OBJECTIVES: The Price-Volume Agreement Program (PVAP) was promulgated in 2007 in South Korea as the first attempt to link price and quantity consumed in order to contain drug expenditure to a reasonable level. This paper provides empirical evidence whether price adjustment according to total quantity consumed has manifest effects in controlling drug expenditure for diabetes drugs.

METHODS: National Health Insurance Service claims data on diabetes drugs were used for 10 years (2003-2012). We estimated the impact of PVAP on drug expenditure at product-level using random effect difference-in-difference model by comparing the level of total monthly drug expenditure on diabetes drugs between negotiation drugs and existing drugs after adjusting the average differences in drug expenditure before and after PVAP.  RESULTS: Even if price changes alone ceteris paribus would have decreased total drug expenditure, volume gre more to the extent to compensate the price effect and pushed up total drug expenditure for diabetes between 2003 and 2012. Monthly total drug expenditure for negotiation drugs was 11.15% higher on average compared to existing drugs controlling for its differences before and after PVAP. The monthly total drug expenditure became higher on average compared to existing drugs controlling for its differences before and after PVAP in all four subgroups, with the largest extent among the exentide group (by 14.40%), followed by vildagliptin (by 6.62%). CONCLUSIONS: PVAP only had a restricted impact on the total drug expenditure.