When given the chance to pay less, patients choose cheaper prescription drugs | Berkeley News

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As prescription drug spending continues to rise in the United States, along with prices for new and well-established drugs, insurers, employers and patients are searching for ways to cut costs. A new study led by UC Berkeley researchers found that a policy called reference pricing is effective at encouraging patients to spend significantly less on prescription drugs by choosing cheaper drugs over name brand options.

Under the reference pricing strategy, the insurer or employer establishes its maximum contribution towards the price of therapeutically similar drugs and then the patient must pay the remainder out of pocket. The insurer/employer contribution is based on the price of the lowest-priced drug in the therapeutic class, called the reference drug. In theory, this policy would encourage patients to save money by selecting cheaper drugs that work just as well as their name-brand counterparts.

Reference pricing has been implemented across the United States by self-insured employers such as CalPERS, the agency which manages the pension and health benefits accounts for California public employees. Yet little has been known about how the policy has influenced patient spending on drugs. The new study found that reference pricing was associated with significant changes in drug selection and spending for patients covered by employment-based insurance in the United States. In the first 18 months after implementation, employers’ spending dropped $1.34 million and employees’ cost sharing increased $120,000.

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When given the chance to pay less, patients choose cheaper prescription drugs | Berkeley News.