OBJECTIVES

Lowering drug costs is one of the top health policy priorities of the American public, driven by rising out-of-pocket and health plan spending for select medication classes where there are large differences in prices within medication class. The objective of this study is to simulate the expected savings of offering a financial incentive to patients to switch from a high cost drug to a lower cost, therapeutically similar drug in the insulin and multiple sclerosis drug classes.

METHODS

We simulated the expected changes in out-of-pocket and plan spending net of financial incentive costs using a Markov model with a 1-year time frame. We defined drugs as therapeutically similar if they were in the same therapeutic class and were also considered exchangeable by a clinical pharmacist. A lower cost drug was defined as one that cost the health plan at least $50 less than the next lowest cost therapeutically similar drug. The probability of switch was derived from elasticity estimates in the literature while the number patients, medications, patient and plan prices, and baseline adherence were estimated using administrative claims data from a regional mixed model HMO. We varied elasticity, and incentive size jointly in two-way sensitivity analyses.

RESULTS

Our insulin cohort included 2,127 individuals on high cost drugs. An incentive of $250 offered the highest health plan savings. At this level, 6% of eligible patients switched to a lower cost alternative in the base-case analysis. This yielded $93 and $24 of net plan and patient savings, respectively per patient incentivized. Savings increased with higher elasticity, up to $636 and $164 of net plan and patient savings, respectively. Simulations using multiple sclerosis drugs yielded similar results.

CONCLUSIONS

Even at low switch rates, a financial incentive program reduces both patient and health plan spending within the first year in this simulation.