07:00pm Tuesday 22 August 2017

Multiple Drug Cost Containment Policies Save Money But Generate Trade- Offs

Researchers at the Center for AIDS Intervention Research at the Medical College of Wisconsin analyzed four cost containment policies enacted sequentially in Michigan, and found that overall, the combined effect of the policies did lower costs, but some individual policies generated tradeoffs that actually reduced cost savings for the Medicaid program.

The findings are published in the April issue of Health Affairs. Jennifer W. Kibicho, PhD, assistant professor of psychiatry and behavioral medicine, and Steven D. Pinkerton, PhD, professor of psychiatry and behavioral medicine, are the authors of the study. Both have faculty appointments at the Center for AIDS Intervention Research at the Medical College of Wisconsin.

“One surprising result was that Maximum Allowable Cost policy increased overall costs, especially given its widespread implementation in at least 44 states. It’s important to look at the total cost containment policy package and ask the tough tradeoff questions. Cost containment policies involve considerable administrative costs and overheads. Simply stated, our paper highlights the limit to multiple containment strategies, encouraging policy makers to beware of and factor in tradeoffs in their decision making,” said Dr. Kibicho.

Nationwide, Medicaid prescription spending increased 18.8 percent per year between 2000 and 2002, which is a steeper increase than any other medical service. Rising costs have been attributed to increased medication needs, a shift in demand towards newer, more expensive drugs, and increasing prices in existing drugs.

In this study, the authors analyzed the Michigan Medicaid program’s efforts to cut costs on cardiovascular drugs used by elderly Medicaid/Medicare beneficiaries. 

The first cost containment policy, the creation of preferred drug lists, increased both preferred and generic drugs’ market share and reduced the daily cost of therapy. Enacting a maximum allowable cost policy increased generic market share, but actually increased cost.

The remaining two cost containment policies—joint purchasing arrangement, and the expanded multistate pooling arrangement—did not significantly affect the daily cost of therapy.

The cumulative effect of these four cost containment strategies was a 10 percent decrease in the daily cost of therapy.

“We all have an interest in keeping costs low. Our findings suggest that policy makers need to carefully evaluate the impact of multiple policies to restrain drug spending, and ensure that scarce public dollars achieve the greatest return for money spent,” said Dr. Kibicho.

Dr. Kibicho added that these findings have implications for other drug reimbursement and assistance programs, including AIDS Drug Assistance Programs, which also operate under various cost containment policies and are struggling to meet growing demand.

The Center for AIDS Intervention Research at MCW is one of five HIV prevention research centers in the United States funded by the National Institute of Mental Health. CAIR’s missions are the development of improved ways to prevent HIV infection, the development of new approaches to improve the health of persons affected by HIV/AIDS, and disseminating its research findings to service providers in the United States and throughout the world so they directly benefit from CAIR’s work.

Medical College of Wisconsin


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