Feb 11, 2005
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The military health system, as well as the private health care sector, has experienced rapid growth in pharmaceutical expenditures. In 2002 alone, the Department of Defense spent about $3 billion on outpatient pharmacy benefits. As part of an effort to redesign the TRICARE pharmacy benefit to save costs, the Department of Defense is considering moving from a two-tiered to a three-tiered co-payment system, which will increase the co-payment for some classes and brands of drugs. Providers (acting in the interest of their patients) would, theoretically, have an incentive to prescribe less-costly options. To predict how changing to a three-tiered system will affect costs and pharmacy utilization, the authors use an existing data resource to determine how beneficiaries age 45 to 64 in private-sector health plans responded to similar changes in pharmacy benefits. In this analysis, the authors assess, among other potential outcomes, how changing to a three-tiered system would affect aggregate costs and pharmacy utilization and how it would affect the utilization of specific (high-cost) classes of medications.