Systemwide Effects of Medicaid Retrospective Drug Utilization Review Programs

Aggregate pooled cross-sectional and time-series annual state data for 1985 to 1992 were used to estimate the systemwide effects of retrospective drug utilization review programs (Retro-DUR) on Medicaid drug and nondrug outcomes. The results provide evidence that these programs produce significant cost savings in the drug budget without spillover effects (positive or negative) in other nondrug budgets within the Medicaid system. We also examine the influence of restricted formularies in this post-Retro-DUR era on drug and nondrug budgets in the Medicaid system; we find significant cost savings in the former but positive spillover effects in the latter.