Demographics and the Cost of Pharmaceuticals in a Private Third-Party Prescription Program

Objective: To compare variance in the cost of pharmaceuticals attributable to demographic variables with variance explained by plan characteristics, using prescription claims data within various therapeutic categories, and to examine differences in average cost of pharmaceuticals among demographic variables after controlling for covariates. Design: Retrospective, cross-sectional study. Data Collection: Data for this study were obtained from 1996 prescription claims information for the commercial population administered by a Rhode Island-based pharmacy benefit management (PBM) company. Six therapeutic categories with the highest expenditures were analyzed. Information on claims for six drug categories was extracted using database management software. Statistical analyses using multiple regression and analysis of covariance were carried out. Results: Plan characteristics outperformed demographic variables sixteenfold for all drug categories combined in explaining variance in cost of pharmaceuticals among plan enrollees. Average cost of pharmaceuticals differed among demographic variables such as age, gender, location, and place of employment after controlling for average wholesale price and days supply. Conclusions: The results obtained in this study have practical significance in the determination of capitation rates when utilization history of prospective members is not available. In this situation, managed care organizations (MCOs) or PBMs may have to set capitation rates based solely on eligibility data. Significant differences in average drug costs among the members based on place of employment suggest that benefit managers should consider differentiating capitation rates according to their clients\u27 businesses. Finally, the data from this study indicated that commercial members residing in Tennessee had the lowest average cost of pharmaceuticals among all states evaluated. The fact that one PBM manages more than 80% of the TennCare prescription program along with a significant commercial client base suggests that a spillover effect may exist

The Effect of Plan Characteristics on the Cost of Pharmaceuticals in a Private Third-Party Prescription Program

This study used prescription claims data to evaluate whether average cost of pharmaceuticals differed among various plan characteristics after controlling for covariates and to examine the relationships among plan characteristics and cost of pharmaceuticals within various therapeutic categories. Data for the study were obtained from 1996 prescription claims information for a commercial population administered by a Rhode Island-based PBM. Six therapeutic categories were analyzed. Significant associations were found among plan characteristics and cost of pharmaceuticals. Average cost of pharmaceuticals differed among various plan characteristics such as copayment, mode of payment, formulary status, and pharmacy type after controlling for average wholesale price and days\u27 supply. © 2000, Informa UK Ltd All rights reserved: reproduction in whole or part not permitted. All rights reserved