Variation in Prescription Use and Spending for Lipid-Lowering and Diabetes Medications in the Veterans Affairs Healthcare System

Substantial variation in prescription spending and use of brand-name drugs exists across the VA healthcare system, with no apparent relationship to quality of care.

Published Online: October 15, 2010
Walid F. Gellad, MD, MPH; Chester B. Good, MD, MPH; John C. Lowe, RPh, MBA; and Julie M. Donohue, PhD

Objectives: To examine variation in outpatient prescription use and spending for hyperlipidemia and diabetes mellitus in the Veterans Affairs Healthcare System (VA) and its association with quality measures for these conditions.


Study Design: Cross-sectional.


Methods: We compared outpatient prescription use, spending, and quality of care across 135 VA medical centers (VAMCs) in fiscal year 2008, including 2.3 million patients dispensed lipid-lowering medications and 981,031 patients dispensed diabetes medications. At each facility, we calculated VAMC-level cost per patient for these medications, the proportion of patients taking brand-name drugs, and Healthcare Effectiveness Data and Information Set (HEDIS) scores for hyperlipidemia (low-density lipoprotein cholesterol level <100 mg/dL) and for diabetes (glycosylated hemoglobin level >9% or not measured).


Results: The median cost per patient for lipidlowering agents in fiscal year 2008 was $49.60 and varied from $39.68 in the least expensive quartile of VAMCs to $69.57 in the most expensive quartile (P < .001). For diabetes agents, the median cost per patient was $158.34 and varied from $123.34 in the least expensive quartile to $198.31 in the most expensive quartile (P < .001). The proportion of patients dispensed brand-name oral drugs among these classes in the most expensive quartile of VAMCs was twice that in the least expensive quartile (P < .001). There was no correlation between VAMC-level prescription spending and performance on HEDIS measures for lipid-lowering drugs (r = 0.12 and r = 0.07) or for diabetes agents (r = -0.10).


Conclusions: Despite the existence of a closely managed formulary, significant variation in prescription spending and use of brand-name drugs exists in the VA. Although we could not explicitly risk-adjust, there appears to be no relationship between prescription spending and quality of care.


(Am J Manag Care. 2010;16(10):741-750)

Despite the existence of a closely managed formulary, significant variation in prescription spending and use of brand-name drugs exists across the Veterans Affairs Healthcare System (VA). Although we could not explicitly risk-adjust, there was no apparent relationship between prescription spending and quality of care. 


  • Although practice pattern variation is well-documented in Medicare and other settings, few studies have examined variation in prescribing.
  • Identifying and eliminating unnecessary variation in prescribing should be part of all quality and efficiency improvement programs.
  • This study has important implications for drug spending outside the VA, where the use of closed formularies is less common, rates of generic drug utilization are lower, and overall cost implications are even more profound.
Geographic variation in healthcare utilization and spending in the United States is well-documented.1,2 After accounting for differences in prices and disease prevalence, researchers reported 2-fold variation in Medicare spending in 2006 across hospital referral regions, largely owing to differences in the volume of healthcare services delivered.3 Studies4,5 to date have shown that areas with higher Medicare spending perform no better than low-spending areas on process quality-of-care and health outcome measures and  may, in fact, perform worse. Areas of healthcare that exhibit a high degree of regional variation in use and spending tend to be those in which clinical evidence is weak and there is a lack of consensus-based treatment guidelines.6

One area in which spending has increased dramatically in the past 15 years is prescription drugs.7 Despite the debate over the value of this increased spending,8 few studies9-16 have examined regional variation in prescription drug use. Most of these studies were conducted with data from the late 1990s, were focused on variation within limited geographic regions, or did not examine the association between prescription drug spending and health outcomes.

We chose the Veterans Affairs Healthcare System (VA) as the setting in which to study variation in outpatient prescription drug use and spending, and we focus herein on facility-level variation. In the VA, we can isolate differences in prescription use independent of health system factors known to affect use such as insurance coverage for prescription drugs and the existence of formularies. In addition, variation in drug spending will not be due to differences in price, as acquisition costs for medications generally do not vary between regions in the VA. Our objectives for this research were (1) to assess the level of variation in outpatient prescription use and spending in the VA for 2 widely used therapeutic categories (lipid-lowering drugs and diabetes medications) and (2) to determine if VA medical centers (VAMCs) that spent more per patient for these medications performed better on routinely collected quality measures for hyperlipidemia and diabetes.


Setting and Data Sources

The VA is one of the largest integrated healthcare systems in the United States, with more than 8 million veterans enrolled and more than 5 million receiving care.17,18 In fiscal year 2008 (FY2008), the VA spent $3.1 billion on outpatient pharmaceuticals. Between 1996 and 2009, the VA transitioned from a decentralized system of more than 170 individual drug formularies to a single VA National Formulary.19,20 Healthcare providers have access to all US Food and Drug Administration– approved medications but must request and cite justification for nonformulary drugs before their use.

The VA Pharmacy Benefits Management Services database contains all individual VA outpatient pharmacy transactions in the United States. We used aggregate outpatient pharmacy data for FY2008 to study prescription use and spending across 135 VAMCs nationwide. The database includes aggregate VAMC-level data on the cost for each dispensed product (acquisition cost to the VA), the number of unique patients receiving prescriptions, and the number of prescriptions and dosage units dispensed. We also obtained VAMC-level quality measures from the VA Office of Quality and Performance.

Population and Drugs Studied

We aggregated total prescription spending for lipid-lowering and diabetes medications (including insulin) at the VAMC level. Each VAMC may include several hospitals and community-based clinics. For example, the VA Pittsburgh (Pennsylvania) Healthcare System Veterans Integrated Service Network (VISN) 4 includes 3 different hospitals or divisions. VISN 15 (Missouri, Kansas, and parts of Illinois) aggregates the prescription spending of its 6 VAMCs into 2 groups (rather than at the facility level, as measured in other regions of the country). We maintained the designation of these 2 groups as VAMCs for the purposes of the analysis of variation in spending.

We chose to study lipid-lowering and diabetes medications, which are commonly used drugs available in brand-name and generic forms and treat conditions with objectively measured quality outcomes (Table 1). For lipid-lowering medications, we excluded bile acid sequestrants because of the likelihood that these agents are used for conditions other than hyperlipidemia (eg, cholestyramine resin for chronic diarrhea or pruritus). We also excluded niacin products because the VA recommends the use of brand-name Niaspan® (long-acting niacin) over “nutritional” generics, and these agents are clinically used primarily for high-density lipoprotein cholesterol and triglyceride control rather than for low-density lipoprotein cholesterol (LDL-C) control.

Outcome Variables

Drug Spending. Our main drug spending variable was cost per patient in FY2008 for lipid-lowering and diabetes medications. We divided the total amount spent by each VAMC

for these medication classes (ie, acquisition cost for all dispensed units or pills in the class) by the number of unique patients who were dispensed these medications. For example, if a VAMC dispensed 100,000 pills of simvastatin at an acquisition cost of $0.08 per pill, then the total amount spent by that VAMC would be $8000. Because VA acquisition cost varies little across VAMCs and because VA Pharmacy Benefits Management Services data include only drug costs and not pharmacy labor, supply, or overhead costs, differences in spending among VAMCs should reflect differences in prescribing practices (eg, type of medicine and intensity of use) rather than differences in drug price or labor costs.

Our primary interest was estimating the extent of variation in spending due to prescribing differences as opposed to differences in adherence, which would affect the number of prescriptions filled and thus total cost per patient. Therefore, we also calculated a second VAMC-level spending variable, namely, the mean cost per 30-day prescription. The mean  cost per prescription at a VAMC depends on what drugs are filled (ie, medication choice) rather than on the total days’ supply dispensed during the year. The VAMCs using more expensive brand-name agents will have a higher mean cost per prescription than facilities using fewer brand-name agents, regardless of whether patients miss certain doses during the year or are taking 1 or 2 agents to control their disease. We compare our 2 spending measures and assume that if they are highly correlated, VAMC-level spending differences are not driven by differences in adherence.

Quality of Care. The VA collects Healthcare Effectiveness Data and Information Set (HEDIS) quality measures at each facility using independent reviewers from the External Peer Review Program, who examine cross-sectional random samples of medical records.21 We used facility-level HEDIS measures obtained from the VA Office of Quality and Performance to measure quality of care for hyperlipidemia and for diabetes.22 Lipid-lowering and diabetes therapy is associated with improvements in these intermediate measures.23-25 Evidence about the association between surrogate measures and outcomes such as mortality is mixed26; however, these measures are accepted quality metrics and are used to evaluate the performance of physicians, institutions, and health plans.

HEDIS scores were obtained for LDL-C levels less than 100 mg/dL. Data were abstracted on the percentage of patients aged 18 to 75 years with a diagnosis of diabetes or with ischemic heart disease who had undergone a full lipid panel during the past year and whose most recent LDL-C level was less than 100 mg/dL.

HEDIS scores were also obtained for glycosylated hemoglobin (A1C) levels exceeding 9% or not measured (ie, poor control) in the past year. The External Peer Review Program abstracts data on the percentage of patients aged 18 to 75 years with a diagnosis of diabetes having an A1C level exceeding 9% or for whom A1C testing was not performed. This measure is the most up-to-date clinical measure of diabetes control used and reported by the VA Office of Quality and Performance. For ease of comparison across the 2 conditions, we reverse-scored the A1C measurement (1 minus the HEDIS score), so that a higher score represented better quality of care.

Independent Variables

We expected drug spending to be associated with the level of brand-name drug use. For lipid-lowering agents, we measured the percentage of patients on lipid-lowering therapy at each facility who were receiving brand-name drugs. We classified rosuvastatin calcium (Crestor®), atorvastatin calcium (Lipitor®), fluvastatin sodium (Lescol®), ezetimibe (Zetia®), and ezetimibe-simvastatin (Vytorin®), which are nonformulary in the VA, as brand-name agents and examined variation in prescribing of these agents. For diabetes medications, we measured the percentage of patients taking diabetes drugs who received thiazolidinediones (ie, pioglitazone hydrochloride [Actos®] or rosiglitazone maleate [Avandia®]), which are a brand-name–only class of oral hypoglycemics.

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