Pharmacy Benefit Design, Generic Dispensing, and Mail Service Utilization

Pharmacy Benefit Design, GenericDispensing and Mail Service Utlization:A Panel Analysis of Plan Sponsor Data

M. Christopher Roebuck, MBA and Joshua N. Liberman, PHDCVS Caremark

Pharmacy Benefit Design, Generic Dispensing and Mail Service Utilization: A Panel Analysis of Plan Sponsor DataM. Christopher Roebuck, MBA and Joshua N. Liberman, PHD

Methods• Study design: A retrospective analysis of prescription claims

• Feasible generalized least squares models were estimated for each of three dependent variables, by tier:- Generic Dispensing Rate (GDR) = (# of Generic Rxs) ÷

(Total # of Rxs)- Generic Substitution Rate (GSR) = (# of Generic Rxs) ÷

(# of Generic Rxs + # of Multi-Source Brand Rxs)- Mail Distribution Rate (MDR) = (# of Mail service Rxs) ÷

(Total # of Rxs)

table 1. descriptive statistics

Pharmacy Benefit design elementstwo-tier(N=140)

three-tier(N=254)

Retail Coinsurance 0.54 (0.46) 0.24(0.40)Retail Generic Copay ($) 7.52 (3.37) 8.70 (3.62)Retail Brand Copay ($) 25.45 (9.42) –Retail Preferred Brand Copay ($) – 23.20 (7.36)Retail Nonpreferred Brand Copay ($) – 38.02 (10.97)Mail-Retail Generic Copay Ratio 2.03 (0.74) 2.25 (1.71)Mail-Retail Brand Copay Ratio 1.82 (1.18) –Mail-Retail Preferred Brand Copay Ratio – 1.84 (0.49)Mail-Retail Nonpreferred Brand Copay Ratio – 1.84 (0.51)Retail Deductible 0.13 (0.32) 0.14 (0.33)Retail Dispense as Written Penalty (Physician) 0.17 (0.35) 0.23 (0.40)Retail Dispense as Written Penalty (Patient) 0.21 (0.38) 0.34 (0.44)Retail Maximum Allowable Benefit 0.09 (0.27) 0.04 (0.19)Retail Maximum Out of Pocket 0.09 (0.28) 0.06 (0.22)

Notes: Mean values presented; standard deviations in parentheses.All values are expressed as proportions unless otherwise indicated.

oBjectiveTo estimate the relationships between pharmacy benefit design, generic dispensing, and mail service utilization by conducting a panel analysis of plan sponsor data. Although prior studies have investigated the impact of patient cost-sharing on prescription drug utilization, few have accounted for other common elements of pharmacy benefit design. Furthermore, trends in pharmacy utilization due to demographics, brand and generic drug pipelines, as well as prescription delivery options have also been largely ignored, potentially leading to biased results.

data• Plan sponsor-level dataset of 367 employers and 27 health plans,

covering 11,273,851 members

• Continuously managed by CVS Caremark from 1/1/2005 through 12/31/2006 (measured quarterly)

• Having either a two-tier or three-tier pharmacy benefit design structure

• With both retail pharmacy and mail delivery options

• Without retail refill restrictions for maintenance medications (i.e., no “mandatory mail”)

• Note: All variables were calculated as means, weighted by the number of eligible participants within each plan sponsor-quarter

• Detected and accounted for heteroskedasticity across panels and first-order autoregressive serial correlation

• Independent variables included:- Proportion of plan members in each of 5 age groups, 5 geographic regions, and gender

- Indicator variable for employer versus health plan sponsor- Member out-of-pocket (OOP) costs for generic, preferred brands and non-prefered brands at retail (linear and squared)

- Mail-retail member out-of-pocket (OOP) cost ratios (linear and squared)

- Dichotomous variables for coinsurance, deductible, maximum allowable benefit (MAB), maximum out-of-pocket (MOOP), and two types of dispense-as-written (DAW) penalties

- A vector of 8 quarterly time dummies

Results• Most member cost-share variables were associated with changes in GDR, GSR, and MDR in their expected directions.

However, support for the nonlinearities of these relationships emerged.

• Marginal effects were generally greater in magnitude for brand OOP costs than for generic OOP costs

• Decreases in mail-retail OOP cost ratios were related to increases in MDR, but did not necessarily lead to increases in GDR or GSR

• GDR and GSR were 1 to 2 percentage points higher in:

- Two-tier plans with a deductible, DAW, or MAB

- Three-tier plans with a DAW or MAB

• MDR was 1 to 4 percentage points higher in three-tier plans with a retail deductible, DAW, or MAB

• GDR, GSR, MDR all increased significantly with time by 7, 2, and 2 percentage points, respectively

coNclusioNsBrand and generic member OOP costs likely have differential and non-linear effects on the relative utilization of prescription drugs. Prior studies of the effect of member cost-sharing on pharmacy utilization may be biased if other benefit design characteristics, mail service prescription fulfillment, and time trends in generic and brand use are omitted.

liMitatioNs & FutuRe diRectioNsDespite the cross-sectional time series, random effects-based approach, the potential endogeneity of pharmacy benefit design variables still exists. Therefore, causality should not be inferred. The analytical dataset is being expanded to include additional clients and time periods to allow for fixed effects estimation.

table 2. selected Results from FGls Models of Generic dispensing Rate by tierPharmacy Benefit design elements two-tier three-tier

Retail Coinsurance0.01046***

(0.00205)-0.00650***(0.00218)

Retail Generic Copay-0.00049(0.00084)

-0.00221***(0.00058)

Retail Generic Copay Squared0.00004

(0.00005)0.00010***

(0.00002)

Retail Brand Copay0.00204***

(0.00042)–

Retail Brand Copay Squared-0.00001*(0.00001)

–

Retail Preferred Brand Copay –0.00090

(0.00062)

Retail Preferred Brand Copay Squared –-0.00002(0.00001)

Retail Nonpreferred Brand Copay –0.00275***

(0.00036)

Retail Nonpreferred Brand Copay Squared –-0.00002***0.00000

Mail-Retail Generic Copay Ratio0.00643*

(0.00390)-0.00171(0.00139)

Mail-Retail Generic Copay Ratio Squared-0.00193**(0.00077)

0.00011(0.00010)

Mail-Retail Brand Copay Ratio0.00177

(0.00187)–

Mail-Retail Brand Copay Ratio Squared-0.00016(0.00012)

–

Mail-Retail Preferred Brand Copay Ratio –-0.00028(0.00916)

Mail-Retail Preferred Brand Copay Ratio Squared –-0.00173(0.00208)

Mail-Retail Nonpreferred Brand Copay Ratio –-0.01521**(0.00648)

Mail-Retail Nonpreferred Brand Copay Ratio Squared –0.00555***

(0.00117)

Retail Deductible0.01272***

(0.00310)0.00293

(0.00205)

Retail Dispense as Written Penalty (Physician)0.01932***

(0.00242)0.01859***

(0.00183)

Retail Dispense as Written Penalty (Patient)0.01423***

(0.00206)0.00498***

(0.00171)

Retail Maximum Allowable Benefit0.01004**

(0.00418)0.02450***

(0.00333)

Retail Maximum Out of Pocket-0.03043***(0.00323)

0.00393(0.00285)

Notes: FGLS = Feasable generalized least squares regression with heteroskedastic panels and common AR(1) autocorrelation. Statistical significance denoted as: *** p<0.01; ** p<0.05; * p<0.10.

table 3. selected Results from FGls Models of Generic substitution Rate by tierPharmacy Benefit design elements two-tier three-tier

Retail Coinsurance0.00254**

(0.00108)-0.00663***(0.00131)

Retail Generic Copay-0.00089*(0.00051)

-0.00109***(0.00032)

Retail Generic Copay Squared0.00006**

(0.00003)0.00005***

(0.00001)

Retail Brand Copay0.00050**

(0.00026)–

Retail Brand Copay Squared0.000000.00000

–


(0.00033)



(0.00018)


Mail-Retail Generic Copay Ratio0.00713***

(0.00267)-0.00025(0.00084)

Mail-Retail Generic Copay Ratio Squared-0.00189***(0.00061)

-0.00009(0.00006)


(0.00125)–


–

Mail-Retail Preferred Brand Copay Ratio –-0.01458***(0.00475)

Mail-Retail Preferred Brand Copay Ratio Squared –0.00365***

(0.00112)

Mail-Retail Nonpreferred Brand Copay Ratio –-0.00107(0.00352)

Mail-Retail Nonpreferred Brand Copay Ratio Squared –0.00113**

(0.00053)


(0.00126)0.00202**

(0.00090)


(0.00133)0.01334***

(0.00093)


(0.00130)0.00576***

(0.00087)

Retail Maximum Allowable Benefit-0.00098(0.00156)

0.00622***(0.00152)


0.01118***(0.00156)


table 4. selected Results from FGls Models of Mail distribution Rate by tierPharmacy Benefit design elements two-tier three-tier

Retail Coinsurance0.00254**

(0.00108)-0.00663***(0.00131)

Retail Generic Copay-0.00089*(0.00051)

-0.00109***(0.00032)

Retail Generic Copay Squared0.00006**

(0.00003)0.00005***

(0.00001)

Retail Brand Copay0.00050**

(0.00026)–

Retail Brand Copay Squared0.000000.00000

–


(0.00033)



(0.00018)


Mail-Retail Generic Copay Ratio0.00713***

(0.00267)-0.00025(0.00084)

Mail-Retail Generic Copay Ratio Squared-0.00189***(0.00061)

-0.00009(0.00006)


(0.00125)–


–

Mail-Retail Preferred Brand Copay Ratio –-0.01458***(0.00475)

Mail-Retail Preferred Brand Copay Ratio Squared –0.00365***

(0.00112)

Mail-Retail Nonpreferred Brand Copay Ratio –-0.00107(0.00352)

Mail-Retail Nonpreferred Brand Copay Ratio Squared –0.00113**

(0.00053)


(0.00126)0.00202**

(0.00090)


(0.00133)0.01334***

(0.00093)


(0.00130)0.00576***

(0.00087)

Retail Maximum Allowable Benefit-0.00098(0.00156)

0.00622***(0.00152)


0.01118***(0.00156)


Pharmacy Benefit Design, Generic Dispensing, and Mail Service Utilization

Health & Medicine

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