Report: Reference Pricing Decreases Overall Spending, Increases Patient Cost Sharing

A new economic analysis published in JAMA found that the implementation of reference pricing increased the percentage of prescriptions filled for the lower-priced drugs within each therapeutic class, while simultaneously increasing patient cost sharing and decreasing overall prices paid.

Although reference pricing has been more widely implemented in Europe, it has been adopted by a few US employers. Under the most common approach, pharmacy benefit managers (PBMs) assign drugs to any of several tiers within their formularies, usually based on the drug’s price. Consumers’ co-payments are lowest for drugs in the first tier, moderate for drugs in the second tier, and highest for drugs in the third tier. Furthermore, under this system, pharmacists are authorized to automatically substitute less expensive drugs without consulting the prescribing physician.

Reference pricing groups drugs by therapeutic class, with the lowest-priced treatment available to patients for the lowest co-payment. Notably, under reference pricing, pharmacists cannot substitute a drug for another without consulting the prescribing physician.

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Earlier studies of reference pricing have shown that although it results in savings for employers, patients also faced higher out-of-pocket spending on those prescriptions still written by their physicians for higher priced drugs. Those results were based on trends in the first 18 months after implementing reference pricing. The newly published study extended that analysis to 54 months after implementation.

In the study, researchers analyzed 1.2 million prescriptions from Reta Trust, which implemented reference pricing in July 2013. They compared those data with 2.1 million prescriptions covered by the California Public Employees’ Retirement System (CalPERS).

In the first 2.5 years after implementation of reference pricing, the percentage of prescriptions filled for the low-priced drug within each therapeutic class increased from 1.8% to 8.4%, patient cost sharing increased by 10.3%, and prices paid decreased by 19.1% for Reta Trust patients compared with CalPERS patients.

During the subsequent 2 years, the percentage of prescriptions for the lowest-priced drug in each therapeutic class increased an additional 6.2%, patient cost sharing decreased by 21.3%, and prices paid increased by 7.2%.

The study authors noted that their focus was on the effects of reference pricing on patient cost sharing. The initial spike in cost-sharing is consistent with previous studies, which the authors attributed to a lag in response by physicians and patients. As they adjusted, however, the rate of cost sharing decreased as evidenced by their results between 2.5 and 4.5 years post-implementation.

Although the benefits for employers and patients is statistically significant, the authors noted that the effects on patient cost-sharing are dependent on how quickly prescribers adapt to the new system.

REFERENCE

Robinson J, Whaley C, Brown T, Dhruva S. Physician and Patient Adjustment to Reference Pricing for Drugs. JAMA Network; February 5, 2020. https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2760028. Accessed February 10, 2020.