Document Type

Article

Date of Original Version

2000

Abstract

Objective:

To compare variance in the cost of pharmaceuticals attributable to demographic variables with variance explained by plan characteristics, using prescription claims data within various therapeutic categories, and to examine differences in average cost of pharmaceuticals among demographic variables after controlling for covariates.

Design:

Retrospective, cross-sectional study.

Data Collection:

Data for this study were obtained from 1996 prescription claims information for the commercial population administered by a Rhode Island-based pharmacy benefit management (PBM) company. Six therapeutic categories with the highest expenditures were analyzed. Information on claims for six drug categories was extracted using database management software. Statistical analyses using multiple regression and analysis of covariance were carried out.

Results:

Plan characteristics outperformed demographic variables sixteenfold for all drug categories combined in explaining variance in cost of pharmaceuticals among plan enrollees. Average cost of pharmaceuticals differed among demographic variables such as age, gender, location, and place of employment after controlling for average wholesale price and days supply.

Conclusions:

The results obtained in this study have practical significance in the determination of capitation rates when utilization history of prospective members is not available. In this situation, managed care organizations (MCOs) or PBMs may have to set capitation rates based solely on eligibility data. Significant differences in average drug costs among the members based on place of employment suggest that benefit managers should consider differentiating capitation rates according to their clients' businesses. Finally, the data from this study indicated that commercial members residing in Tennessee had the lowest average cost of pharmaceuticals among all states evaluated. The fact that one PBM manages more than 80% of the TennCare prescription program along with a significant commercial client base suggests that a "spillover effect" may exist.

Publisher Statement

For non-commercial academic use only.

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