A study based on e-prescribing in Massachusetts found that doctors who used e-prescribing systems could save $0.70 per patient per month, which translates to $845,000 annually per 100,000 insured patients filling prescriptions.

The savings were linked to one of the features of e-prescribing systems called formulary decision support, which prompts prescribers to prescribe lower-cost medications. Such feature increased the prescribing of generics and other lower-cost options, researchers reported in the Archives of Internal Medicine, one of the JAMA/Archives journals.

“The potential savings increase with more availability and use of e-prescribing; for complete e-prescribing use, the projected savings are $3.91 million per 100,000 patients per year,” said lead author Michael A. Fischer of Brigham and Women’s Hospital and Harvard Medical School in Boston.

Noting that prescription drug costs account for a significant proportion of medical spending, authors suggested that a tiered copayment system could lower the cost of medication.

In the study, insurers identified preferred medications, such as generic drugs, and classified them as first-tier with the lowest copayment. Moderately priced brand-name medications were categorized as second-tier while expensive brand-name medications were designated as third-tier.

More than 1.5 million patients filled 17.4 million prescriptions during the 18-month study period. After implementation of e-prescribing, tier 1 prescriptions increased by 3.3 percent and second- and third-tier prescriptions decreased accordingly, researchers reported.

“Our results suggest that there are important economic gains achievable through the broader use of e-prescribing with formulary decision support but that merely providing e-prescribing systems to clinicians will not necessarily achieve those savings,” they said.

Several health plans have been partnering with providers of e-prescribing programs, and they expect that the increased use of generic drugs will give them initial return on investment. The Health Alliance Plan of Michigan, for instance, estimated a five-year ROI of more than $14 million by improving its generic use rate.

The study “Interoperable Electronic Prescribing In The United States” published by the Health Affairs journal said the savings are significant for Medicare, which spent $42.2 billion in 2007 for beneficiaries’ prescription drugs.

“Such savings also could become increasingly important for private insurers that are facing decreasing investment earnings and enrollment because of the recent economic crisis,” the study noted.

For more information:

Fischer MA, Vogeli C, Stedman M, Ferris T, Brookhart MA, Weissman JS. (2008). Effect of Electronic Prescribing with Formulary Decision Support on Medication Use and Cost. Archives of Internal Medicine, Dec 8;168(22):2433-9.

Friedman M, Schueth A, & Bell D. (2009). Interoperable Electronic Prescribing In The United States: A Progress Report. Health Affairs, Mar-Apr;28(2):393–403.

For 2009, to be a “successful e-prescriber,” eligible professionals must report the e-prescribing quality measure through their Medicare Part B claims on at least 50 percent of applicable cases during the reporting year.

Under the Medicare E-prescribing Incentive Program, prescribers using a “qualified e-prescribing system” will receive incentive payments from Medicare beginning Jan. 1, 2009. The 2-percent reward will drop to 1 percent in 2011, then down further to 0.5 percent two years later, and go away after 2013.

The program, which is part of the Medicare Improvements for Patients and Providers Act of 2008, will slap those who do not adopt the electronic system with penalties – 1 percent in 2012, 1.5 percent in 2013, and 2 percent in 2014 and each subsequent year.

In addition, claimants should be an “eligible professional” whose estimated allowed Medicare Part B charges for the e-prescribing measure codes are at least 10% of their total Medicare Part B allowed charges. For more information, visit the CMS E-prescribing Incentive Program.

In general, an eligible professional is one of the following: physician, physical or occupational therapist, qualified speech-language pathologist, nurse practitioner, physician assistant, clinical nurse specialist, certified registered nurse anesthetist, certified nurse midwife, clinical social worker, clinical psychologist, registered dietitian, nutrition professional and qualified audiologist.

According to CMS, the e-prescribing incentive is similar to the Physician Quality Reporting Initiative in that reporting periods are one year in length. The incentive is based on the covered professional services furnished by the eligible professional during the reporting year.

Meanwhile, the U.S. Department of Health and Human Services said that eligible professionals may be exempted from the reduction in payment “if it is determined that compliance with requirement for being a successful prescriber would result in significant hardship.

In a Medscape news report, Dr. David Brailer, chairman of Health Evolution Partners and and former National Coordinator for Health Information Technology, said that cost is barrier for many physicians to purchase and install electronic health systems.

“The incentives will turn that business case around. My expectation is that the payments will be in excess of what we anticipate physicians’ costs to be.”

The government said Medicare is expected to save up to $156 million over the five-year course of the program in avoided adverse drug events.

The HHS pointed out estimates that as many as 530,000 adverse drug events are reported every year by Medicare beneficiaries while the Institute of Medicine said that more than 1.5 million Americans are injured each year by drug errors.