University of California, Berkeley, Study Confirms Efficacy of Prescription Drug Reference Pricing for Lowering Drug Costs for Employers and Patients

Using ActiveRADAR’s Solution, Study Featured in JAMA Builds on Previous Research to Demonstrate Power of Reference Pricing to Decrease Prescription Drug Costs over Two and a Half- and Five-Year Time Frames

SACRAMENTO, Calif.--(BUSINESS WIRE)-- ActiveRADAR, a company specializing in prescription drug cost reduction programs for employers, trust funds and health plans, announced the release of a new study led by researchers at University of California, Berkeley, that demonstrates the efficacy of prescription drug reference pricing to lower annual drug costs for employers and patients. The study, which leveraged ActiveRADAR’s solution, found that reference pricing encourages patients to switch to lower-priced drugs, delivering significant cost-savings that increase over time.

ActiveRADAR’s reference pricing model compares all brand name and generic medications within a therapeutic category, identifies the clinically appropriate and least expensive therapeutically equal option, and adjusts co-pays to encourage patients to select the lowest cost alternatives. By leveraging advanced algorithms, clinical research and the principles of behavioral economics, this approach drives down drug prices immediately, efficiently and extremely.

The new study, which is featured in The Journal of American Medicine (JAMA), examined changes in prescriptions and pricing for more than 1,300 non-specialty drugs before and after an alliance of private employers began using reference pricing. The research team found that implementing reference pricing measurably lowered prescription drug spending for the employer (plan sponsor) as well as reduced costs for employees over time. The study builds upon previous research published in the New England Journal of Medicine (NEJM) in 2017, using the same employee population and adding another two and a half years of data to bring the total research period to five years.

“While our initial research found that reference pricing curbs prescription drug spending for employers, this follow-on study indicates that reference pricing also reduces costs for patients, and that both groups continue to see increased savings over time,” said lead author James C. Robinson, PhD, director of the Berkeley Center for Health Technology at the School of Public Health. “It is gratifying to see this research continue to bear our initial findings and support the hypothesis we began with five years ago. This reinforces not only how effective reference pricing is at the time of implementation, but how its ability to drive cost-savings grows over time to benefit both employers and patients.”

The net effect of the 2017 NEJM study was nearly 20 percent lower drug spending for employers and a 10 percent increase in cost-sharing for patients. The new JAMA study found that, over time, cost-sharing declined by more than 20 percent as physicians and patients adjusted to the new pricing incentive. By five years after implementation, savings to employers are substantial and cost-sharing to employees is lower than prior to implementation. Results also indicate reference pricing may shift the number of dispensed drugs from those with higher rebate amounts for prescription drug benefit managers to those with the lower price point for employers and patients.

“The U.S. healthcare system has long struggled to function as an efficient marketplace, and prescription drug pricing is one of the most dramatic examples of how out-of-control costs can get when normal supply and demand dynamics are not present,” said David Henka, CEO and President, ActiveRADAR. “This ongoing UC Berkeley research is pivotal as it indicates that a proven and powerful mechanism for reining in drug prices is available right now.”

ActiveRADAR’s reference pricing solution sets drug prices according to clinical value. Benefit plan sponsors thereby pay a single reimbursement rate for drugs that have been shown to be viable therapeutic alternatives to one another. Each therapeutic class has a specific reference price drug that is selected after a rigorous evaluation of clinical evidence by independently practicing physicians and clinical pharmacists. ActiveRADAR’s reference pricing solution drives rational reimbursement rates in up to 65 therapeutic drug categories, creating savings for plan sponsors and their members.

About ActiveRADAR:
Since 2010, ActiveRADAR (formally RxTE Health) has worked with some of the country’s largest employers across multiple industries, including unions and trusts, to effectively drive down prescription drug costs. ActiveRADAR leverages a reference pricing model which applies proprietary algorithms scientifically proven to drive immediate and ongoing savings of more than 20 percent, while also empowering members and their doctors to select the most cost-effective drug treatment. To start lowering costs, increase benefit plan adherence and improve the well-being of employees, visit www.ActiveRADAR.com.

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