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Nonlinear Pricing in Drug Benefits and Medication Use: The Case of Statin Compliance in Medicare Part D
Author(s) -
Jung Kyoungrae,
Feldman Roger,
McBean A. Marshall
Publication year - 2014
Publication title -
health services research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.706
H-Index - 121
eISSN - 1475-6773
pISSN - 0017-9124
DOI - 10.1111/1475-6773.12145
Subject(s) - medicare part d , prescription drug , copayment , medicine , medical prescription , statin , compliance (psychology) , beneficiary , actuarial science , econometrics , business , economics , finance , pharmacology , health care , psychology , social psychology , health insurance , economic growth
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.