Association of Reference Pricing with Drug Selection and Spending

Published in: New England Journal of Medicine, Volume 377, Number 7, pages 658-665. doi: 10.1056/NEJMsa1700087

Posted on RAND.org on September 28, 2017

by James C. Robinson, Christopher Whaley, Timothy T. Brown

Read More

Access further information on this document at New England Journal of Medicine

This article was published outside of RAND. The full text of the article can be found at the link above.

Background

In the United States, prices for therapeutically similar drugs vary widely, which has prompted efforts by public and private insurers to steer patients toward the lowerpriced options. Under reference pricing, the insurer or employer establishes a maximum contribution it will make toward the price of a drug or procedure, and the patient pays the remainder.

Methods

We used difference-in-differences multivariable regression methods to analyze changes in prescriptions and pricing for 1302 drugs in 78 therapeutic classes in the United States, before and after implementation of reference pricing by an alliance of private employers. We assessed trends for the study group relative to those for an employee group that was not subject to reference pricing. The study included 1,122,741 prescriptions that were reimbursed during the period from 2010 through 2014.

Results

Implementation of reference pricing was associated with a higher percentage of prescriptions that were filled for the lowest-priced reference drug within its therapeutic class (difference in probability, 7.0 percentage points; 95% confidence interval [CI], 4.0 to 9.9), a lower average price paid per prescription (-13.9%; 95% CI, -23.8 to -2.7), and a higher rate of copayment by patients (5.2%; 95% CI, 0.2 to 10.4) than in the comparison group. During the first 18 months after implementation, spending for employers was $1.34 million lower and the amount of copayments for employees was $0.12 million higher than in the comparison group.

Conclusions

Implementation of reference pricing was associated with significant changes in drug selection and spending for a population of patients covered by employment-based insurance in the United States.

Research conducted by

This report is part of the RAND Corporation external publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.