Cici McNamara, University of Wisconsin-Madison - The Impact of a National Formulary Expansion on Diabetics

Title: The Impact of a National Formulary Expansion on Diabetics
(with Natalia Serna)

Abstract: This paper estimates the causal effect of the expansion of Colombia’s national prescription drug formulary to include five new types of insulin on the healthcare utilization and costs of type I diabetics, and identifies the mechanism through which outpatient cost reductions are realized. We find that expanded coverage generates a 17% increase in the cost of insulin for type I diabetics. At the same time, annual outpatient care utilization falls by 1.9 claims. We devise tests to explore the relative importance of two mechanisms by which the expansion may have lowered non-drug healthcare utilization: spillovers from drug to non-drug spending and rationing of care. We find no evidence that the formulary expansion reduces the rate of complications from diabetes, and find substantial declines in non-drug costs even among the subset of diabetics with no scope for spillovers. We find large reductions in the utilization of discretionary care including diagnostic tests, but no such declines for the use of essential drugs, suggesting that rationing of care is the primary driver of observed cost savings.

Presenter: Cici McNamara, University of Wisconsin-Madison

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