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CloudView blog

Ideas and insights to help health care providers stay informed and profitable in today's challenging health care environment.

What Will Happen to Drug Costs Under Accountable Care?

by Josh Gray, VP of athenaResearch

I recently speculated on how Accountable Care is likely to affect pharmaceutical costs. With this entry, we move from theory to actual experience by exploring a data set recently analyzed by the athenahealth Cloud Analytics team. The data consists of member-per-month drug expenditures for individuals who are insured under health plans receiving pay based on various global risk contracts, with rewards if they control the overall cost of care for defined populations. Though not nationally representative, this data set (see graph below) covers about 400,000 individuals between 2008 and 2012.

Pharmaceutical Spending on Individuals Covered by Commercial Risk Contracts

As the data reveals, drug costs for those covered by risk contracts were relatively flat from 2009 to 2011, before spiking 8.6% in 2012. A large portion of this change —70% — was due to an increase in the cost of antiviral compounds: Over the entire period, the compound annual growth rate for drug costs was 2.4%.

Within those figures, there were interesting sub-trends within and across pharmaceutical classes:

  • Growth in spending on drugs required to manage chronic disease.
    In theory, the expansion of Accountable Care should increase compliance with drugs that effectively manage chronic disease. In practice, it was true: There was an increased investment in drugs to treat diabetes (up 20% over four years) and asthma (up 7%).
  • Decreased costs for narcotics.
    During this time period, per-member costs for narcotics dropped 13%. It’s interesting to note that the use of analgesic anti-inflammatories increased 53%, suggesting (though not proving) that more aggressive utilization of anti-inflammatories might have accounted for some of the lesser reliance on narcotics.
  • Increased use of generic drugs.
    Per-member costs for antidepressants and drugs to treat peptic ulcer disease decreased a sizable 41% and 49%, respectively, likely reflecting greater reliance on generic compounds.
  • Reduction in antibiotics.
    Over the time period we studied, several providers within our database set a goal of reducing unwarranted variation around use of antibiotics for acute bronchitis. This shift is likely one factor contributing to a 45% reduction in per-member costs of antibacterials.

These results reflect a limited data set, and are not necessarily representative of Accountable Care Organizations (ACOs) as a whole. Most ACOs are still in their infancy, and it is all but certain that those who succeed will become more sophisticated over time.

In summary, for this sample, Accountable Care did not decrease pharmaceutical expenses. But it did appear to redistribute spending in a way that seemed to reflect a more systematic approach to managing care.

If you are part of an ACO and have experience managing pharmaceuticals, or if you have comments to share, I would love to hear from you. Please add a comment to this post, or reach me at

Check out Josh Gray's Google+ Profile. Follow @JoshGray_HIT on Twitter.

Josh leads the athenaResearch team's efforts in mining athenahealth network data for insights into physician performance and the US health care system. 

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