Currently Viewing:
The American Journal of Managed Care June 2016
Development of a Tethered Personal Health Record Framework for Early End-of-Life Discussions
Seuli Bose-Brill, MD; Matthew Kretovics, MPH; Taylor Ballenger, BS; Gabriella Modan, PhD; Albert Lai, PhD; Lindsay Belanger, MPH; Stephen Koesters, MD; Taylor Pressler-Vydra, MS; and Celia Wills, PhD, RN
The Value of Decreasing Health Cost Volatility
Marc Herant, PhD, MD, and Alex J. Brown, MEng, MBA
Variations in Patient Response to Tiered Physician Networks
Anna D. Sinaiko, PhD
Primary Care Appointment Availability and Nonphysician Providers One Year After Medicaid Expansion
Renuka Tipirneni, MD, MSc; Karin V. Rhodes, MD, MS; Rodney A. Hayward, MD; Richard L. Lichtenstein, PhD; HwaJung Choi, PhD; Elyse N. Reamer, BS; and Matthew M. Davis, MD, MAPP
Currently Reading
Impact of Type 2 Diabetes Medication Cost Sharing on Patient Outcomes and Health Plan Costs
Julia Thornton Snider, PhD; Seth Seabury, PhD; Janice Lopez, PharmD, MPH; Scott McKenzie, MD; Yanyu Wu, PhD; and Dana P. Goldman, PhD
The Evolving Role of Subspecialties in Population Health Management and New Healthcare Delivery Models
Dhruv Khullar, MD, MPP; Sandhya K. Rao, MD; Sreekanth K. Chaguturu, MD; and Rahul Rajkumar, MD, JD
When Doctors Go to Business School: Career Choices of Physician-MBAs
Damir Ljuboja, BS, BA; Brian W. Powers, AB; Benjamin Robbins, MD, MBA; Robert Huckman, PhD; Krishna Yeshwant, MD, MBA; and Sachin H. Jain, MD, MBA
Review of Outcomes Associated With Restricted Access to Atypical Antipsychotics
Krithika Rajagopalan, PhD; Mariam Hassan, PhD; Kimberly Boswell, MD; Evelyn Sarnes, PharmD, MPH; Kellie Meyer, PharmD, MPH; and Fred Grossman, MD, PhD
Value of Improved Lipid Control in Patients at High Risk for Adverse Cardiac Events
Anupam B. Jena, MD, PhD; Daniel M. Blumenthal, MD, MBA; Warren Stevens, PhD; Jacquelyn W. Chou, MPP, MPL; Thanh G.N. Ton, PhD; and Dana P. Goldman, PhD
Effects of Physician Payment Reform on Provision of Home Dialysis
Kevin F. Erickson, MD, MS; Wolfgang C. Winkelmayer, MD, ScD; Glenn M. Chertow, MD, MPH; and Jay Bhattacharya, MD, PhD
Adoption of New Agents and Changes in Treatment Patterns for Hepatitis C: 2010-2014
Xiaoxi Yao, PhD; Lindsey R. Sangaralingham, MPH; Joseph S. Ross, MD; Nilay D. Shah, PhD; and Jayant A. Talwalkar, MD

Impact of Type 2 Diabetes Medication Cost Sharing on Patient Outcomes and Health Plan Costs

Julia Thornton Snider, PhD; Seth Seabury, PhD; Janice Lopez, PharmD, MPH; Scott McKenzie, MD; Yanyu Wu, PhD; and Dana P. Goldman, PhD
An analysis of claims from over 90,000 patients with type 2 diabetes (T2D) demonstrates that increased medication cost sharing is associated with higher rates of hospitalization and increased plan costs.

Objectives: To study the association between cost sharing for diabetes medications, adherence, hospitalization rates, and healthcare costs, with relationship to patient risk.

Study Design: A retrospective claims analysis of data from 35 large, private, self-insured employers (2004 to 2012).

Methods: We examined outcomes for 92,410 patients aged 18 to 64 years with a type 2 diabetes (T2D) diagnosis who filled at least 1 T2D prescription. First, we examined the relationship between adherence, measured as the proportion of days covered, and cost sharing, measured as the out-of-pocket cost to purchase a pre-specified bundle of T2D prescriptions. We then examined the association between adherence and hospital days. Simulations showed the effect of increased cost sharing on adherence and inpatient utilization.

Results: A $10 increase in out-of-pocket cost was associated with a 1.9% reduction in adherence (P <.01). In turn, a 10% reduction in adherence was associated with a 15% increase in per-patient hospital days (0.17 days; P <.01). For the average plan, switching from low to high cost sharing reduced per-patient medication costs by $242 and increased per-patient hospitalization costs by $342, for a net increase of $100 in plan costs. Increases in per-patient costs were greater for high-risk patients, such as those with heart failure ($1328).

Conclusions: Increased cost sharing for T2D medication was associated with reductions in pharmacy costs, but higher total costs for patients with T2D. This problem is particularly acute for patients with 1 or more cardiovascular comorbidities. The results suggest that increased diabetes cost sharing may hamper efforts to lower the total cost of diabetes care.

Am J Manag Care. 2016;22(6):433-440

Take-Away Points
This study investigated the association between cost sharing for type 2 diabetes (T2D) medications and patient outcomes, including medication adherence, hospitalizations, and healthcare costs to payers. Increasing patient out-of-pocket costs decreased patient medication adherence, and poorer medication adherence resulted in increased days spent in the hospital. The long-term hospitalization costs associated with lower adherence were greater than the health plan’s prescription drug cost-savings, particularly for high-risk patients. Decreasing out-of-pocket expenses may actually decrease long-term T2D-related costs for payers. 
  • Higher levels of cost sharing are associated with lower levels of adherence to T2D medications. 
  • Reduced adherence to T2D medications is associated with an increased number of days spent in hospital. 
  • Although higher cost sharing reduces T2D drug costs, it raises hospitalization costs and, overall, increases costs to the plan. 
  • High cost sharing has particularly adverse consequences in high-risk populations, such as those with heart failure or prior myocardial infarction, in terms of patient health and plan costs.
The last decade has seen a proliferation of payer-driven efforts to contain rising healthcare costs. Prescription drugs have increasingly been subject to utilization management policies, including tiered formularies and patient cost sharing for branded products. However, a large body of literature shows that increased cost sharing can have unintended consequences of patient noncompliance to prescribed medication regimens,1-7 and may delay treatment initiation in patients newly diagnosed with chronic illness, including diabetes, hypertension, high cholesterol, and multiple sclerosis.8,9 This has prompted concern that increased cost sharing may worsen outcomes for patients.10-12

If high cost sharing worsens patient medication adherence, it could lead to costly complications that partially or completely offset payers’ pharmacy savings. For example, a study of patients with high cholesterol suggested that higher cost sharing reduced drug adherence and worsened outcomes for patients at high risk of complications, subsequently increasing overall costs.13 However, the relationships between cost sharing, medication adherence, and outcomes are sensitive to drug class and patient condition.4,5 More disease-specific estimates on the implications of cost sharing for patient outcomes and plan-spending are needed.6,14 In particular, in the case of diabetes, there have been a number of innovations over the past 10 years, and more information is needed on whether the relationship between cost sharing, adherence, and outcomes has changed as a result.

Disruptions to therapy caused by high cost sharing can be particularly harmful for patients with diabetes. Successful blood glucose control in patients with diabetes substantially decreases the risk of numerous complications, including cardiovascular disease (CVD), end-stage renal disease, stroke, retinopathy, and death.15 Diabetes affects 29.1 million Americans, costs the US healthcare system $245 billion annually (2012 data), and is projected to increase dramatically over the next 40 years.16-18 Type 2 diabetes (T2D), which represents 90% to 95% of adult diabetes cases,16 is a progressive disease, and requires most patients to eventually use drug therapy to achieve blood glucose control.19 Although antihyperglycemic drugs can effectively control blood glucose levels, research indicates that these drugs are underutilized, with studies finding the percent adherent to T2D medications ranges from 31% to 87%, with sizable groups of nonadherent patients in many populations.7,20,21

Given the launch of new classes of antihyperglycemics in a healthcare system increasingly concerned with budget constraints, our study updates past work on cost sharing in diabetes1,4 in light of the new landscape. Moreover, given that past studies have found that increased cost sharing for diabetes medications may lead to complications which offset the pharmacy cost savings,1,4 one might wonder whether payers have changed benefit designs such that these offsets are no longer present. To answer these questions, we measured associations between cost sharing of T2D-related medications, patient adherence, and total costs for health plans. To do this, we used retrospective data on medication use, healthcare utilization, and spending among privately insured patients with T2D to simulate the per-patient healthcare spending associated with low-cost ($10 co-payment) and high-cost ($50 co-payment) pharmacy plans.


A retrospective cohort design was used to analyze the associations among cost sharing, medication adherence, and per-patient all-cause hospital days. Combining these analyses, it was possible to link cost sharing to hospitalization and estimate the impact of cost sharing on plan costs. Additional detail can be found in the eAppendix (available at


The study sample was assembled using a longitudinal database of medical and pharmacy claims from 2004 to 2012 from 35 self-insured employers. The data set was constructed at the person-year level to reflect a person’s experience in a specific health plan.

Patients with T2D were identified for the study based on 1 or more inpatient or ambulatory visit with a T2D diagnosis (International Classification of Diseases, Ninth Revision, Clinical Modification diagnosis codes 250.x0 or 250.x2). To create a working-age sample and exclude patients also covered by Medicare—for whom the claim history may be incomplete—the sample was restricted to patients aged 18 to 64 years at baseline. To ensure sufficient follow-up for analysis, patients were required to have had continuous health plan and pharmacy benefit enrollment during the first observed year with a T2D diagnosis, and for at least 1 year afterward.

Patients excluded from the study included those with less than 1 year of follow-up, those pregnant, and those with gestational diabetes. Additionally, patients using an insulin pump were excluded due to the difficulty in measuring adherence in claims data; however, patients using insulin, not on a pump device, were included. Because this study examined adherence to T2D medications, person-year data were retained only for years in which the patient filled 1 or more T2D prescriptions. Data from the first year with a T2D diagnosis were excluded because the patient may not have had T2D for the entire year. Finally, we excluded outlier patient data in terms of cost sharing and hospital days, as well as patients in small plans (<10 total enrollees with T2D). Additional details on outlier exclusions are available in the eAppendix.


Data were collected for the following covariates: patient age, gender, indicators for each of the Charlson comorbidities22 during the previous year, medical cost sharing faced by the patient in the given year, and indicators for each year in the study period.4,6,8 Medical cost sharing was defined as the average portion of medical (ie, inpatient, outpatient, and emergency department) services that individuals in a given plan paid out of pocket (OOP).

The key explanatory variable was cost sharing for T2D medications, measured as the average patient OOP cost of purchasing a T2D drug prescription in a given plan. Specifically, the OOP costs to obtain a fixed bundle of T2D prescriptions were averaged across the individuals in a plan, and the result was divided by the number of drugs in the bundle to obtain the average OOP cost per T2D prescription. Total T2D drug costs were defined as the total amount the plan and patient spent on T2D drugs in a given year.

The key outcome measures were patient medication adherence and number of hospital days. Adherence was measured as the proportion of days covered (PDC) (ie, the fraction of days in the year in which the patient had a supply of at least 1 T2D medication on hand). For example, a PDC of 0.75 indicates that a patient had T2D medications on hand for about 9 months of the year. PDC was selected over another common adherence measure—the medication possession ratio—which has a tendency to overestimate adherence. Hospital days were defined as the number of days an individual spent in hospital in a given year. Hospital stays in which a patient was admitted and discharged in a single day were counted as a full day.

Statistical Analysis

Linear regression models were used to estimate the relationship between cost sharing, adherence and hospital days at the patient-year level. First, adherence was estimated as a function of drug cost sharing, then days in hospital were estimated as a function of adherence. Adjusted analyses controlled for age, gender, each of the Charlson comorbidities, and the year (to absorb time trends). Because patient adherence to T2D medications may also depend on OOP spending for other healthcare services, the analysis of adherence, as a function of T2D medication cost sharing, also controlled for medical cost sharing.

We used these estimates in a 2-step process to predict total plan costs (ie, plans’ drug plus hospitalization costs) at high and low levels of T2D drug cost sharing. Low cost sharing and high cost sharing were defined as an average OOP cost per T2D prescription of $10 and $50, which approximately corresponded to the 10th and 90th percentiles of cost sharing, respectively. Regression models were used to predict adherence and hospital days at the low and high cost-sharing levels, holding covariates at their mean values. Payer hospitalization cost was determined by multiplying the predicted number of days in hospital by the average payer cost of a hospital day. Costs were inflated to 2012 US dollars using the Consumer Price Index for All Urban Consumers. By combining the analyses linking cost sharing to adherence and adherence to days in hospital, we predicted the plan’s T2D drug costs and hospital costs at high and low cost-sharing levels, and estimated how total plan cost would vary with cost sharing.

These predictions were performed for several scenarios. The base case used the full study sample. Subsequent analyses were performed on subsamples defined by patient risk: specifically, the presence of CVD, congestive heart failure (CHF), prior myocardial infarction (MI), renal disease, or prior hospitalization. Additional subsamples included lower-risk patients, including those in none of the above risk groups, and those with no comorbidities. Finally, because our plan-level cost-sharing measure was potentially subject to measurement error in smaller plans, the analyses were repeated based on plan size subsamples. Our base-case analysis included all T2D patients in plans with 10 or more patients with T2D that year; subanalyses also examined plans with greater than 20, 50, 100, and 500 patients with T2D.

Descriptive Statistics

From more than 7 million covered lives in the database, 727,476 had at least 1 claim with a T2D diagnosis. After applying exclusion criteria, 92,410 patients from 1514 healthcare plans were eligible for study inclusion. Plans had an average of 8776 members and 144 patients with T2D in the study cohort. Table 1 shows the personal characteristics of patients included in the study overall, as well as those in low and high cost-sharing plans (defined by the 10th and 90th percentiles of cost sharing). The sample was mostly male (56.1%), aged between 50 to 64 years (71.4%), and had an average of 1.17 Charlson comorbidities at baseline.

The mean annual per patient OOP amount for T2D drugs was $242 (SD = $337) and the mean OOP amount per individual T2D prescription was $22.70 (SD = $16.70). Only 10% of patients had an average OOP per T2D prescription cost exceeding $54, and 10% had an average OOP cost below $11.

The average adherence to T2D medications, measured as PDC, was 67% (SD = 29.1%). Patients with T2D spent an average of 1.15 (SD = 7.70) days in hospital each year. In a given year, 1 in 6 (16.6%) patients with T2D was hospitalized. Adherence in the sample ranged from 0.27% to 100%. (No one had a zero PDC because individuals were required to fill ≥1 prescription for cohort inclusion.) Individuals in low cost-sharing plans had an average adherence of 69%, whereas in high cost-sharing plans, the average adherence was 63%.

Copyright AJMC 2006-2018 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
Welcome the the new and improved, the premier managed market network. Tell us about yourself so that we can serve you better.
Sign Up