1 Exploration of Health Care Providers Behavior to Keep Their Revenues after Reduction of Payment Generosity --- A Case of Drug Payment in Taiwan Likwang Chen Center for Health Policy Research and Development National Health Research Institutes Taiwan June 10, 2008

2 Taiwan s NHI expenditures on pharmaceuticals Around 25% NHI expense each year from 1996 to 2002; 28% in The elderly (65+) spend about 40% of pharmaceutical expenses; 14% of their drug expenses was for treating hypertension in Around 80% of NHI drug expense for outpatient care is through the hospital sector. Drugs are usually provided in hospitals with costs reimbursed to hospitals through the NHI.

3 The most prevalent form of strategy for controlling NHI drug expenditures Methods for controlling drug expenditures: co-payment (demand- side); adjustments of drug reimbursement rates and global budgeting (supply-side) The most prevalent form of strategy: reducing reimbursement rates --- mainly targeting at hospitals

4 Large-scale NHI price adjustment actions Four times: implemented in April 1 of 2000, April 1 of 2001, March 1 of 2003, and November 1 of 2006, respectively. Each of them relied on information from a drug market price survey. The last three (2001, 2003, 2006) followed the concept of generic grouping based on chemical equivalence. The last two (2003, 2006) were introduced under an environment with global budgeting.

5 Focus of this study The influences of Taiwan s generic- grouping price adjustments in 2001 One major difference between the background situations for this action and for its following two actions: the 2003 and 2006 actions were under global budgeting, while the 2001 action was not.

6 Research questions Did the 2001 price adjustment action reduce the daily expense on cardiovascular drugs consumed by elderly regular patients with hypertension in the hospital outpatient setting? What was the corresponding effect on the number of days of cardiovascular drugs? Did the 2001 action affect the daily dosage of a cardiovascular drug?

7 Study design Study population: elderly regular patients with hypertension (visiting the same hospital) Study period: pre-action period=2000/09/ /02/28; post-action period=2001/09/ /02/28 Unit of analysis: patient-hospital group Outcome variables: [1] the daily expense, [2] the number of days of drug, [3] the total expense, [4] the daily dosage for a period Explanatory variable: post_action (dummy variable)

8 Study design (continued) Drugs investigated: The 3 most-used cardiovascular drugs: beta blocking agents (BBAs), calcium channel blockers mainly with vascular effects (CCBs), plain ACE inhibitors (ACE-inhibitors) --- price significantly reduced by the action The most-used hypotensive agent: plain Angiotensin II Antagonists (AIIAs) --- price keeping the same after the action Statistical model: fixed-effects OLS regression model, difference-in-differences method

9 Selection of exposure and comparison groups The exposure group: a cohort of patients taking drugs targeted by the action in the pre-action period (prices reduced by the action) The comparison group: a cohort of patients taking drugs not targeted by the action in the pre-action period (prices not reduced by the action)

10 Data sources Longitudinal data of a random sample of 1,000,000 NHI enrollees born in 2006 or earlier Registration records, data of ambulatory care expenditures by visits and corresponding data of details of ambulatory care orders in for enrollees born in or before 1935/09/01 Corresponding registration data of hospitals An archive containing historical data on NHI reimbursement rates for drugs

15 The relationship between changes in the number of days of drugs and in the number of visits Results from our additional analysis based on the first-differenced estimator show that hospitals simply increased the number of visits to dispense more drugs (i.e., to increase the number of days of drugs). Hospitals appeared to ask their patients to return to the hospitals to acquire prescription drugs more frequently. Hospitals in Taiwan usually arrange future visits for their patients, so it is possible that hospitals manipulate time intervals between consecutive visits for their regularly attending patients to expand the volumes of drugs dispensed.

16 Changes in daily dosage for the population including regular and non- regular patients Results from our additional analysis of the daily dosage of a sample including regular and non-regular patients show that the daily dosage may be higher for non-regular or new patients. The average daily dosage for the population including regular and non- regular patients increased after the action.

17 Conclusions Generic grouping price reductions can decrease the daily expenses of cardiovascular drugs for elderly regular patients. Health care providers may react to such policy changes by expanding the volume of drugs prescribed for regular patients. For non-regular or new patients, the daily dosage may be higher.

18 Conclusions (continued) The expansion of pharmaceutical use raised the consumption level of low-volume users in the pre-action period closer to the required level of daily treatment for hypertension after the action. However, the expansion of pharmaceutical consumption may also lead to inefficient use of the four drug classes, as a large proportion of patients obtained more than one day of prescription drugs belonging to a specific class per day in the post-action period.

19 Conclusions (continued) These knock-on effects weaken the capability of generic grouping price adjustments for controlling total pharmaceutical expenditures. The government should effectively use NHI data to establish a longitudinal database to detect health care providers inappropriate behaviors for keeping their revenues after reduction of payment generosity.

20 Thanks for listening! Comments are welcome!