Healthy Skepticism Library item: 19973

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

Designing A Prescription Drug Benefit
Health Affairs 2004; 23:(1):123
http://content.healthaffairs.org/content/23/1/123.full

Abstract:

PROLOGUE: Recently both the governor of Illinois and the mayor of New York City, individually, took the bold step of announcing serious consideration of plans to reimport from Canada prescription drugs manufactured by U.S. companies but available in Canada at deeply discounted prices, as a means of trimming health care costs. This was done amid staunch opposition by the U.S. Food and Drug Administration (FDA) because of presumed safety concerns. A report commissioned by Gov. Rod Blagojevich (a Democrat) found that the State of Illinois could save upwards of $56.5 million annually on prescription drugs for state employees and the retired, while employees and retirees could themselves save roughly $34.2 million per year. Similarly, Mayor Michael Bloomberg (a Republican) has stated that “if Canadians can produce drugs that the FDA says are effective and safe and well-labeled, then I would like to see New Yorkers being able to benefit.”

The growing willingness by state and local politicians of both parties to thumb their noses at the feds on this issue appears to reflect a certain desperation felt by policymakers attempting to devise solutions to address escalating health care expenditures at a time when government budgets are mired in red ink. Recent findings have alarmingly shown that health care spending in 2002 surged forward at nearly four times the rate of growth in the U.S. economy. Prescription drugs, while no longer the primary source of spikes in health care spending that they were in the late 1990s, nevertheless continue to be a major cost driver. To stem the tide, while states and localities consider reimportation and other avenues, employers and health plans have undertaken to reengineer health insurance drug benefits, implement tiered cost-sharing plans, and adopt additional efforts aimed at improving cost-effectiveness. The prevalence of tiered drug benefits, for example, has risen from 55 percent in 2002 to 63 percent in 2003.

The papers that follow, accordingly, provide insight into structural strategies employed by health care purchasers and consumers intended to maximize the bang for the pharmaceutical buck. First, Peter Neumann of Harvard University describes the growing trend of health plans’ adopting standardized formulary guidelines that seek to inject greater transparency and consideration of cost-effectiveness into the drug formulary process. Next, Stephen Soumerai of Harvard Medical School examines the economic and clinical implications of adoption, by cash-strapped states, of policies favoring substitution of cheaper drugs within a therapeutic class for use by Medicaid enrollees. Soumerai provides guidance for minimizing unintended negative consequences of such practices, including reduced use of essential treatment regimens and greater reliance on more costly provider and institutional care.