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Online ISSN: 1099-176X    Print ISSN: 1091-4358
The Journal of Mental Health Policy and Economics
Volume 11, Issue 2, 2008. Pages: 67-77
Published Online: 30 May 2008

Copyright © 2008 ICMPE.


 

The Effect of a Three-Tier Formulary on Antidepressant Utilization and Expenditures

Dominic Hodgkin,1* Cindy Parks Thomas,1 Linda Simoni-Wastila,2 Grant A. Ritter,1 Sue Lee3

1Ph.D., Institute for Behavioral Health, HellerSchool of Social Policy and Management, BrandeisUniversity, WalthamMA, USA
2Ph.D., B.S.Pharm, Department of Pharmaceutical Health Services Research, University of Maryland. Baltimore, MD, USA.
3M.S., Schneider Institutes for Health Policy, HellerSchool of Social Policy and Management, BrandeisUniversity, WalthamMA, USA.

Correspondence to*: Dominic Hodgkin, Heller School, Mailstop 035, Brandeis University, 415 South St, Waltham MA 02454-9110, USA.
Tel.: +1-781-736 8551
Fax: +1-781-736 3905
E-mail: hodgkin@brandeis.edu.

Source of Funding: Agency for Health Care Research and Quality, grant 5R01HS013092-02 to Brandeis University.

Abstract

In recent years, US health plans have implemented multi-tiered formularies, which label certain brand medications ‘non-preferred’ and require higher patient copayments for those medications.  This policy relies on patients’ willingness to switch medications in response to copayment differentials.  We study the effects of one plan’s three-tier formulary implementation on antidepressant utilization and spending, using a prepost design with a comparison group.  For the antidepressants that became nonpreferred, prescriptions per enrollee decreased 11% in the three-tier group and increased 5% in the comparison group.  Regression results indicate that the three-tier formulary slowed the growth in the probability of using antidepressants. The policy also increased out-of-pocket payments while reducing plan payments and total spending.  The reduction in the proportion of enrollees filling any prescriptions contrasts with results of prior studies for non-psychotropic drug classes. The impact of the three-tier formulary approach may be somewhat different for antidepressants than for some other classes. 

 

Background: Health plans in the United States are struggling to contain rapid growth in their spending on medications. They have responded by implementing multi-tiered formularies, which label certain brand medications `non-preferred' and require higher patient copayments for those medications. This multi-tier policy relies on patients' willingness to switch medications in response to copayment differentials. The antidepressant class has certain characteristics that may pose problems for implementation of three-tier formularies, such as differences in which medication works for which patient, and high rates of medication discontinuation.

Aims of the Study: To measure the effect of a three-tier formulary on antidepressant utilization and spending, including decomposing spending allocations between patient and plan.

Methods: We use claims and eligibility files for a large, mature nonprofit managed care organization that started introducing its three-tier formulary on January 1, 2000, with a staggered implementation across employer groups. The sample includes 109,686 individuals who were continuously enrolled members during the study period. We use a pretest-posttest quasi-experimental design that includes a comparison group, comprising members whose employer had not adopted three-tier as of March 1, 2000. This permits some control for potentially confounding changes that could have coincided with three-tier implementation.

Results: For the antidepressants that became nonpreferred, prescriptions per enrollee decreased 11% in the three-tier group and increased 5% in the comparison group. The own-copay elasticity of demand for nonpreferred drugs can be approximated as -0.11. Difference-in-differences regression finds that the three-tier formulary slowed the growth in the probability of using antidepressants in the post-period, which was 0.3 percentage points lower than it would have been without three-tier. The three-tier formulary also increased out-of-pocket payments while reducing plan payments and total spending.

Discussion: The results indicate that the plan enrollees were somewhat responsive to the changed incentives, shifting away from the drugs that became nonpreferred. However, the intervention also resulted in cost-shifting from plan to enrollees, indicating some price-inelasticity. The reduction in the proportion of enrollees filling any prescriptions contrasts with results of prior studies for non-psychotropic drug classes. Limitations include the possibility of confounding changes coinciding with three-tier implementation (if they affected the two groups differentially); restriction to continuous enrollees; and lack of data on rebates the plan paid to drug manufacturers.

Implications for Health Care Provision and Use: The results of this study suggest that the impact of the three-tier formulary approach may be somewhat different for antidepressants than for some other classes.

Implications for Health Policy: Policymakers should monitor the effects of three-tier programs on utilization in psychotropic medication classes.

Implications for Further Research: Future studies should seek to understand the reasons for patients' limited response to the change in incentives, perhaps using physician and/or patient surveys. Studies should also examine the effects of three-tier programs on patient adherence, quality of care, and clinical and economic outcomes.


Received 21 November 2006; accepted 25 February 2008

Copyright 2008 ICMPE