Health Services Management Research > Volume 21, Number 1 > Pp. 14-22

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Trend and variation of prescription drug cost in the veterans health-care system

Jian Gao  and James Campbell

Correspondence to: Jian Gao E-mail: jian.gao{at}med.va.gov

Using descriptive statistics, this paper revealed that the prescription drug cost as a percentage of total health-care cost in Department of Veterans Affairs (VA) health-care system has outpaced the national trend. Given the fact that the national drug expenditure is the most fast-growing component in the health-care expenditure, the drug cost trend in VA commands further assessment for its financial and clinical impact. Furthermore, by applying simple log linear regression, we analysed the geographic variation in prescription drug use in the VA health-care system. We found a 30% deviation from the predicted drug cost at medical centre level and 15% deviation at Network level. Although this variation is relatively small compared with the variation in other medical service use, reduction of the variation has significant clinical and financial implications. Since the method used in this study is easy to implement, this paper provides a practical tool for large health-care systems such as VA, States and health maintenance organizations to identify those hospitals that over- or under-prescribe drugs.

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