Skip Navigation U.S. Department of Health and Human Services
Agency for Healthcare Research Quality
Archive print banner

Managed Care/Market Forces

This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: Let us know the nature of the problem, the Web address of what you want, and your contact information.

Please go to for current information.

Different changes in drug formulary administration and copayments can have very different effects on drug use and spending

A new study shows that when employers switch from a one-tier prescription drug plan that has the same copayment for all drugs to a three-tier plan that has a much higher copayment for nonpreferred brand-name prescription drugs, a substantial number of enrollees may stop taking their medication instead of switching to less expensive medications. In three-tiered drug benefit plans, copayments increasingly escalate for generic (tier-1), preferred brand name (tier-2), and nonpreferred brand name (tier-3) drugs.

Haiden A. Huskamp, Ph.D., of Harvard Medical School, and her colleagues compared use of and spending on three types of drugs (cholesterol-lowering statins, ACE inhibitors for heart disease, and proton-pump inhibitors that treat acid reflux disease) by members of two employer-sponsored health plans with comparison groups covered by the same insurers. Employer 1 simultaneously switched from a one-tier to a three-tier formulary and increased all enrollee copayments for medications. Employer 2 switched from a two-tier to a three-tier-formulary, changing only the copayments for tier-3 drugs.

More members of the Employer 1 plan who were initially taking tier-3 statins than those in the comparison group switched to lower-cost tier-1 or tier-2 medications (49 percent vs. 17 percent), but more of them also stopped taking statins entirely (21 vs. 11 percent). Patterns were similar for ACE inhibitors and proton-pump inhibitors. Plan members of Employer 2, who implemented more moderate drug formulary changes, were more likely than the comparison group to switch to tier-1 or tier-2 medications, but they were not more likely to stop taking a given class of medications altogether. Dr. Huskamp, whose work is supported by the Agency for Healthcare Research and Quality (HS10803), suggests that employers may consider implementing drug formulary changes more gradually to lessen the likelihood that people will simply stop using prescribed drugs to avoid the large increase in out-of-pocket costs.

More details are in "The effect of incentive-based formularies on prescription-drug utilization and spending," by Dr. Huskamp, Patricia A. Deverka, M.D., Arnold M. Epstein, M.D., and others, in the December 4, 2003, New England Journal of Medicine 349, pp. 2224-2232.

Editor's Note: Select for a related study for more information on access tiered drug formularies and psychotropic use by Dr. Huskamp.

Return to Contents
Proceed to Next Article

The information on this page is archived and provided for reference purposes only.


AHRQ Advancing Excellence in Health Care