Since the advent of the PBMs, the concept of reference pricing for pharmaceuticals has seen multiple waves of interest and policy discussion but only minimal uptake. Reference pricing, sometimes referred to as a therapeutic MAC, requires patients to pay the full difference between the price charged at the pharmacy and a reference price reimbursed by the insurer. The reference price is the price of a low-cost drug in a therapeutic cluster of drugs considered clinically equivalent in the treatment of a condition.
Over the years, reference pricing has been used successfully in many countries, including Canada and Britain, to manage prescription spending without reducing quality of care. However, concerns over complexity and member satisfaction as well as the PBM industry’s historical reliance on rebates (prior to the growth in pass-thru models) have been barriers to the adoption of reference pricing in the U.S.
A study just published in The Journal of Managed Care Pharmacy, reports the results of Arkansas’ experience with reference pricing for proton pump inhibitors (PPIs) for its state employees. Arkansas implemented reference pricing for PPIs including esomeprazole but excluding generic omeprazole, on September 1, 2005. Beneficiary cost share for all PPIs except generic omeprazole was determined from comparison of the PPI actual price to the $0.90 omeprazole OTC reference price per unit.
Over 43 months of reference pricing, net plan costs for PPIs fell dramatically by 49.5% PMPM compared with the preperiod, despite an increase in the pharmacy dispensing fee. In the first quarter of 2009, the net spend for PPIs was only $2.19, despite the state’s significantly higher than average utilization of PPIs. While PPIs costs have been declining recently for most plan sponsors as more patients use generics, the state of Arkansas’ savings greatly exceeds those of other plan sponsors without reference pricing. The authors estimated the net savings at $1.31 PMPM over the nearly four year study period relative to a very large and diverse comparison group. As the authors point out, the savings would have been even greater had they included generic omeprazole in the reference pricing list.
Equally important given concerns that reference pricing is too complex for the average consumer, utilization of PPIs did not change yet beneficiary costs actually decreased by 6.7% due to a large movement away from branded PPIs to OTC and generic omeprazole. Between 2004 and 2009, marketshare for omeprazole, generic and OTC combined, grew from 57 to 86%. Given these results, it appears that the employer did a nice job of making beneficiaries aware of lower cost therapeutic alternatives, which patients took full advantage of over the course of the study.
The study authors make little mention of the member “noise” resulting from this plan design change; but given the large uptake in omeprazole that was observed and the state’s long-term, continued adoption of the program, it is reasonable to conclude that any member noise was manageable and likely dissipated quickly with time, as I have repeatedly seen with other types of major plan design changes. Bottom line: This evaluation provides solid evidence that reference pricing for PPIs can save real dollars without reducing utilization. For plan sponsors looking to optimally manage their drug spend, referenced-based pricing is worth consideration.