrogenic risks (Levy 1992;Soumerai et al. 1993). PUM initiatives may also, however, limit patients' access to needed medications and promote the use of medications that are less effective or more likely to cause adverse events. From an economic perspective, therefore, the short-term drug cost savings realized from PUM measures may be offset by long-term increases in overall health care utilization (Soumerai et al. 1993). Furthermore, the unintended effects of PUM programs may be magnified in a sensitive, vulnerable patient population such as seniors, many of whom have few financial resources but many medical needs.Access to appropriate pharmaceutical treatment for seniors has become a major health policy issue in the United States (Iglehart 2001). In fact, persons aged 65 and older represent about 13 percent of the population but consume approximately 30 percent of all prescription medications (AARP 1999;Arnett et al. 1990). On average, a person in this group receives 20 prescriptions per year (Poisal and Murray 2001), which can be a severe financial burden.In 1998, seniors spent an average of $537 (representing 3.55% of family income) on out-of-pocket prescription drugs, much more than the out-of-pocket average of $192 (representing 1.25% of family income) for working-age adults (Xu 2003). The disproportionate financial burden of prescription drugs for seniors versus nonseniors was found across all family income levels. The continued aging of the population, the expanded numbers and types of available medications, and the rise in the cos...

Medication adherence issues in patients treated for COPD

“…In the US, 97% of people over 65 years who receive incomplete Medicare coverage need supplemental insurance (Roberts 2006). Since the Medicare Prescription Drug Improvement and Modernization Act of 2003 only went into effect in 2006, its impact on suboptimal medication use is still to be determined (Maio et al 2005). …”

“…Although underuse can result in morbidity and health care cost, the cost of the medication is believed to be one of the most important determinants of underuse (Hanlon et al 2001; Stuart 2004; Maio et al 2005). Tiotropium has demonstrated the highest expected net benefit for ratios of the willingness to pay per quality-adjusted life-year (QALY) (Rutten-van Mölken et al 2007).…”

What impact do prescription drug charges have on efficiency and equity? Evidence from high-income countries

“…The substantial body of literature on prescription drug charges already includes several reviews. However, the remit of most of these reviews is constrained by a focus on, for example, specific populations [2-4]; a sub-set of the literature such as studies from the United States, the United Kingdom, and/or Canada [5-9]; specific forms of prescription drug charges such as reference pricing [10,11] and tiered formularies [12]; or the main articles in the area [7,13-16]. We add to existing reviews by covering studies carried out in a wider range of high-income countries and reviewing papers published in languages other than English.…”

Estimates of the Price Elasticity of Switching Between Branded and Generic Drugs

“…The study concluded that individuals with larger coinsurance rates spent less money on prescription drugs, primarily because they filled fewer prescriptions, as opposed to purchasing more low-cost generic medications (Leibowitz, Manning, and Newhouse 1985). Subsequent analyses using observational data confirmed the negative relationship between cost sharing and drug spending across various groups, including the Medicaid population (Reeder and Nelson 1985;Soumerai et al 1987), Medicare population (Eaddy et al 2012;Maio et al 2005), and the privately insured (Druss et al 2004;Eaddy et al 2012;Huskamp et al 2003;Joyce et al 2002;Mager and Cox 2007). Recent estimates of the price elasticity of demand for prescription drugs from observational studies that account for patient selection into insurance range from 0.1 to 0.6 depending on type of drug (Contoyannis et al 2005;Meyerhoefer and Zuvekas 2010).…”