Does Funding Atypical Antipsychotic Drugs Save Money For State Governments?

By S. Van McCrary, Health Law & Policy Institute

In Ethical and Practical Benefits of the New Atypical Antipsychotic Medications, I discussed several ethical issues regarding the expensive new atypical antipsychotic drugs used to treat schizophrenia. A more pressing issue for many state legislatures is how state-funded mental health care programs can better contain the rising costs of treatment and thereby effectively serve the largest number of seriously ill persons. The central choice in this context is often perceived to be whether to provide less expensive drugs for more persons or more costly medications for fewer persons. Considering the complexity of treating many schizophrenic patients, and the frequency with which some patients relapse and require rehospitalization, however, it remains unclear whether a strategy that simply seeks initially to avoid the cost of the more expensive drugs actually will be successful in keeping overall costs of treatment lower than with the more traditional drugs.

Two recent articles by Dr. William M. Glazer at Harvard Medical School have investigated issues of comparative cost efficacy of traditional versus atypical antipsychotic drugs. Dr. Glazer and his colleagues have developed a theoretical "pharmacoeconomic" model that measures cost efficacy of treatment for schizophrenia by evaluating the respective total costs of therapy under a number of different assumptions about cost of drugs, cost of rehospitalization for "revolving door" patients, responsiveness of patients to medication, and rates of patient compliance with the prescribed drug regimen. Estimates of the actual costs of the drugs range from $30 to $154 per year for haloperidol (a traditional drug) compared to $2,472 to $2,767 per year for risperidone or olanzapine (atypical drugs). The results of both economic studies suggest that, under certain conditions and assumptions, olanzapine’s and risperidone’s superior treatment pattern may lead to reductions in the total costs of medical care for persons with schizophrenia.

Factors that may prove critical in determination of these cost efficacy issues include: (1) the variation in rates of discontinuation of drug therapy with atypical versus traditional medications (compliance with medication and likelihood of relapse); (2) variation in actual inpatient hospitalization costs and levels of access to inpatient care; (3) the degree to which states are able to negotiate more favorable prices for bulk purchases of the newer drugs; and (4) the impact of coexisting conditions, such as alcohol abuse, on treatment results. Dr. Glazer and his associates continue their theoretical work on these issues, and other researchers plan to publish additional cost effectiveness results later in 1999. Further, a number of major U.S. drug companies currently are engaged in actual clinical studies of the cost efficacy of the new atypical drugs. Although it is uncertain when the results of these ongoing studies will become available, at that time a much clearer profile of the cost efficacy of these drugs should be known.

Thus, a conclusive answer to the question whether providing the new atypical drugs will actually save money for the states is yet to be determined. Nonetheless, several states are attempting to provide these drugs for an increased number of appropriate patients, due to pressures from litigation by mental health advocacy organizations. In this sense, the experience of states themselves may provide additional evidence to confirm or refute the cost efficacy argument. Meanwhile, it is clear that many schizophrenic patients can benefit dramatically from atypical antipsychotic medications. The well being of these patients will be enhanced even while answers to the cost efficacy question are pending. This is a desireable result in itself.