Nonlinear pricing in drug benefits and medication use: The case of statin compliance in medicare part D

Jeah (Kyoungrae) Jung, Roger Feldman, A. Marshall McBean

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Objective To examine how enrollees' statin compliance responds to expected prices in Medicare Part D, which features a nonlinear price schedule due to a coverage gap. Data Sources/Study Setting Prescription Drug Event data for a 5 percent random sample of Medicare Advantage Prescription Drug Plan enrollees in 2008 who did not receive a low-income subsidy. Study Design We analyze statin compliance prior to the coverage gap, where the "effective price" is higher than the actual copayment for drugs because consumers anticipate that more spending will make them more likely to reach the gap. We construct each enrollee's effective price as her expected price at the end of the year, which is the weighted average between pre-gap and in-gap copayments with the weight being the predicted probability of hitting the gap. Compliance is defined as at least 80 percent of days covered. Principal Findings Part D enrollees' pre-gap statin compliance decreases by 3.7-4.7 percentage points for a $10 increase in the effective price. Conclusion The presence of a coverage gap decreases statin compliance prior to the gap, suggesting that incorporating expected future prices is important to assess the full impact of cost sharing on drug compliance under nonlinear price schedules.

Original languageEnglish (US)
Pages (from-to)910-928
Number of pages19
JournalHealth Services Research
Volume49
Issue number3
DOIs
StatePublished - Jan 1 2014

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Medicare Part D
Hydroxymethylglutaryl-CoA Reductase Inhibitors
Compliance
Costs and Cost Analysis
Pharmaceutical Preparations
Prescription Drugs
Appointments and Schedules
Medicare Part C
Cost Sharing
Information Storage and Retrieval
Weights and Measures

All Science Journal Classification (ASJC) codes

  • Health Policy

Cite this

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Nonlinear pricing in drug benefits and medication use : The case of statin compliance in medicare part D. / Jung, Jeah (Kyoungrae); Feldman, Roger; McBean, A. Marshall.

In: Health Services Research, Vol. 49, No. 3, 01.01.2014, p. 910-928.

Research output: Contribution to journalArticle

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