COMPARATIVE STUDY
JOURNAL ARTICLE

The effect of a three-tier formulary on antidepressant utilization and expenditures

Dominic Hodgkin, Cindy Parks Thomas, Linda Simoni-Wastila, Grant A Ritter, Sue Lee
Journal of Mental Health Policy and Economics 2008, 11 (2): 67-77
18509214

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.

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