Financial incentives and drug spending in managed care

This study estimates the impact of patient financial incentives on the use and cost of prescription drugs in the context of differing physician paymen t mechanisms. A large data set was developed that covers persons in managed care who pay varying levels of cost sharing and whose physicians are compe nsated under two different models: independent practice association (IPA)-m odel and network-model health maintenance organizations (HMOs). Our results indicate that higher patient copayments for prescription drugs are associa ted with lower drug spending in IPA models (in which physicians are not at risk for drug costs) but have little effect in network models (in which phy sicians bear financial risk for all prescribing behavior).