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Health Care Costs and Financing

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Medicare drug benefit bill will increase physicians' exposure to drug formularies

Congress recently passed legislation that will add prescription drug benefits to Medicare in 2006. Currently, 27 to 35 percent of Medicare beneficiaries have no drug coverage. The Medicare drug benefits program will likely adopt a drug formulary to help control costs and use. A drug formulary lists drugs that generally are less expensive to the health plan and to consumers but are therapeutically equivalent to more expensive medications.

Enacting a Medicare drug benefit that incorporates formularies will greatly expand physicians' exposure to them, according to a survey of physicians involved in direct patient care that was conducted in 2000 and 2001 before passage of the Medicare drug benefit bill. The analysis of the survey, which was supported in part by the Agency for Healthcare Research and Quality (HS10803), showed that nearly two-thirds of doctors obtain one-fourth or more of their practice revenue from Medicare. Physicians whose practices received the majority of revenue from Medicare reported that 51 percent of their patients had formularies compared with 62 percent of physicians with less than 25 percent of practice revenue from Medicare.

The number of managed care contracts a physician's practice had (which was presumably correlated with the number of formularies the physician must deal with) was associated with negative feelings toward formularies. Physicians who used information technology to write prescriptions and check formulary information had more positive attitudes toward formularies than those who used neither technology. The authors suggest that Medicare impose limits on the number of competing Medicare formularies operating in a particular area, promote the adoption and use of information technology to make it easier to obtain information on drug formularies, and incorporate financial incentives for physicians to adhere to formularies.

See "Physicians' views of formularies: Implications for Medicare drug benefit design," by Bruce E. Landon, M.D., M.B.A., James D. Reschovsky, Ph.D., and David Blumenthal, M.D., M.P.P., in the January 2004Health Affairs 23(1), pp. 218-226.

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