Content by Keyword: Drugs, Medical Devices, and Pharmacy Services

This section reviews what is known as well as that which remains unanswered in the context of the bolded questions presented throughout the discussion above. There are some common themes. The first crosscutting theme is that the literature focuses on drug use and spending almost as if “prescription drugs” were a single homogeneous product. A f

Medicare beneficiaries who have no prescription coverage must, by definition, bear the entire cost of their drug purchases out of pocket. However, the obverse does not follow; no prescription plan currently available to Medicare beneficiaries covers the entire cost of outpatient prescription drugs. Were Medicare to adopt a drug benefit, it would p

Surely the most compelling issue for policy makers regarding a possible Medicare drug benefit is the question of cost. For any given proposal, actuaries can readily determine that part of the program cost which represents a shift in financial responsibility from beneficiaries or other third party payors. It is much more difficult to predict the im

Although the determinants of who has prescription benefits remain unclear, there is no question that drug coverage rates among Medicare beneficiaries have been rising. In 1992, 57 percent of beneficiaries had prescription coverage (Poisal, et al., 1999). By 1996 the rate was 68.8 percent (Poisal, et al., forthcoming). The movement of Medicare bene

Medicare pays for prescription drugs only if they are administered in institutional settings (e.g., hospital or nursing home) or belong to several special drug categories such as immunosuppressives, erythropoiten, oral anti-cancer drugs, hemophilia clotting factors, and some vaccines. The vast majority of outpatient prescription drugs are not reim

The determinants of drug spending described above operate primarily through the drug selection decisions made by Medicare beneficiaries and their physicians. However, drug prices can be an important factor, particularly for those beneficiaries without stable drug coverage.

Spending on outpatient prescription drugs by non-institutionalized Medicare beneficiaries reached $25.1 billion in 1996 1 , the latest year for which accurate statistics are available (Poisal, et al, forthcoming). Four years earlier in 1992, beneficiaries spent $16.2 billion (Laschober and Olin, 1996).

This report summarizes the findings from an intensive review of the literature addressing important policy issues in prescription drug coverage, pricing, utilization, and spending. The review had three primary aims:

Report prepared for US Department of Health and Human Services Office of the Assistant Secretary for Policy and Evaluation Office of Health Policy February 18, 2000 by Bruce Stuart, Ph.D. Nicole Brandt, PharmD Becky Briesacher, MA Cheryl Fahlman, BSP, MBA Daniel Mullins, Ph.D. Frank Palumbo, J.D., Ph.D. Josefina Pizarro,

The results presented in this study provide a wealth of information on prescription drug use in the United States. This study used recent data from multiple surveys, private sector pricing data, and outreach meetings with industry representatives and researchers to provide a detailed examination of multiple factors relating to coverage, utilizatio

1 - National Association of Chain Drug Stores, The Chain Pharmacy: Industry Profile , Alexandria, VA, 1999. 2 - In general most of the relationships in this table have been established with at least two different sources of data. 3 - IMS Health Retail Method-of-Payment Report TM 1999. 4 - Cash customers may also include customers with pres

IMS data on retail prices for the most commonly filled prescription drugs for the total population show that cash payers usually paid higher prices for the same drug than people with third-party payment. The IMS price data for individual drugs are highly confidential and proprietary, and their use in this report is contingent on their not being di

MEPS data for 1996 show that people with prescription drug coverage received more costly drugs than people without coverage. However, for any specific drug, the total price paid for people with coverage tended to be lower than the price paid by people without coverage. 31

IMS data used in this chapter are drawn from the IMS Health Retail Method-of-Payment Report ™ and Price Trak Report™. IMS collects data from a panel of 34,000 retail pharmacies, including independents, chains, and pharmacies within food stores or mass merchandisers. The IMS sample for these products accounts for over 60 percent of retail outle

The 1996 MEPS includes a pharmacy survey to validate prescription drug utilization reported by respondents, and to obtain direct measures of retail prices paid for drugs. For each prescription drug "event" reported by respondents MEPS endeavors to ascertain the price through the pharmacy survey. The pharmacy data, in combination with the comprehen

As described in the previous section, both the processes by which prices are determined and the ultimate price paid for drugs by various purchasers varies considerably. Other factors also lead to wide differences, such as different pricing strategies between generic and brand name drugs and between single-source and multiple-source drugs. In the r

Medicaid programs pay retail pharmacies using fixed cost limits and fixed dispensing fees. For single-source drugs (brand-name drugs without generic equivalents), the cost limit is set at the estimated pharmacy acquisition cost for the drug. For multiple-source drugs (with brand name or generic competitors), the limit is based on a MAC. These are

Prices paid to manufacturers by the VA, other federal agencies, and certain other entities, such as Indian tribal governments, are set by the Federal Supply Schedule (FSS). Under the Veterans Health Care Act of 1992, manufacturers must make drugs available to covered entities at the FSS price as a condition of eligibility for Medicaid reimbursemen

Not all drugs dispensed by pharmacies are purchased from wholesalers. Institutions that operate their own outpatient pharmacies, such as hospitals and clinics, may deal directly with manufacturers, either individually or through buying groups. They typically save the wholesaler markup. In addition, they may receive a price lower than that offered

The simple pricing model just described applies to cash transactions but not to those in which the retail pharmacy is paid by a group insurer, employer, or other third party at the point of sale. This section will describe mechanisms affecting the prices paid by private third parties that manage drug benefits. Again, because management by a PBM is