Making a case for employing a societal perspective in the evaluation of Medicaid prescription drug interventions

Sanjoy Roy, S. Suresh Madhavan

Research output: Contribution to journalReview articlepeer-review

8 Scopus citations


The choice of a perspective is among the most critical influences of the potential outcome of an economic evaluation, since it determines whose interest is relevant in any given analysis. For publicly funded programmes such as Medicaid, and now Medicare, it is important that economic evaluations are undertaken from a societal perspective because such evaluations inform decisions about allocation of healthcare resources. It has been argued that approaches other than the societal perspective selectively include specific costs, while ignoring other costs that are very much more 'real', and hence lack theoretical foundation in welfare economics. In view of the importance of perspectives in economic evaluations, this paper reviews 25 existing reports of economic evaluations of interventions involving prescription drugs in the Medicaid programme to examine the perspectives employed in such evaluations, based on the specific cost and benefit measurements. No explicit statement of the perspective employed was included in any of the articles selected for this review. Based on an analysis of the cost measures, none of the studies were found to have adopted a societal perspective in their evaluation. Most studies were from the perspective of Medicaid as the payer and as such did not include costs and benefits from outside the Medicaid system. Ten of the identified evaluations of interventions focused just on costs related to prescription drugs. Six studies included an evaluation of the impact of the intervention on overall programme costs along with the costs of prescription drugs. The nine remaining evaluations employed a broader approach to include related effects of the drug-benefit intervention on costs and utilization of other healthcare services such as physician, outpatient and inpatient services. This review emphasizes the importance of a societal approach in evaluating the effects of interventions in Medicaid and other publicly funded drug benefit programmes. Existing evaluations fall short of employing such a broad perspective. This, along with the limitations in design and data, make findings from these studies less reliable than should be used to make major decisions regarding allocation of tax dollars. While methodological challenges to such an approach are valid and understandable, there is an increasing need to attempt evaluations of cost-containment strategies from a broad-based societal perspective to ensure continuity and sustainability of publicly funded drug benefit programmes such as Medicaid and Medicare.

Original languageEnglish
Pages (from-to)281-296
Number of pages16
Issue number4
StatePublished - 2008


  • Drug utilisation
  • Formularies
  • Healthcare expenditure


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