Have Value-Based Trends Moved the Private Prescription Insurance Market Towards Greater Value as Measured by Cost-Effectiveness?

Background: Value-based cost-sharing shows promise as a way to decrease costs without affecting outcomes, although debate rages on about how value should be defined. Recently a large northwest private insurance plan explicitly implemented tiered formulary based on cost-effectiveness ratios of individual drugs. This policy resulted in cost savings to the plan without sacrificing patient health. Given the pressures of rising costs, we explore whether, employer-based private health insurance plans have implicitly adopted value-based cost-sharing approaches that are in line with cost-effectiveness estimates.

Methods: At the drug level, we merge a dataset containing 5 drug tier designations (0-4) that are tied to increasing incremental cost-effectiveness ratio (ICER) ranges with the MarketScan Commercial Claims dataset from 2010-2013. We evaluate whether out-of-pocket (OOP) cost levels and trends were associated with drug value designation, and whether the associations varied by insurance plan type and market concentration. Specifically, at the drug-year level, our model estimates the natural log of average OOP costs for a standardized 30-day supply of each drug, with year, value tier, and their interaction as the independent variables of interest. Our model controls for generic status, payer reimbursement level, and average wholesale price and uses drug-level random effects to account for repeated observations. We also estimate the average cost-effectiveness of the drug claims in the sample by year and generic status using the formulary’s cost-effectiveness value ranges.

Results: The weighted average OOP cost for a 30-day supply of drugs in tiers 0 through 4 were $6.87, $22.62, $62.22, $57.36, and $59.85, respectively. OOP costs for cost-saving and preventive drugs (tier 0) decreased 5% annually from 2010-2013 (p<0.01); OOP costs for drugs costing under $10,000/QALY (tier 1) decreased 4.5% annually (p<0.01) and OOP costs for drug costing over $50,000/QALY (tier 3) and $150,000/QALY (tier 4) decreased by 2.4% and 2.2% respectively (p<0.01 and p=0.046). OOP costs for drugs valued between $10,000-$50,000/QALY did not change significantly (p=0.31). OOP costs decreased across all tiers in all plan types with the largest changes in high deductible health plans and the least changes in HMOs. Insurance market concentration level appeared unrelated to change in OOP costs by tier. The average ICER of drug claims appears to be decreasing over 2010-2013, however this likely reflects generics consuming an increasing share of drug claims. When stratified by generic status, average ICER increased for generic drugs over time and did not change for brand name drugs.

Conclusion: OOP costs for prescription drugs are decreasing across value levels, with OOP costs for higher value drugs generally decreasing at a faster rate than lower value drugs. This evidence toward a shift in value does not reveal strong differences in OOP costs for drugs valued over $10,000 to $50,000 per QALY, indicating many plans may be maintaining a three-tiered formulary not explicitly based on cost-effectiveness.