Abstract
Using pharmacy benefits manager claims data, this study analyzed how cost-management techniques including cost sharing affected enrollees in health maintenance organizations (HMOs) versus employer-sponsored fee-for-service plans. Because HMOs bear the risk of pharmaceutical costs and influence the prescribing practices of the physicians in their network, we expected different patterns of prescription use, such as proportionately more generic medications in HMOs. Also, because HMO physicians are likely to prescribe relatively more drugs for high-severity conditions, HMO enrollee demand should be less price sensitive. The impact of cost sharing was found to be significantly less for HMOs. A 5-dollar increase in copayments decreased expenditures by 16 percent in fee-for-service plans but only by 1 percent in HMOs. Furthermore, when cost sharing was set at zero, HMO plans were found to have significantly fewer and cheaper medications, resulting in lower per-enrollee medication expenditures.