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This study investigated the relationships between antipsychotic drug use patterns and direct costs for 3,321 Medi-Cal patients with schizophrenia. Ordinary least-squares regression models were used to estimate the impact on costs of receiving antipsychotic drug treatment, delays in treatment, changes in therapy, and continuous therapy. Average costs were $25,940 per year per patient. Having used an antipsychotic drug was correlated with lower psychiatric hospital costs ($2,846 less) but higher nursing home costs. Completing one year of uninterrupted drug therapy was correlated with higher nursing home costs. Delayed drug treatment and changes in therapy increased the cost by $9,418 and $9,719, respectively.

Background: Health plans commonly face the conflicting demands of trying to provide access to novel technologies, including new classes of medications, while trying to contain costs. These demands are particularly acute for California's Medicaid program, known as Medi-Cal, which is responsible for delivery of medical care to an unusually large population of mentally ill individuals in the context of a culturally diverse environment. To meet the challenge, Medi-Cal has instituted a formal process for technology assessment of new and existing pharmaceutical products known as the Therapeutic Class Review (TCR)., Objective: The purpose of this paper is to describe the information produced for Medi-Cal in the TCR process for antidepressant medications and the individual petition review of antipsychotic medications, and to synthesize our experience in a series of policy recommendations designed to improve the quality of coverage decisions., Outcome: A collaborative process between Medi-Cal and Lilly resulted in a substantive body of new evidence regarding the needs of Medi-Cal recipients, the quality of current treatment, and prospects regarding the cost-effectiveness of introducing newer treatments., Conclusion: Medi-Cal has a formal process for evaluating new medicines. This process allows researchers to understand the needs of those who make coverage decisions. We recommend increasing routine epidemiologic surveillance, including service use, and clinical trials that include aspects of usual medical care early in the drug development process.