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Insurance type influences medication costs and the choice of brand-name or generic drugs

Private insurance and Medicaid provided coverage for 74 percent of outpatient prescription drug purchases in the United States in 1996, while 19 percent of drug purchases were not covered by any type of insurance. A substantial portion of Americans still lack any insurance coverage for drugs. Moreover, the type of health insurance individuals have influences whether they purchase brand-name or generic drugs and the price they pay for the drugs, according to Agency for Healthcare Research and Quality investigators G. Edward Miller, Ph.D., and John F. Moeller, Ph.D.

Drs. Miller and Moeller analyzed data on household prescription drug purchases, excluding refills, from the 1996 Medical Expenditure Panel Survey (MEPS) Household Component and the 1996 MEPS Pharmacy Component (which included computerized records of household drug purchases). People covered by Medicaid were the most likely (54 percent) to receive a generic drug for their prescriptions, and those who had private insurance were the least likely (42 percent) to choose a generic drug. Uninsured individuals fell in between the two groups (47 percent). People with private insurance used fewer generic drugs than either Medicaid recipients or uninsured people in each of six therapeutic classes of drugs.

To compare retail drug prices across insurance types, the investigators used standardized prices, that is, the retail unit price of each drug relative to a benchmark price. They found that uninsured individuals paid standardized prices that were, on average, 16.5 percent higher than the standardized prices paid by those with private insurance and 8.4 percent higher than the standardized prices paid by Medicaid recipients. Thus, people who are uninsured face higher out-of-pocket costs for drugs than those who have insurance for two reasons: they pay the full cost of their drug purchases, and they do not have access to the discounts and rebates that insurance plans negotiate on behalf of their enrollees.

More details are in "Outpatient prescription drug prices and insurance coverage: An analysis by therapeutic drug class and user characteristics from the 1996 Medical Expenditure Panel Survey," by Drs. Miller and Moeller, Investing in health: The social and economic benefits of health care innovation 14, pp. 23-57, 2001.

Reprints (AHRQ Publication No. 02-R021) are available from the AHRQ Publications Clearinghouse.

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