Economic Impact of Cost-Containment Strategies in Third Party Programmes in the US

Abstract

This is the second article in a 2-part series that examines the economic impact of several different strategies used to control costs in third party programmes. This article investigates 5 different methods: (a) formularies; (b) capitation; (c) drug utilisation review; (d) prior approval; and (e) drug product selection. The published literature indicates that use of formularies decreases drug expenditures, but these savings may be offset by expenditures in other areas of healthcare programmes. Capitation, though less well studied than other strategies, may show some effectiveness in reducing costs by increasing generic dispensing and promoting switching from prescription drug to over-the-counter. Drug utilisation review, as a systematic programme of claims data review, has been shown to yield positive economic return in a variety of areas, including both impersonal and face-to-face educational interventions with healthcare practitioners. Prior approval and drug product selection both result in savings when examined in isolation from other aspects of healthcare. Cost-shifting, administrative costs and costs incurred because of possible decreased access to care have yet to be fully accounted for.

Cost Containment Strategies in the United States: Role of Cost-Effectiveness Research

“…The formulary originated from a 1936 recommendation by the American College of Surgeons for the development of a pharmacy and therapeutics (P&T) committee to develop selective drug product lists within hospitals (22). By 1965, P&T committees became a requirement for accreditation by the Joint Commission for the Accreditation of Healthcare Organizations.…”

“…These results, however, may be influenced by the study design, which made no attempt to control for other factors that may have influenced the increased rates of hospitalization. Nonetheless, debate has arisen as to whether restrictions in access to Medicaid-funded prescriptions may have an adverse effect on the health status of recipients, and/or increase the cost for nonpharmacy services (22).…”

“…Drug use evaluation (DUE) is "a continuing program that reviews, analyzes and interprets patterns of drug usage in a given health care delivery system against predetermined standards and includes efforts to correct patterns of drug use that are inconsistent with these standards" (22). As a result of a DUE, incorrect usage of medication may be limited by requiring permission for the drug's use before dispensing or by mandating dispensing the medication only for selected indications (prior authorization or precertification programs).…”

“…Several evaluations of Medicaid cost savings through DUES show that these evaluations can yield positive economic results. For example, in a randomized, controlled trial conducted in four states, a group of primary care physicians and pharmacists met to discuss appropriate use of target drugs (22). Compared with the control group, drug utilization costs decreased 13% in the experimental group.…”

The Problem

“…On the contrary, some studies show that prescribing restrictions (as they are carried out in the United States) have "unintended consequences": they may actually worsen outcomes and increase the total costs of care. [7][8][9] Likewise, programs for improving compliance may improve medication-taking behaviour but they rarely show positive effects on outcomes.…”