Appendix Table A1.

Comparison of plan benefits based on actual out-of-pocket (OOP) spending

	Plan A		Plan B		Plan C
	Cost-sharing	Quantity	Cost-sharing	Quantity	Cost-sharing	Quantity
Drug 1 ($1500)	50% coins (=$750)		30% coins (=$450 copay)	1 fill	$100 copay	2 fills
Drug 2 ($750)	10% coins (=$75)	4 fills	30% coins (=$225 copay)	2 fills	$100 copay
Price based on actual OOP spending
	$75		$300		$100
Expected price based on formulary
	$297.75		$299.25		$100

Note:

1. Plan benefit designs: All plans have a multi-tiered scheme in initial coverage, but the tier structure differs by plan. In all plans, enrollees enter a coverage gap when their total drug spending reaches $2,960, and hit catastrophic coverage after OOP spending of $4,500.
2. Total spending on each drug (spending by plan and enrollees): Both drugs are recommended to be filled once a month. The total spending on drug 1 is $1,500 for one month of supply, and total spending on drug 2 is $750.
3. Possible drug utilization in initial coverage given the benefit designs: Enrollees in plan A use only drug 2 while those in plan B use both drugs and enrollees in plan C use only drug 1. Taking only drug 2, enrollees in plan A hit the gap after 4 fills. Those in plan B enter the gap after 1 fill of drug 1 and 2 fills of drug 2, while those in plan C reach the gap after 2 fills of drug 2. Once hitting the gap, everyone has the same cost-sharing – 45% of drug spending in 2015.
4. Price index in initial coverage based on actual OOP spending: $75 for plan A, and $300 for plan B, and $100 for plan C. This index captures the average monthly OOP spending.
5. Calculation of each plan’s expected monthly price in initial coverage based on formulary:
   1. Obtain the price of each drug in each plan by multiplying the total spending of the drug by coinsurance for the drug imposed by the plan. For copayment, the drug price equals the copayment amount. This price is presented in parentheses.
   2. Get the weight for each drug as the share of each drug’s fills in the total fills in the entire sample (using the number of fills in the entire sample addresses endogeneity related to utilization driven by the plan benefit design). The weighs are 0.33 and 0.67 for drugs 1 and 2, respectively.
   3. Multiply each drug’s price in each plan (calculated in 5.a) times the weight of the drug, and sum to get the weighted average price. For example, the expected initial monthly price in plan A is calculated as $750*0.33 + $75*0.67=$297.75.
   4. For plans with a deductible (not used in the example above), deducible amounts are accounted for before copayment or coinsurance is applied. Suppose plan D has a $300 deductible followed by 30% coinsurance. For this plan, cost-sharing for drug 1 is calculated as $300 + ($1,500 − $300) *0.30 = $660 and cost-sharing for drug 2 is $435 (=$300 + ($750 − $300) *0.3).