Incentivizing Prescription Drug Switching to Reduce Patient and Health Plan Spending: A Microsimulation Model

  • Kai Yeung
    Correspondence: Kai Yeung, PharmD, PhD, Kaiser Permanente Washington Health Research Institute, Metropolitan Park East, 1730 Minor Ave, #1600, Seattle, WA 98101, USA.
    Kaiser Permanente Washington Health Research Institute, Seattle, WA, USA

    The Comparative Health Outcomes, Policy, and Economics Institute, University of Washington, Seattle, WA, USA

    Kaiser Permanente Bernard J. Tyson School of Medicine, Pasadena, CA, USA
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  • Ernesto Ulloa
    Kaiser Permanente Washington Health Research Institute, Seattle, WA, USA

    Department of Biostatistics, University of Washington, Seattle, WA, USA
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Published:October 01, 2021DOI:


      • Most spending for prescription drugs is on branded drugs that do not have direct generic equivalents but many of these drugs do have therapeutic alternatives within class.
      • Using a microsimulation model, we demonstrate that a direct patient payment can incentivize patients to switch from a higher cost drug to a lower cost, therapeutic alternative drug, generating both patient and health plan savings.
      • Future work should integrate considerations of shared decision making, medical ethics, and treatment effect heterogeneity into these incentive programs.



      Most spending for prescription drugs is on branded drugs that do not have direct generic equivalents but many of these drugs do have therapeutic alternatives within class. We estimate the potential savings from providing patients a financial incentive to switch from a higher cost drug to a lower cost, therapeutic alternative drug.


      We used individual state-transition microsimulations to model medication use and spending with and without financial incentives over a 12-month time horizon with a healthcare sector perspective. Costs and utilization inputs were from individuals on branded insulins or multiple sclerosis drugs enrolled in a regional mixed-model health maintenance organization. Base-case model used a one-time financial incentive of $83 and $250 offered to patients on higher cost insulin and multiple sclerosis treatments, respectively, to switch to lower cost drugs within class.


      Savings per individual offered an incentive in the insulin and multiple sclerosis classes were, respectively, $84 (95% CI $46-$122) and $2,127 (95% CI $267-$3,987). Varying the incentive size and switch probability resulted in maximum savings of $712 at elasticity of 0.2 and incentive size $250 for the insulin drug class. For the multiple sclerosis drug class, maximum savings of $5945 was at elasticity of 0.2 and incentive size of $1000. Short time horizon makes our savings estimates conservative.


      If programs such as financial incentives could encourage even a small proportion of patients to switch among drugs within therapeutic class, then substantial savings could be generated.


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