An Exploratory Study of Physician Perceptions of Drug Price Information

and a Prescription Price Newsletter Jeffrey A. Kotzan

Mat thew Perri Alan P. Wolfgang

ABSTRACT. The project assessed physicians' attitudes toward price information and their willingness to pay for a newsletter of prescription price comparisons. In a mail sample of 1,344 question- naires containing an example of price comparisons for the nonste- roidal antiarthrit~c agents, it was determined that physicians strongly agree that prescription price information is needed, useful, and im- portant to their patients. Generally, physicians tend to seek and are most satisfied with rice information they receive from patients and pharmacists rather t 1 an that they receive from pharmaceutical repre- sentatives or fellow practitioners. Younger physicians and physi- cians who perceived strong patient expectations for prescription price information expressed a greater willingness to subscribe to a newsletter price servlce.

INTRODUCTION

Examination of various strategies designed to contain health care costs, including those for ethical pharmaceutical products, is an area of much interest to providers, fiscal intermediaries and other

Jeffrey A. Kotzan, Ph.D., is Head of the Department of Pharmaw Care Ad- ministration, Collegeof pharmacy, University of Georgia, Athens, GA 30602. Matthew Perri 111, Ph.D.. and Alan P. Wolfgang, Ph.D., are Assistant Professors in the Department of Pharmacy Care Administration, College of Pharmacy, Uni- versity of Georgia.

Journal of Pharmaceutical Marketing & Management, Vol. 4(3) 1990 O 1990 by The Haworth Press, Inc. All rights reserved. 3

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4 JOURNAL OF PHAMCEUTICAL MARKETING & MANAGEMENT

third-party payers, and consumers alike. Interest in the evaluation of those strategies will undoubtedly grow in the future with rapidly escalating costs for medical services. Expenditures for personal health care topped $435 billion in 1987 and are expected to increase to almost $1.4 trillion in the year 2000 (1).

As ethical pharmaceuticals play a larger role in patient care, per- sonal expenditures for pharmaceuticals and devices are projected to increase from $33 billion in 1987 to $103 billion in 2000 (1). Esti- mating pharmaceutical expenditures accurately may be difficult be- cause of the influence of new product introductions, biotechnology research and development, and innovations in phanaceutical mar- keting, such as direct-to-consumer prescription drug advertising. These and other factors are likely to have unpredictable effects on drug use (2). It is predictable, however, that new drug therapies will command premium prices and that the cost of drug therapies will continue to increase.

One strategy for containing future expenditures for pharmaceuti- cals is to persuade physicians to prescribe the most cost-effective product for a given condition by providing physicians with accurate drug cost information. An information strategy such as this has ap- peal but may not be successful because it is generally accepted that physicians are poorly informed about the cost of the pharmaceuti- cals they prescribe. In general, physicians have demonstrated poor overall accuracy for predicting prices for prescriptions (3). They tend to greatly overestimate the prices of the less expensive legend drugs and to greatly underestimate the more expensive products. This study also provided evidence that physicians who claim they are confident about prescription costs are generally no better es- timators of prices than those physicians who are less confident. Further, medical residents who indicated that they relied on price information from pharmacists were more accurate estimators of pre- scription prices than practicing physicians who relied on informa- tion from manufacturers' representatives (3). This finding implies that the source of price information may also be a factor affecting the accuracy of physician price predictions.

If an information strategy for reducing prescription expenditures is to be effective, physicians should perceive significant need for price information and be willing to alter their prescription writing

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Kotzan, Peni, and Worfgang 5

habits in response to drug cost information. Physicians appear to be growing more receptive to the idea of incorporating price informa- tion into the decision process. In a study reported in 1954, physi- cians expressed little interest in considering price in the prescription decision process (4). More recent evidence suggests, however, that physicians will accept and use price information in a managed health care environment. In one study, providing drug price information to physicians in a managed care setting in a bulletin or newsletter for- mat was shown to reduce overall costs by as much as 30% (5).

The primary objective of this investigation was to develop an understanding of how an information strategy would be accepted by physicians. To accomplish this objective we set out to answer sev- eral basic questions. First, do physicians believe there is a need for accurate drug cost information, and are they willing to use this in- formation in prescribing decisions if it is provided? Next, what sources do physicians currently use for drug cost information, and how satisfied are they with these sources? Finally, are physicians willing to pay for drug cost information?

METHODOLOGY

A preliminary questionnaire was developed from an initial pool of items developed by the investigators. This was informally tested on a small group of physicians, resulting in some minor changes in phraseology. The final version of the instrument contained three sections (available from the authors). The first section was a cover letter identifying the sponsor and explaining the voluntary nature and purpose of the study. The second section displayed a graph and tabular data of actual average prescription prices for the most fre- quently prescribed quantities of the top seven nonsteroidal, anti- inflammatory agents. The drug products included in the graph were selected based on dollar volume. The prices and quantities pre- sented to the physicians were derived from a Medicaid data base containing over 700,000 prescription charges for a 1-month period. The final section of the questionnaire contained attitudinal items and several questions designed to assess physicians' sources of and satisfaction with drug price information and to assess physician de- mographics. The instrument was individually signed by one investi-

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gator and was designed so that after completion it could be easily folded to expose a business return reply address.

Two copies of a current mailing list composed of a random sam- ple of 1,344 Georgia physicians were purchased commercially, fa- cilitating an initial mailing and a follow-up mailing 10 days later. Surveys that were completed and returned were reduced into rna- chine readable form, verified, uploaded to a central computer sys- tem, and analyzed with the Statistical Analysis System (6).

RESULTS

The overall response rate was 22.6%, and of 304 usable ques- tionnaires were collected. Two-thirds of the responding physicians reported that they practiced in a group practice setting. About one- half (56.3%) had been in practice less than 15 years, and 43.8% were in practice for 15 years or more. The responding physicians were almost evenly divided between primary care (53.1%) and spe- cialty (46.9%) practice.

Perceived Need for Drug Price Infbrmetion

Physicians' responses to individual survey items indicated that there was significant need for drug cost information in medical practice. This is evidenced by the fact that 82% of the physicians indicated that they needed more drug cost information than they currently receive. Most of the responding physicians agreed that patients are concerned about drug costs (85%) and 'expect physi- cians to know about drug cost information (57%). Further, 59% of the respondents agreed that cost was a factor in patient compliance.

Use of Drug Price Information

Of the physicians surveyed, 82% agreed that if they did know more about drug cost they could save their patients money on pre- scription drugs, and 68% agreed that they would use drug cost in- formation if it were more accessible. A total of 82% of the physi- cians agreed that health care administrators are concerned about drug prices. Of the physicians who responded, 87% indicated that they frequently use drug cost information in making prescribing

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Kotzan, Perri, and Wolfgang 7

decisions; however, 62% indicated that they believed cost should not be a consideration in the selection of a drug therapy.

Drug Price Bulletin

A large majority of the respondents (90%) agreed that the news- letter concept was a good idea for providing physicians with drug cost information. Only 46%, however, indicated that they would be willing to pay for information in this format. Physicians' willing- ness to pay for the service on an annual basis was categorized as $0, $0-$30, $31-$50, $51-$70, and more than $70. Only a few respon- dents indicated that they were willing to pay more than $30 per year for the service and, therefore, the item was dichotomized into those who expressed a willingness to pay something (46%) versus those who expressed no interest in paying for the service (54%).

Sources o f Information and Satisfaction

Figures 1 and 2 show that physicians reported that they seek price information most frequently from patients, followed by pharma- cists, pharmaceutical representatives, and, finally, fellow medical

Hedical Doctors

5 Pharmaclsta

e Patient.

Rarely . - Frequency of Use

Figure I . Sources of prescription price inrormation and their frequency of use

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8 JOUIRNAL OF PHARMACEUTICAL MARKETING & MANAGEMENT

Hsdlcal Doctors

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El Patlanta Detall Persons

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Satisfaction Figure 2. Satisfaction with sources for prescription price informalion

practitioners. The survey results also indicated that physicians were most satisfied with the information received from patients and phar- macists and less satisfied with the information received from fellow practitioners and pharmaceutical representatives.

Physician Characteristics and Willingness to Pay

The results of the categorical analysis are presented in Table 1. This analysis produces a table similar to analysis of variance proce- dures with reported chi-square values in place of the customary F- ratios. The results indicated a significant relationship between the willingness to pay for the price information and the two variables of years in practice and patient expectations. The interaction between the years in practice variable and the patient expectation variable proved insignificant. No relationship was noted between willing- ness to pay for the prescription price information and physician spe- cialty.

The individual effects of years in practice and patient expecta- tions are reported in Figures 3 and 4. Those physicians who be- lieved patients expect them to be knowledgeable about prescription

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Kotzan, Perri, and Wolfgang 9

prices were more willing to pay for the service. Also, those younger physicians who had been in practice for less than 15 years were more willing to pay.

DISCUSSION

Perceived Need for Drug Price Information

The results of this survey supported previous findings which indi- cated that physicians are poorly informed regarding prescription price information. Few medical practitioners stated that accurate drug price information was readily available to them in their prac- tices. Physicians reported that they tend to rely upon and are satis- fied with drug price information gathered from paticnts. However, drug price information received from patients should be interpreted cautiously. The information received from patient sources may be anecdotal, imprecise, or simply incorrect. Furthermore, drug price information provided by patients cannot easily be organized in a manner allowing the practitioner to compare similar products within a single therapeutic category.

The results of the survey also provided evidence to support a relationship between patients expecting their physician to be aware of drug price information and physicians' willingness to pay for drug price information. Younger physicians also were significantly

TABLE I. CATEGORICAL MODEI. ANALYSIS 01; WILLINGNESS TO PAY r.OI< YEARS IN PRACTICE ANI) I'AI'IGNT EXI'ECI'ATIONS 01: PRICE KNOWI.El')I;II.

Source Cnlcpor ical Al ialysis

1) F Chi-Squorc l ' r o l ~ ; ~ b i l i ~ j

Intercept I 154.84 0.0001 Yems in Pmcticel I 5.17 0.0230 Pltient Expectn~ionsz 2 12.23 0.0022 Interaction o f Yews in Pr:lclice

and Patient Expec~ations 2 2.92 0.2323 Residu;d 0 0.00 1.0000

ILcss 1l1:in 15 yc:m in p ~ x t i c c is cidxlcd "A," ilnd IS YC~II.S or 11i01.c is cixlcd "I3." , 2P;~licnls exl~cct l l ~ c physician 10 Ii:wc prcscril~lion price inli11111:11iim is ~Odcd "A" ( 1 ~ i ~ g r w ,

"I)" for dis:~grce. 3111d "N" fur 11~11Lriil.

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10 JOURNAL OF PHARMACEUTIC4L MARKETING & MANAGEMENT

ngree Wsutral Dlragrea

Patients Expect MD Price Knowledge Figure 3. Perceived patient expectation lor prescription price information knowledge

Lass Ihan 15 Years bra lhan 15 Years

Years in Practice Figure 4. Willingness to pay for prescriplion price inrormation and years in practice Jo

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Kotzan, Pem; and Wolfgang I I

more willing to pay for a drug price information bulletin. This could be due to heightened sensitivity to patient expectations, since youn- ger physicians would be at a stage in their careers when they would be building practices, or perhaps this is simply a product of socie- ty's recent movement toward cost containment in health care.

Feasibility of 8 Drug Price Bulletin

Based on the results of this study, an informational cost-contain- ment strategy for pharmaceuticals that relies upon voluntary sub- scriptions by physicians for drug price information should be ap- proached cautiously. Physicians indicate that they need accurate drug price information and that they will incorporate this informa- tion into their decision-making process and prescription writing habits, providing an incentive to pursue this conccpt. However, many physicians were simply not willing to pay for this type of information service. If i t is assumed that willingness to pay for a service such as this is an indicator of perceived worth, these results indicate a general reluctance to support a drug pricc information service. However, as noted above, physicians who are more sensi- tive to patient expectations- younger physicians, for example - are willing to pay for a drug price bulletin.

Considering recent trends in health care consumerism and inno- vative patient behaviors, such as "doctor shopping" where patients actively seek out a practitioner who will accommodate their needs and desires in a physician, the perceived worth of a drug pricc infor- mation bulletin should increase. The question remains whether pro- viding this information to physicians will have any impact on their prescription writing habits. A drug price information bullctin may be very effective in containing costs in managed care settings whcre savings can result in economic incentives for the physician. But what about fee-for-service physicians in private practice? The in- centive for these professionals may be minimized because patient complaints may be deferred (e.g., to pharmacists) and probably will not be directly attributed to the prescriber.

It seems that a drug price information service will most effec- tively influence physician prescribing habits in situations where there are incentives for cost containment. For example, risk-sharing

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contracts between physicians and managed health care provider groups might provide such an incentive. Arrangements such as these could limit prescription expense by passing a portion of the savings back to the physician, making price information necessary for attaining financial objectives.

Physicians perceive the need for drug price information and real- ize that many patients may want them to be knowledgeable about prescription prices. But is a general knowledge acceptable, or do patients want physicians to be able to make specific price compari- sons? Managed-care and other cost-containment strategies are on the rise, providing an incentive for physicians to learn about drug prices. Fee-for-service physicians may currently have less incentive to be well informed about drug prices, but as the cost-conscious consumer begins to demand prescription price sensitivity from the physician, this, too, may change.

This study was limited by the self-reported nature of the data and the limited exposure physicians have to drug price information. The response rate was only approximately 23%, indicating that nonre- sponse bias could be a significant factor in this investigation. The results obtained could be biased because physicians who are more concerned about drug prices might be more likely to respond to a survey such as this one. Although the low response rate and poten- tial for bias are of great concern, this response rate should be suffi- cient to provide insight into this issue.

REFERENCES

1. Division of National Cost Estimates, Office of the Actuary, Health Care Financing Administration. National health expenditures, 1986-2000. Health Care Fin Rev 1987;8(Summer):l-36.

2. Lipton HL, Lee RL, Freeland MS. Drugs and the elderly. Stanford, CA: Stanford University Press, 1988.

3. Oppenheim GL, Steven HE, Asworth C. The family physician's knowl- edge of the cost of prescribed drugs. J Fam Pract 1981;12:1027-30.

4. Caplow T, Raymond JJ. Factors influencing the selection of pharmaceuti-

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Kotzan, Peh , and Wolfgang 13

cal products. J Marketing 1954;19:18-9. 5. Fendler JF, Gumbhir AK, Sall K. The impact of drug bulletins on physician

prescribing habits in a health maintenance organization. Drug Intell Clin Pharm 1984;18:627-31.

6. SAS Institute, Inc. SAS user's guide: statistics version 5 edition. Cary, NC: SAS Institute, Inc., 1985.

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