The Impact of Pharmaceutical Formularies on Prescription Drug and Health Care Costs and Utilization

What are the effects of a health plan instituting a three-tiered co-payment (TTCP) financing mechanism on prescription drug spending, total health care spending, and patients' compliance with treatment protocols and quality of care? The study, conducted by researchers at Harvard University in conjunction with Merck-Medco, involved an analysis of Merck-Medco administrative, medical and pharmaceutical claims, and encounter data. The researchers investigated the effects of the three-tier co-payments on drug use and costs for both drugs and other health care services as well as the effects of the three-tier formulary on patterns of care for patients diagnosed with depression, congestive heart failure, and hypercholesterolemia. This study informs public and private policymakers - particularly those involved in designing proposals for adding a prescription drug benefit to Medicare - on the range of implications a three-tier copay strategy for prescription drug cost containment may have for patients, plans, and the market.