• Seth A Seabury, Dana P Goldman, Iftekhar Kalsekar, John J Sheehan, Kimberly Laubmeier, and Darius N Lakdawalla.
• University of Southern California, Health Sciences Campus, GNH 1011, M/C 9300, Los Angeles, CA 90089-3900. E-mail: seth.seabury@precisionhealtheconomics.com.
• Am J Manag Care. 2014 Feb 1; 20 (2): e52-60.

ObjectivesTo measure the impact of state Medicaid formulary policies on costs for patients with schizophrenia and bipolar disorder.Study DesignRetrospective analysis of medical and pharmacy claims for patients diagnosed with schizophrenia or bipolar disorder in 24 state Medicaid programs.MethodsWe combined information on formulary restrictions in Medicaid with the medical and pharmacy claims of 117,908 patients with schizophrenia and 170,596 patients with bipolar disorder in Medicaid who were single-eligible, and newly prescribed a second-generation antipsychotic from 2001 to 2008. We tested the impact of formulary restrictions on the medical costs and utilization of patients in the 12 months after the index prescription. To capture social costs in addition to medical expenditures in Medicaid, we estimated the incremental costs of incarcerating patients with schizophrenia and bipolar disorder associated with formulary restrictions.ResultsPatients with schizophrenia subject to formulary restrictions were more likely to be hospitalized (odds ratio 1.13, P <.001), had 23% higher inpatient costs (P <.001), and 16% higher total costs (P <.001). Similar effects were observed for patients with bipolar disorder. Our estimates suggest restrictive formulary policies in Medicaid increased the number of prisoners by 9920 and incarceration costs by $362 million nationwide in 2008.ConclusionsApplying formulary restrictions to atypical antipsychotics is associated with higher total medical expenditures for patients with schizophrenia and bipolar disorder in Medicaid. Combined with the other social costs such as an increase in incarceration rates, these formulary restrictions could increase state costs by $1 billion annually, enough to offset any savings in pharmacy costs.

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