Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. Spending Estimates

04/01/2000

MEPS data for 1996 indicate that 27 percent of people who used prescription drugs paid for those drugs in full at the time they received them.3 Most people with public or private coverage pay only a copayment or coinsurance amount. (Exceptions include people who have not yet met a deductible or who have exceeded a cap on their coverage and people who have an indemnity plan, which reimburses the policyholder instead of the pharmacy.) As a result, household survey data alone can provide cost information for only a portion of all prescriptions.

Because MEPS has a pharmacy component, it can obtain full price information for prescriptions paid for by third parties. As noted earlier, however, pharmacy survey responses were not always available. When neither the individual nor a pharmacy provided price data for a prescription, the price had to be imputed through statistical matching: a total price was assigned to the prescription based on price data for the same drug furnished to a similar individual. There were also instances in which a total price was available for the prescription, but the amounts paid by the insurer and/or the individual were missing. Again, values were imputed for each such prescription.

MCBS also uses a process of imputation in cases in which household respondents were unable to supply price and payment information. Because MCBS has no pharmacy component, imputation is needed for more prescriptions than under MEPS, and the method of assigning prices is different.4 The MCBS average price per non-Medicaid prescription, $35.23, is quite close to the average price of $35.90 found by MEPS for Medicare beneficiaries without Medicaid.5 However, because MCBS counts fewer prescriptions per beneficiary using prescription drugs, its aggregate spending estimates are lower than MEPS estimates for Medicare beneficiaries.

Because the process of imputation leads to some potential measurement errors in comparing prices paid for a particular drug by individuals with different coverage statuses, all the price comparisons in chapter 3 are based on MEPS drug purchases for which the price was established through a direct match of pharmacy and household survey information. However, for the spending estimates in chapter 2, both the MCBS and the MEPS data used include prescriptions for which prices were imputed. Dropping all prescriptions for which prices were imputed would have left nationally unrepresentative populations and samples too small to estimate aggregate spending differences for different subgroups. Imputation is designed to generate accurate aggregate estimates, but may misrepresent pricing, especially for individual drugs.

It should be emphasized that all of the MEPS spending information, and most of that under MCBS, reflects only the amounts paid to pharmacies.6 These amounts are not adjusted for any rebates that may be paid by the manufacturer to the insurer, because these rebates are generally not reflected in the prices charged at the point of sale. There is one exception: under MCBS, but not MEPS, spending data for Medicaid beneficiaries are reduced to reflect rebates received from manufacturers by state Medicaid programs. Rebate estimates are derived from state financial reports to HCFA(now known as CMS). Thus, all other things being equal, we would expect aggregate spending estimates for MCBS to be somewhat lower than for MEPS.

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