Research in Social and

Administrative Pharmacy j (2014) j–j

Commentary
The Affordable Care Act, health care reform,
prescription drug formularies and utilization
management tools
Brian L. Ung, B.S.*, C. Daniel Mullins, Ph.D.
University of Maryland School of Pharmacy, 220 Arch Street, 12th Floor, Baltimore, MD 21201, USA

Summary

The U.S. Patient Protection and Affordable Care Act (hence, Affordable Care Act, or ACA) was signed
into law on March 23, 2010. Goals of the ACA include decreasing the number of uninsured people,
controlling cost and spending on health care, increasing the quality of care provided, and increasing
insurance coverage benefits. This manuscript focuses on how the ACA affects pharmacy benefit managers
and consumers when they have prescriptions dispensed. PBMs use formularies and utilization control tools
to steer drug usage toward cost-effective and efficacious agents. A logic model was developed to explain the
effects of the new legislation. The model draws from peer-reviewed and gray literature commentary about
current and future U.S. healthcare reform. Outcomes were identified as desired and undesired effects, and
expected unintended consequences. The ACA extends health insurance benefits to almost 32 million people
and provides financial assistance to those up to 400% of the poverty level. Increased access to care leads to
a similar increase in overall health care demand and usage. This short-term increase is projected to decrease
downstream spending on disease treatment and stunt the continued growth of health care costs, but may
unintentionally exacerbate the current primary care physician shortage. The ACA eliminates limitations on
insurance and increases the scope of benefits. Online health care insurance exchanges give patients a central
location with multiple insurance options. Problems with prescription drug affordability and control
utilization tools used by PBMs were not addressed by the ACA. Improving communication within the U.S.
healthcare system either by innovative health care delivery models or increased usage of health information
technology will help alleviate problems of health care spending and affordability.
Ó 2014 Elsevier Inc. All rights reserved.

Keywords: Health care reform; Affordable Care Act; United States healthcare issues; Control utilization tools

Competing interests: The authors declare no potential conflicts of interest, competing interests, or funding sources
associated with this manuscript.
* Corresponding author. Tel.:þ1 8055016087.
E-mail address: brian.ung@umaryland.edu, brian.ung89@gmail.com (B.L. Ung).

1551-7411/$ - see front matter Ó 2014 Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.sapharm.2014.08.004
2 Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
Introduction
Health care reform under the ACA will impact
millions of Americans, yet the ripple effects beyond
the intended impact are unclear. The ACA is
arguably the most comprehensive change to the
U.S. health system since the inception of Medicare
and Medicaid in 1965. Decreasing the number of
uninsured, controlling costs, and increasing the
amount of coverage provided by insurance plans
are goals of the ACA. Under the ACA, nearly all
aspects of the U.S. healthcare system will be
affected including the way in which prescription
drug coverage benefits are structured for new and
currently insured individuals. The ACA will require
insurance plans for individuals and small groups to
comply with mandated minimum coverage stan-
dards set by the state benchmark plan. This
formulary requirement is to ensure patient access
to care and to increase affordability of medication.
However, government mandated formulary re-
quirements in the U.S. have been linked to excess
spending, opening the door for increases in the cost
of health care for all patients, including those
currently with insurance.1
Background
The objective of this paper is to examine the
impact the ACA may have on health care consumers
in the United States when they have prescriptions
dispensed. Two key areas that are examined include
prescription drug formularies and utilization con-
trol measures commonly used by pharmacy benefit
managers. The overarching effects that the ACA will
have on the U.S. healthcare system will be exam-
ined. This paper also analyzes how these changes
could lead to an increase in access to care barriers for
Table 1
Examples of four common utilization control measures used by United States PBMs2–5
Type of utilization control Prescriber contact
measure
Prior authorization Yes
Step therapy Dependent on patient
history
Tiered copayment No
Quantity limits Yes, if change in directions
required
patients requiring medication. Expected ramifica-
tions for both the newly and currently insured and
potential solutions that could alleviate these issues
will also be discussed.
PBMs and control utilization tools
The increasing usage and administrative costs
associated with the management and payment of
prescription drugs has led to health plans in the
United States “carving out” this section of bene-
fits to pharmacy benefit managers (PBMs). PBMs
negotiate drug prices with both the pharmaceu-
tical industry and pharmacies and act as the
middleman between the payer and the rest of the
health care system. PBMs utilize formularies to
encourage the usage of medications that have
been proven to be safe, effective and affordable.2–4
Table 1 illustrates four common utilization
control and formulary exception features that pa-
tients have to directly deal with when they are get-
ting prescriptions dispensed.
There is evidence that these formulary features
are effective at controlling drug spending, ensuring
safe usage of medications, and shifting prescribing
patterns toward the usage of preferred medica-
tions, especially those in the elderly and chronic
disease population.2–4,6
Patient issues with control utilization tools
Although the utilization control techniques
used by PBMs have good intentions and attempt
to help patients, they come with unintentional
barriers to access of care.6–9 The primary argument
against the prior authorization process is that the
process not only requires the involvement of the
PBM, pharmacy, and prescriber but also takes
Length of process Notes
Ranges from instant to a Requires approval of PBM
few business days (more before medication is
common) covered
Usually instant, dependent Requires attempt of
on need of prescriber preferred therapy
contact
Instant Determines cost sharing
responsibility of patient
Dependent on Sets day supply and
responsiveness of medication quantity
prescriber restrictions
 Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
time to complete, often several days. It has been
estimated that prior authorizations have the ability
to cost physicians $68,274 per year to deal with the
process.10 Almost 70% of physicians reported
several days as a typical wait time for prior autho-
rization to be completed with 10% stating over a
week as the length of the time they normally have
to wait.10 Prior authorization has also been associ-
ated with a high “walk-away” rate. It has been esti-
mated that almost 40% of prescriptions requiring a
prior authorization fail to reach the patient and are
instead abandoned.10–12
The dynamic nature of a drug formulary may
have a negative impact on patients. Switching a
drug from formulary status to requiring a prior
authorization has the potential to lead to both an
unexpected discontinuation/interruption of therapy
or forced therapeutic switching. Patients may expe-
rience adverse effects, an increase in cost sharing
responsibility, or a lesser therapeutic benefit from a
forced switched in medication.2,3,7 This also opens
the door for additional medical costs to incur as pre-
scribers may have to be contacted to issue prescrip-
tions for the new preferred drug.9 Increases in health
care usage could also be seen while the patient ad-
justs to the new medication. Patients may also be
less likely to use drug therapy or even discontinue
necessary medications, due to the cost sharing re-
sponsibilities set in place by tiered copay levels. In
these circumstances these policies present patients
with a major access to care barrier, potentially lead-
ing to an increase in downstream medical costs and
further usage of health care.7–9,13–17
Primary care physician shortage
Another related factor to consider is that the
U.S. currently is experiencing a physician shortage
and will need an additional 52,000 primary care
physicians to keep up with its population growth,
aging population and insurance expansion.16 The
recommended change in dose or medication speci-
fied by the insurance company may require addi-
tional physician and patient interaction. This
interaction could be delayed by lack of appointment
openings at the physician office or by an inability to
reach either party. Similarly, patients experiencing
adverse effects from medications may be impacted
by the lack of physician availability.16,17
Methods
A logic model was created to represent and
summarize the major assumptions underlying the
3
ACA (Fig. 1). A logic model can be viewed as a
“road-map” of a program. It is a visual representa-
tion of how a program is intended to work and
highlights what steps need to occur in order for
the program to meet its expected goals. The inputs
featured in the model are specific parts of the ACA
that contribute to the funding of its implementa-
tion, will become parts of the United States health-
care system, or are areas of focus of the ACA.
Inputs are found in the left most column of the
model. Outputs of the model included reactionary
changes that occurred in the U.S. healthcare system
due to the inputs and the ACA. Outputs can be
located in the middle column of the logic model.
The outputs feed into the outcome portion of the
logic model, which are divided into short, medium
and long term. Outcomes are found in the third col-
umn of the logic model and included continued ef-
fects on the U.S. healthcare system that were a
result from the outputs portion of the logic model.
Outcomes of the implementation of the ACA are
based on peer-reviewed and gray literature com-
mentary related to health care reform and the
ACA. A literature search was performed using the
keywords: affordable care act, health care reform,
health care issues, prescription drug coverage. Da-
tabases searched included PubMed and Science-
Direct. Other sources included the Center of
Medicare and Medicaid Services, professional or-
ganization literature, national insurer and health
policy organizations’ health care reform reviews
and forecasts (e.g. Kaiser Family Foundation,
Avalere, as well as other gray literature commen-
tary on the ACA). Articles reviewed ranged from
analysis of past health care legislation, government
and professional organization statements
regarding language of the ACA, and projected ef-
fects of the ACA as forecasted by health insurance
companies and U.S. healthcare related professional
journals. A wide range of materials was used to
formulate the logic model in order to get the view-
points of all affected stakeholders, some of which
might not be present in primary literature. Predic-
tions of effects of the ACA were dependent on a
combination of several external factors: people
elect to either enroll, if qualified, in Medicaid plans
or purchase insurance plans from the insurance ex-
change; PBMs continue to use utilization control
techniques in the same capacity; PBMs redesign
their formularies within the restraints of the
ACA, and the demand for health care will be largely
based on affordability rather than the benefits
offered. Other future health care factors that affect
the model include: drug costs and spending being
 4
Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
Fig. 1. Logic model representation of the Affordable Care Act. (For interpretation of the references to colour in this figure legend, the reader is referred to the web version of
this article).
 Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
influenced by brand patents expiring as well as the
development of drugs such as “specialty drugs”; us-
age of health care by the newly insured; the effec-
tiveness of treatment in prevention of disease and
downstream usage of health care. The ACA will
affect the United States healthcare system in a num-
ber of different ways. Some of its effects will be seen
immediately while other effects will not be seen until
areas of the ACA have been a working part of the
U.S. healthcare system for a couple of years. The
outcomes that are expected by the ACA in this
model do not follow a linear progression. Some of
these outcomes are related to one another and com-
pound medium and long term outcomes. The out-
comes visualized are also not equally distributed
within the U.S. population. Some outcomes may
affect the U.S. healthcare system to a greater degree
than others. Desired outcomes of the ACA are
highlighted in green, expected but unintended con-
sequences of the law are in yellow, and undesirable
outcomes are in blue.
Results
Increased formulary coverage
One component of the ACA that directly
affects formulary design lies in the “Essential
Health Benefits (EHB) Rule.” The EHB rule
states that for individual, small group, and other
non-grandfathered insurance plan prescription
drug coverage “at least the greater of (1) One
drug in every USP category and class; or (2) the
same number of drugs in each category and class
as the EHB-benchmark plan” must be covered.18
This law marks the first time the United States
federal government has mandated formulary re-
quirements outside of Medicare Part D spon-
sors.19 The EHB rule will force pharmacy benefit
managers to model and mimic their exchange for-
mularies after the state selected benchmark plan.18
The intended effect of the rule is clear – to increase
access and affordability of prescription drugs for
those who need them.19,20
Greater plan variability
Plans offered on the exchange come in five
different levels, based on the average percentage
of cost of covered benefits that the insurance plan
will pay for. These levels range from 60%
(Bronze) to 90% (Platinum). A catastrophic plan
will also be made available to people under the
age of 30 or whose percentage of income spent on
health insurance would exceed 8%. Each state
5
participating in the exchange marketplace will
select their benchmark plan.18 Patients will see dif-
ferences in the type of coverage seen on the
marketplace depending on their state of residence.
Increased government financial assistance
The ACA does offer financial assistance for
prescription drugs and health care. Medicare Part
D beneficiaries are among those that see the most
assistance. In the past, Medicare Part D enrollees
were responsible for a deductible for their pre-
scription drugs. After this deductible would be
met, cost sharing with the Medicare Part D plan
would be started until a yearly coverage limit is
reached. After this limit, the patient would be
responsible for all prescription drug costs until
reaching a catastrophic coverage limit. The gap
between the initial limit and the catastrophic limit
is referred to as the “donut” hole. Provisions in
the ACA will gradually decrease the amount of
patient cost-sharing responsibility in the donut
hole from 100% to being completely eliminated in
2020. There will also be negotiated discounts for
branded medications while in the coverage gap.
Individuals and families, whose income falls be-
tween 133% up to 400% of the poverty level, will
receive subsidies from the government to purchase
insurance plans from the exchange. Those whose
income is between 133 and 250% of the poverty
line will only be responsible for premiums totaling
from 3 to 8.05% of their income while those who
earn 300–400% of the poverty level will have a
premium spending cap of 9.5%.18
Accountable Care Organizations/Health
Information Technology
ACOs are organizations which hold the finan-
cial risk associated with treating a population and
the outcomes associated with it. They emphasize
accountability within its many branches of health
care including, but not limited to; physicians,
institutions, mental health, and long term care.
The ACA gives United States healthcare pro-
viders incentives to work with others to increase
the quality of care and provide resources and tools
to build their own ACO structures. Because the
ACO and payer hold the financial risk, there is a
greater incentive to measure quality of care and to
examine both the short- and long-term care of the
population. ACOs had gained popularity even
before the introduction of the ACA with Kaiser
and CareFirst being two current examples.19,21,22
It is believed that interprofessional collaborations,
6 Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
such as an ACO, will help alleviate the primary
care physician shortage by increasing the effi-
ciency of health care delivery.20,23 Having this
ability to coordinate care among different health
care areas is thought to positively affect patient
outcomes.20,23
The need for greater usage of technology in the
U.S. healthcare system is also addressed in the
ACA. The ACA provides incentives for the usage
of health information technology (HIT) as well as
penalties for those who are not utilizing such
tools.18 Electronic prescribing and electronic
health records are two examples of HIT technol-
ogy that have increased efficiency and communi-
cation between providers in the U.S.11,24 The use
of HIT provides a way for physicians and other
members of the health care team, to better
manage their patients.20,23
Discussion
Excess spending
Although government mandated formulary
requirements aim to increase patient access to
medication, it is not universally accepted that
these requirements are the best way to control
prescription drug prices.9,13 The Academy of
Managed Care Pharmacy (AMCP), which has a
large constituent of members who are part of
pharmacy benefit design, strongly opposes this
part of the EHB rule. The association argues
that this U.S. government mandate will lead to a
level of unnecessary coverage of drugs which ulti-
mately increases the costs to all stakeholders. This
excess coverage was seen with the implementation
of Medicare Part D.13,20 Plans created to serve the
Medicare Part D population are forced to cover
“all or substantially all drugs in the antidepres-
sant, antipsychotic, and anticonvulsant classes,
immunosuppressant (for prophylaxis of organ
transplant rejection), antiretroviral, and antineo-
plastic” classes. It has been estimated that this
government mandate has led and will lead to
almost $4 billion in extra spending from 2010–
2018.1,25,26 The tradeoff between greater formu-
lary coverage versus controlling drug spending
and insurance costs is open to debate but the
Medicare Part D does illustrate that mandated
coverage has the potential to lead to a level of
excess spending.25,27 AMCP also takes the stance
that formulary design should be allowed flexibility
in order to take an evidenced-based approach.
Part of their argument is based on the issue of
formulary updates.20 The persons with the re-
sponsibility of creating and maintaining a drug
formulary have to take into account newly
approved drugs, newly FDA-approved usages of
drugs currently on the market, and additional in-
formation about drug efficacy and safety that may
arise. All this new information may change previ-
ous decisions about a drug’s position on a formu-
lary. Required coverage of drugs may lead to
outdated and inferior decisions about drug inclu-
sion on a formulary and lead to both excess cost
and suboptimal patient outcomes.13,25 Addition-
ally, the benchmark plan may have been designed
for the specific needs of the population it will
serve. The priority of these medical needs may
change in different areas of the state and a
different formulary design may be more cost effec-
tive for other regions. This forecasted excess
spending coincides with the belief of gray litera-
ture commentary, which predicts that the ACA
will lead to short term increases in both premiums
and deductibles in U.S. insurance plans.17,28
The ACA aims to curb rising prescription drug
costs by requiring insurance plans to cover more
drugs.18 This is a temporary fix that does not
address the root of the problem. Mandating
coverage for certain drugs or drug classes covered
actually erodes the leverage that PBMs have to
negotiate prices with drug manufacturers. Taking
this power away not only opens the door for
excess drug spending but allows drug prices to in-
crease without much consequence.20 The goal
should be to emphasize the quality of the product
being developed and used and to control the costs
of medication by limiting coverage and access to
medication to drugs that are backed by scientific
evidence illustrating their cost effectiveness.
Additional concerns with utilization management
tools
The ACA will extend prescription drug
coverage to many patients who have not previously
had access to insurance for pharmaceuticals. How-
ever, the issues and problems resulting from the
control utilization tools have not been addressed by
the ACA. These will only grow in number as the
number of insured people rise. More insured
patients equates to more patients encountering a
situation where prior authorization is required. As
evidenced by the current high “walk-away” rate
associated with prior authorization, a large portion
of these patients will fail to start their newly
prescribed medication therapy.6,8,12 Patients failing
 Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
to start their medication may fail to adhere to their
physician’s advice and see their condition worsen.
Attempts to schedule more frequent or urgent visits
may not be a feasible option due to the physician
workload, which may be exacerbated due to an
influx of new patients who now have insurance
due to the ACA.16,17 An interesting note, a survey
revealed that 31% of physicians indicated that
they were unwilling to accept new Medicaid pa-
tients.29 We may see patients with insurance unable
to easily access primary care options and instead
turn to emergency rooms for medical needs that
are not urgent in nature.11 This increase use of
emergency rooms crowds waiting rooms and is a
more expensive alternative.11
It is largely unknown how many individuals
will use the insurance exchange to purchase
insurance for their current health conditions.
Forecasting the amount of health care that this
newly insured population will utilize is a difficult
task for insurers. An increase in health care usage
due to the addition of new insurance benefits and
a newly insured population could lead to increases
in the cost of health care.28 Similarly, an increase
in the demand of health care usage will further
strain shortages in health care, such as the previ-
ously noted primary care physician gap.16
In addition to the newly insured, those
currently with insurance may also be negatively
affected by the ACA. As previously mentioned, the
utilization control techniques present in drug
benefit plans are far from perfect. There are
many cases where patients either fail to or see a
delay in the initiation of their drug therapy or
experience an unexpected interruption of ther-
apy.2,3,6,8,10,12,14,28 The ACA does not prevent
PBMs from using such techniques to address the
problems seen with these methods, leaving patients
to continue to deal with access to care barriers.
Patients not selecting appropriate plans
The demand for health care in the U.S.
typically has been centered on cost, as evidenced
by the usage of “Affordable” in the ACA. Parts of
the ACA, such as the EHB, mandate covered
services. The implementation of the medical loss
ratio threshold is also forecasted to increase the
amount of spending by health care plans when
providing actual health care, which will
potentially reduce their profit margin.18,28,30 To
remain competitive, pharmacy benefit managers
will have to redesign their drug benefits to appeal
to consumers who may put a high value on
7
affordability.28 Utilization control techniques,
which have been shown to control drug spending,
will undoubtedly remain in use. The government
formulary mandates present in the ACA will
require plans to meet the benchmark plan formu-
lary, but PBMs will be able to use utilization con-
trol techniques to satisfy these requirements.18
The ACA states that insurance plans must provide
an easy to read explanation of benefits but pa-
tients may still fail to understand the complexity
that exists in a drug formulary.14,28
Many patients may select the plan with the
least expensive premium in efforts to save money,
but this same plan may not be the most medically
appropriate.31 The plan with the less expensive
premium may have a higher cost sharing responsi-
bility in the form of a copay or deductible or even
lack coverage for the patient’s current medication.
The plan that most suits the patient’s medical
needs might have a higher premium but also a
lower copay or deductible. Additionally, patients
could encounter problems when choosing their in-
surance plan and be unable to find the cheapest
plan that is appropriate for their medical needs.31
Short-term increases in the cost of insurance
may be seen for some groups of people that do not
qualify for government assistance. The hope is,
however, that this initial increase will lead to a
greater downstream decrease on the amount of
spending on treatment, as prevention of disease
continues to be emphasized.19 The ACA does take
a step forward in providing access to insurance
and assisting with cost-sharing responsibility but
patients will still face similar problems at the
pharmacy counter.
Increased HIT and interprofessional collaboration
The control utilization techniques and formu-
lary features used by PBMs are far from perfect.
Interruption, delay of initiation of drug therapy,
and administrative burden are a few complaints of
these techniques.2,6,8,10,12,13 Evaluating the current
usage of such methods through additional cost-
effectiveness studies and eliminating the unneces-
sary usage of these utilization control tools, will
help address patient complaints. The prior autho-
rization process in particular is a tool that is far
from being used at its greatest efficiency. A trial
utilizing an instant approval process (IAP) has
illustrated the potential to alleviate traditional
PA burdens.11 The instant approval process was
different than normal PA procedures in that it al-
lowed prescribers to write PA criteria directly on
8 Ung & Mullins / Research in Social and Administrative Pharmacy j (2014) 1–9
the prescription form or use a form that was faxed
from the prescriber office to the dispensing phar-
macy. IAP led to a decrease in administrative
burden for physicians, helped patient outcomes,
and increase in satisfaction by the pharmacist.11
Prior authorization currently requires paperwork
to be filled out, faxing and phone calls between
physicians, pharmacists, and insurance com-
panies, but fails to effectively use current technol-
ogy, and appears outdated. The time a patient has
to wait for the prior authorization approval pro-
cess can be cut down by implementing modern
technology. Continued usage and infusion of
HIT into the health care system such as Instant
Approval Process could further eliminate delay
or interruption of therapy.11,32
Traditionally, physicians work in separate envi-
ronments than pharmacists, dentists, surgeons, and
even physicians of other specialties. In many cases,
there is a lack of communication between prescriber
and a pharmacist or a primary care physician and a
specialty physician. This disconnects leaves the
patient lost in the middle, opening the door for
duplication or conflicting treatment plans, delay of
treatment, and excess cost and time spent running
between offices.9 In United States pharmacies it is a
common occurrence for a pharmacist to contact a
doctor to clarify the handwriting of the prescription,
if the physician is aware of a potential drug interac-
tion, or to initiate a prior authorization or step-
therapy process. In some instances, physicians are
unable to be reached immediately by telephone or
fax, leaving the patient to wait. One possible way
to combat this communication problem is a stron-
ger emphasis and supported development of
Accountable Care Organizations (ACOs), high-
lighted in the ACA.18,22 In these models the coordi-
nation of care of prescriber and pharmacist
drastically improves the efficiency of communica-
tion between both parties. Prior authorization and
other formulary management tools are easily acces-
sible to prescribers, cutting down on the time pa-
tients would traditionally have to wait for
formulary exception process to occur. ACOs are
an innovative way to deliver health care. They put
pharmacists, nurses, and other members of the
health care team in a position to be more involved
in the care of a patient.23 It is thought that the pri-
mary care physician shortage in the United States
is overestimated and instead could be alleviated by
increasing the efficiency of the U.S. healthcare sys-
tem.23 A future idea for health care reform would
be the expansion of duties for pharmacists, nurse
practitioners, and other health care professionals.
There has been recent legislation passed in Califor-
nia that grants licensed pharmacists the ability to
perform and be reimbursed for specified patient
care tasks and recognizes pharmacists as “health
care providers.” Such evolution in pharmacy and
other health care avenues is a way we can decrease
the need of physicians for primary care.20 The
continued growth, improvement and prevalence of
interprofessional collaboration within ACOs and
other health care delivery models is a way to
decrease current access to care barriers present in
the U.S. healthcare system.18,19,22
Conclusion
The ACA takes several strides in fixing some of
the problems that currently exist in the United
States healthcare system. The number of uninsured
people in the U.S. country will decrease, patients
will receive greater coverage benefits and the
quality of care they are receiving will improve.19
Current problems with the U.S. healthcare system
such as access to care barriers caused by formulary
utilization control techniques and primary care
physician shortages will continue to exist if more
changes are not put into place or emphasized.
Greater coverage by insurance plans also opens
the door for increased spending on healthcare.
The success of the ACA and future health reform
could be influenced by increasing the efficiency of
communication between different parts of the
health care system. Effective collaboration between
physicians, pharmacists, etc. combined with
increasing the usage of health information technol-
ogy are two things going forward that will play fac-
tors in health care reform.
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