Background: Sources of regional variation in spending for prescription drugs under Medicare Part D in the USA are poorly understood, and such variation may reflect differences in health status, use of effective treatments or selection of branded drugs over lower-cost generics.
Methods: We analysed 2008 Medicare data for 4.7 million beneficiaries for prescription-drug use and expenditures overall and in three drug categories: ACE inhibitors and angiotensin-receptor blockers (ARBs), 3-hydroxy-3-methylglutaryl coenzyme A (HMG-CoA) reductase inhibitors (statins), and selective serotonin-reuptake inhibitors (SSRIs) and serotonin–norepinephrine reuptake inhibitors (SNRIs). Differences in per capita expenditures across hospital-referral regions (HRRs) were decomposed into annual prescription volume and cost per prescription. The ratio of prescriptions filled as branded drugs to all prescriptions filled was calculated. We adjusted all measures for demographic, socioeconomic and health-status differences.
Results: Mean adjusted per capita pharmaceutical spending ranged from US$2413 in the lowest to $3008 in the highest quintile of HRRs. Most (75.9%) of that difference was attributable to the cost per prescription ($53 vs $63). Regional differences in cost per prescription explained 87.5% of expenditure variation for ACE inhibitors and ARBs and 56.3% for statins but only 36.1% for SSRIs and SNRIs. The ratio of branded-drug to total prescriptions, which correlated highly with cost per prescription, ranged across HRRs from 0.24 to 0.45 overall and from 0.24 to 0.55 for ACE inhibitors and ARBs, 0.29 to 0.60 for statins and 0.15 to 0.51 for SSRIs and SNRIs.
Conclusions: Regional variation in US Medicare Part D spending results largely from differences in the cost of drugs selected rather than prescription volume. A reduction in branded-drug use in some regions through modification of Part D plan benefits might lower costs without reducing quality of care.
See also a letter from D Mukherjee and C Mukherjee (N Engl J Med 10 May 2012;366:1842-1843) pointing out that the survey does not address the appropriateness of prescribing, and noting that drug shortages may have affected use.