Several readers have noted that there are other reasons for getting involved in the new Medicare drug program, citing the government’s “loss prevention” financial arrangements, the sophistication of PBMs in managing formularies, and the desire to enter what will be a growing and eventually huge market.
The Piper Report has an excellent summary of th program and pays particular attention to a partnership between Cigna and NationsHealth. The post also has numerous links to other sources that further explain part D.
While all this is interesting, I sense a “bleeding edge” aspect to these programs. For most entrants into this market, this will be their first large-scale initiative into senior drugs management. The challenges they face will include:
–inexperience about seniors and their drug-consuming habits
–the inherent problems with adverse selection noted in previous posts here
–their inability to control, or even impact, the treating physician, widely acknowledged as the primary driver of pharmaceutical utilization
This last may be the most significant. At the end of the day, PBMs are transactions processors, administering (in large part) what physicians order. If they can’t intelligently address and positively impact prescribing behavior in a way that does not put the beneficiary in the middle, they will find themselves caught between the doc and the patient – a very uncomfortable position.
What does this mean for you?
It is highly likely that early adopters will get burned in this deal, and slower movers will glean vital knowledge from observing without entering the fray. This is one of those rare circumstances where I would advise caution.
Workers’ Comp Insider has an excellent summary of NCCI’s recent report on prescription drug costs in workers’ comp. Author Jon Coppelman raises some interesting questions, including:
“why are doctors relying on brand names, when there are very powerful generic drugs available for pain? Why prescribe Oxycontin? Why is Neurontin so popular?
Is this what consumers want?”
Coppelman rightly cites the power of detailers, the armies of attractive, intelligent, well-dressed primarily young men and women who call on physicians to encourage them to write scripts for their particular drugs.
I would also note that PBMs make money only when scripts are filled through their contracted pharmacies. Therefore, while there is indeed an incentive to the PBM to drive network penetration, there is also no incentive to prevent scripts. Certainly some PBMs work hard to “do the right thing” and there are some notable successes, but when they are financially motivated to fill scripts, there is somewhat of a conflict of interest.
Moreover, some PBMs do not understand the WC business, but are jumping into the market because margins are much more attractive than those in group health.
What does this mean for you?
Watch drug utilization growth carefully, learn about this business, and start talking to your PBM about alternative fee structures. There is no quick answer but with drugs accounting for 12% of WC medical spend, it is well worth your time to look for a longer term solution.
The growing popularity of Medicare Part D (the Medicare Drug program) among health plans pharmacy benefit managers (PBMs), is a mystery. As I have noted before, the program as presently conceived is guaranteed to drive adverse selection with only the seniors who will get more from the program than they will pay in likely to subscribe.
I asked national health policy expert Bob Laszewski of Health Policy and Strategy Associates (not affiliated with my firm) if I’m missing something, if there is a good reason why PBMs and health plans are jumping into this business. Bob pointed to a Brandeis University study that indicated those seniors who purchased the drug discount card tended to he high users of drugs. No surprise there – what is revealing is the underlying statistics. Drug card purchasers saved 20% (on average) but used the card twice as often as seniors who received a card automatically from their health plan.
Defenders of the Part D program cite PBMs’ expertise in formulary management, bulk pricing arrangements, cost-sharing with seniors (co-pays etc.) as evidence of their ability to control costs.
Perhaps most telling is the Federal government’s announcement that they will protect PBMs and health plans from excessive losses incurred as a result of their Part D drug programs.
The net – this is one of those “if everyone else is doing it, we better too” businesses. It is reminiscent of the pricing cycles in property and casualty insurance, where as soon as carriers start losing money they raise prices, and as soon as they start making money they cut prices to capture volume. This pattern has been as consistent as the tides, and likely as inevitable.
What does this mean for you?
For those of us on the sidelines, observing the outcome of the rush into Medicare Part D drug cards will be instructive. It is possible that I am missing something here, that PBM programs actually can address utilization (although I have never seen evidence that they do, and because they traditionally make money only when prescriptions are filled, utilization management is not in their DNA).
But I doubt it.
While state legislatures and governors are moving to make significant changes in Medicaid programs, a coalition including AARP, pharmaceutical manufacturers, labor unions, pediatricians and lobbying groups are preparing to do battle for their constituents. The impetus behind this nation-wide movement is the agreement between the Bush Administration and Congress on a $10 billion cut in Federal contributions to Medicaid programs (state governments pay somewhat less than half of the costs of Medicaid, with the Federal government picking up the rest). With that historical decision now law, states have to figure out how best to implement the cuts.
Perhaps most telling, there appears to be consensus from politicians of all stripes that something has to be done. And, given the influence that states have over Medicaid decisions, we will likely see a broad array of possible solutions advanced by legislators. Options include:
— requirements for beneficiaries to share in costs through co-pays and deductibles
— cuts in reimbursement for certain providers, notably nursing homes
— “stripped-down” benefit packages, with different benefits for children, the disabled, elderly poor, and working poor
— negotiations with pharmaceutical manufacturers to reduce drug costs
— change Federal funding for long-term care to a “block grant”, whereby states receive a set amount of money and can make their own decisions as to how to allocate those funds.
This is a good thing. There is no question the US needs to address the exploding costs of Medicaid, and states are excellent “labs” to test various approaches. There is also no question this will be painful for some, with recipients, pharmas, nursing homes, and hospitals among the likely victims. But, we have no choice. Medicaid has grown significantly in recent years, primarily driven by increases in enrollment. Many of the new enrollees are the working poor; individuals who work for employers that do not offer health insurance or cannot afford the employee contribution towards the premium.
What does this mean for you?
This is getting as tiresome for me as it is for you, but prepare for cost-shifting as pharmas and providers seek to recoup lost income by increasing charges and utilization for commercial payers. Especially vulnerable are liability and auto insurers, as their “managed care” programs are in the dark ages.
Back to the detailers v. doctors, if only just for a moment. Dr. Gary Schwitzer of the U. of Minnesota has posted an interesting piece on Rep Henry Waxman’s indictment (figurative, not literal) of Merck’s behavior related to misleading MDs about Vioxx.
Another blog has a highly entertaining review of some highly embarassing marketing training literature ostensibly used by Merck. Suffice it to say that they are using anatomy as well as physiology in their efforts to “reach” docs…
What does this mean to you?
The dollars pharmas have to spend on convincing MDs to order their drugs are much larger than the dollars managed care firms have to “counter-detail”. If managed care firms, insurers, and employers want to stand any chance in this battle, they need to figure out how to do a much better job of educating docs than they have to date.
The Hartford has just released an internal study of the costs of prescription drugs in Workers’ Compensation, and while it only covers the company’s own experience, the report does add a little more depth to the research released by Health Strategy Associates last month.
Key findings include the Hartford’s Rx trend (inflation) rate of 6%. This is about half of the average increase reported by the 24 respondents to HSA’s Survey, and demonstrates what can be accomplished through the vigorous application of intelligent programs.
The report also noted one of the key drivers was the growth in “off-label” use of prescription drugs such as Actiq and Neurontin. The release stated:
“Actiq is a powerful painkiller approved by the FDA for cancer patients with breakthrough pain, but it jumped to number nine from 15 in 2003,” said Dr. Bonner (Medical Director of the Hartford). “The drug is a narcotic that comes in a lollipop or lozenge form and takes just a few minutes to enter the bloodstream. The FDA is concerned about its potential for diversion and abuse. Actiq’s climb up the chart suggests it is being used for a much wider group of patients than those the FDA originally intended.”
Similarly, the drug Neurontin held steady at number two on the list, despite its owner paying more than $430 million to settle state and federal charges relating to the drug’s promotion and marketing to physicians. The FDA approved the drug in 1999 to treat seizures in epilepsy, then approved it in 2002 to treat pain following shingles outbreaks (post-herpetic neuralgia). Even so, the percentage of patients for workers’ compensation injuries being treated for either condition is dramatically smaller than the usage of the drug suggests.”
Not noted in the press release is the name of the entity that is providing pharmacy benefit management services for the Hartford; Tmesys/PMSI. (Sponsor of HSA’s survey).
What does this mean for you?
If you are a WC payer, there is hope. Data-driven programs, applied intelligently and appropriately, can and do reduce prescription drug expenses.
After walking the exhibit halls at the RIMS Conference in Philly for two days, it has become apparent that pharmacy management is the new hot business. Here are a few of the indicators
The latest casualty among drugs falling victim to over-promotion and under-testing is Bextra, Pfizer’s COX-2 inhibitor. This time around it is not just cardiovascular issues that are the problem.
Bextra appears to be linked to a significantly higher incidence of a serious skin reaction, a problem not found in the other COX-2s. This skin condition is what led the FDA to “request” that Pfizer pull the drug last week. Earlier, Pfizer was asked to add additional safety warnings to Bextra’s labeling, a move that fell short of a withdrawal request.
Reactions ran the gamut from shock and disbelief to “I told you so”; perhaps the most telling appeared in the New York Times:
Thalia Segal, a pain specialist at New York University, said, “We used to just put people on these drugs for life and not think about it, but we can no longer commit them to lifelong therapy with impunity. We have to use these medications judiciously and follow people more closely. We have to rely on a much more individualized approach” (O’Connor, New York Times, 4/8).
It is becoming painfully (no pun intended) obvious that the “side effects” of various medications can not only be quite serious, to the point where people die or suffer debilitating conditions, but also have been under-considered by administrators and big pharma alike. And, the treatment expense and other liability associated with these side effects will contribute to our rising health care costs. Over the short term, financial results of the pharmas will suffer (“Pfizer, which on Wednesday announced plans to reduce costs by $4 billion annually and restated 2005 earnings estimates, might have to make additional cost reductions to return to double-digit earnings growth by 2006
I’ve been in Arizona at the Pharmacy Benefit Management Institute annual conference for the last couple of days, and will be reporting back in more detail later. Here are a few of the interesting take-aways
HSA has completed the Second Annual Survey of Prescription Drug Management in Workers’ Compensation.
Respondents represented a wide range of payers, with annual prescription drug spends ranging from $772,000 to $156 million. Total estimated drug costs provided by the respondents amounted to $645 million, approximately 18% of the annual total workers’ compensation drug spend. Together, the carriers participating in the survey represent 35% of all private-payer workers’ compensation insurance in the United States.
If anything, awareness of this problem has grown significantly over the last year. In fact, 20% of respondents, mostly from larger payers, indicated that prescription drug costs were “much more” significant than other medical cost issues.
The results of this survey indicate a significant awareness of the importance of prescription drug costs in workers’ compensation, a focus on PBMs as the primary solution, but a lack of distinction among the PBMs themselves. Clearly, the workers’ compensation industry is looking for solutions that emphasize customer service, utilization control, seamless processes and assistance in working with and educating payer staff and their customers.
There is also a rapidly growing recognition that the treating physician is central to addressing this issue. This recognition has grown dramatically over the last year and although there is not consensus on how to address the issue, there is no mistaking the level of interest in doing so.
Copies of the Survey Report may be obtained by emailing me at jpaduda@HealthStrategyAssoc.com.