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Adoption of Cost Effectiveness-Driven Value-Based Formularies in Private Health Insurance from 2010 to 2013

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  • Elizabeth D. Brouwer

    (University of Washington, Comparative Health Outcomes, Policy, and Economics (CHOICE) Institute)

  • Anirban Basu

    (University of Washington, Comparative Health Outcomes, Policy, and Economics (CHOICE) Institute)

  • Kai Yeung

    (Kaiser Permanente Washington Health Research Institute)

Abstract

Background and Objective It is unclear whether private insurance benefit designs align with the most widely used ex-US definition of value, the incremental cost-effectiveness ratio (ICER). A large Pacific Northwest private insurance plan explicitly implemented a tiered formulary based on cost-effectiveness estimates of individual drugs in 2010, resulting in cost savings to the plan without negatively affecting patient health service utilization. Given the pressures of rising costs, we investigate whether employer-based private health insurance plans have adopted value-based cost-sharing approaches that are in line with cost-effectiveness estimates. Methods At the drug level, we identified five drug tier designations (0–4) that are tied to increasing ICER ranges in a large claims dataset from 2010 to 2013. We used a random effects model to evaluate whether out-of-pocket (OOP) cost levels and trends were associated with drug value designation, controlling for generic status and list price, and whether the associations varied by insurance plan type and insurance market concentration, as measured by the Herfindahl-Hirschman Index (HHI). We also estimated the weighted mean cost effectiveness of the drug claims in the sample by year and generic status using the formulary’s cost-effectiveness value ranges. Results The 2010 volume weighted mean OOP cost for a 30-day supply of drugs in tiers 0 through 4 were $US6.87, $US22.62, $US62.22, $US57.36, and $US59.85, respectively (2013 US dollars). OOP costs for cost-saving and preventive drugs (tier 0) decreased 5% annually from 2010 to 2013 (p

Suggested Citation

  • Elizabeth D. Brouwer & Anirban Basu & Kai Yeung, 2019. "Adoption of Cost Effectiveness-Driven Value-Based Formularies in Private Health Insurance from 2010 to 2013," PharmacoEconomics, Springer, vol. 37(10), pages 1287-1300, October.
    • Handle: RePEc:spr:pharme:v:37:y:2019:i:10:d:10.1007_s40273-019-00821-5
    DOI: 10.1007/s40273-019-00821-5
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    References listed on IDEAS

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    1. Jonathan Gruber & Johanna Catherine Maclean & Bill J. Wright & Eric S. Wilkinson & Kevin Volpp, 2016. "The Impact of Increased Cost-sharing on Utilization of Low Value Services: Evidence from the State of Oregon," NBER Working Papers 22875, National Bureau of Economic Research, Inc.
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