How Does Drug Coverage Vary by Insurance Type? Analysis of Drug Formularies in the United States | Page 2

Published Online: April 21, 2014
Stephane A. Regnier, PhD, MBA
Plan competition had a negative impact on P-TKI coverage, but no significant impact on on-patent ARB or HMG coverage. In other words, when on-patent drugs were more scarce and expensive (such as P-TKIs), plans in competitive states limited the number of on-patent drugs with a low copay, possibly to reduce costs. The key findings were robust: the coefficients’ signs and significance levels remained similar for the core variables when: (1) additional covariates were added; (2) alternative models were applied; and (3) subsets of data were analyzed. Additionally, the most comprehensive logit model passed the goodness-of-fit tests.

The analysis presented in this paper could have some public health implications. Newhouse argued that the optimal cost sharing indicated by the RAND health insurance experiment (HIE) (25% coinsurance) may be suboptimal for medications for chronic diseases, especially medications whose benefits only become apparent in the long term.26,27 For instance, Goldman et al found that compliance with cholesterol-lowering therapy was associated with a reduction in the annual rate of hospitalization. However, the study authors also found that higher levels of cost sharing were associated with a reduction in compliance.28 As such, Medicare plan designs may be suboptimal because they rely heavily on cost-sharing (ie, tier 4) for expensive chronic therapies such as P-TKIs.


There were some limitations in the data. First, coverage information was not complete for all plans. For example, of 1768 plans in the database, 1579 plans had coverage information for all on-patent HMGs; 1673 for all ARBs; and 1631 for all P-TKIs. Only plans that had coverage information for all on-patent drugs within a therapeutic area were included in the analysis, which could, therefore, suffer from censoring issues. Of the plans that did not have information for all HMGs, 39% were commercial plans and 29% were employer plans. In the whole Fingertip Formulary database, commercial and employer plans represented 22% and 11% of the plans, respectively. There was a high overlap across therapeutic areas between plans without coverage information for all products. For instance, 92% of the plans that did not have coverage information for all ARBs did not have information for all HMGs.

Second, clear conclusions for municipal plans could not be derived because they are heterogeneous, as described in the Background and Objectives sections.

Third, only 11 union plans were included, which made it difficult to draw robust conclusions. If prescription data were available, a Herfindahl index based on the market share of plans may be a better measure of competition than a plan count.

Finally, the analysis was a snapshot of the situation in 2011. As more generics launch in each therapeutic area and as more new drugs become available, the results of this study may not be applicable.


Compared with commercial plans, the level of on-patent drug coverage was consistently higher in employer, union, and PBM plans, and consistently lower in Medicare plans. One implication would be to reconsider coverage by Medicare plans for chronic therapeutic diseases with high costs. Patients enrolled with Medicaid (ie, the economically poorest segment of the population) had excellent on-patent drug coverage and good access to new technologies. Increased competition between plans does not reduce on-patent drug coverage for all therapeutic areas.

Take-Away Points

  • Insurance plans assign the drugs that they cover (ie, reimburse) to “tiers,” with the copay varying by tier (the lower the tier, the lower the copay).

  • For 3 drug classes in distinct therapeutic areas, access to on-patent drugs in the lowest copay tiers (1 and 2) was higher in employer, union, and pharmacy benefit management plans than in commercial plans. However, in Medicare plans, substantially fewer on-patent drugs were included in these tiers, which could create choice restrictions and thus compliance issues.

  • Medicare plans should reconsider access to on-patent drugs by tier for high-cost therapeutic areas without affordable alternatives.
Author Affiliation: The study reported in this paper was conducted as part of the author’s research at the University of Neuchâtel, Switzerland.

Author Affiliations: University of Neuchâtel, Switzerland. Novartis Vaccines and Diagnostics AG, Basel, Switzertland.

Source of Funding: No funding was received for this research; editorial assistance was funded by Novartis Vaccines & Diagnostics AG.

Author Disclosures: The author reports employment by Novartis Vaccines and Diagnostics AG (NVD). This paper represents the views of the author and should not be considered as representative of the views of NVD. Authorship Information: Concept and design; acquisition of data; analysis and interpretation of data; drafting of the manuscript; statistical analysis.

Address correspondence to: Stephane A. Régnier, St Alban Vorstadt 49A, CH-Basel 4052, Switzerland. E-mail: stephane.regnier@unine.ch.
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