Pharmacy Benefit Management Institute (PBMI) helps industry professionals manage pharmacy benefit programs through research-based drug benefit education.

Memorial Health Services (MHS) is a network of five hospitals in Southern California. In addition to offering an HMO plan, MHS offers a self-insured exclusive provider organization (EPO) to a population of 9,000 employees. Prior to 2002, all prescriptions for the employee EPO plan were processed as medical claims, subject to the same deductible and out-of-pocket maximum. Once the deductible was met, all claims were covered by the plan at 80%. Employees paid 20% until their out-of-pocket maximum was met at $1,000. Thereafter, all medical and prescription drug claims were covered at 100%. There were no formulary or drug exclusions, so all drugs were covered.

With no limitations in drug coverage, employees and physicians soon became unmindful of the healthcare cost increases they were triggering. Employees showed little concern for cost because the plan virtually paid for the entire cost of a drug once the deductible and out-of-pocket maximum were met. With the increase in direct-to-consumer (DTC) advertising, employees also associated high-priced brand-names with indicators of quality. Similarly, physicians had little concern for cost because their choice of drugs was not limited by a plan’s formulary. When physicians can exercise their own discretion, they are more likely to prescribe the newer brand-name drugs. These factors led to MHS’ over-utilization and over-spending of prescription drugs.

To reduce drug costs, MHS began a new drug card program with a three-tier cost sharing structure in 2002. The plan design changes were implemented under the assumption that employees would instinctively shift to generic drugs because of the lower copayment amount. In the first year of MHS’ card program, the generic utilization rate was a low 39% compared to the U.S. average of 45%. MHS realized that plan design changes alone, in the absence of education, would not direct employees toward more cost-effective drug utilization. Since many brand-name drug patents were expiring, there was an opportunity to promote generic drugs.

Pharmacist support and educational efforts were focused on Memorial Health Services’ 6,000 employees/dependents enrolled in the EPO plan, 1,500 physicians, and in-house pharmacists.

MHS set four primary objectives for its drug benefit educational initiatives:
• Increase awareness among employees about the reality of health and drug costs,
• Direct utilization toward cost-effective medications,
• Alter physician prescribing patterns, and
• Provide pharmacist oversight of drug benefit program administration.

MHS human resources and pharmacy services initially worked together to identify prospects that would benefit from having a pharmacist overseeing the employee pharmacy benefits. Given the expertise in drug therapy, it was apparent that a pharmacist would be well suited in a position to manage prescription benefits. With the support and funding of MHS human resources, a pharmacist was employed to oversee pharmacy benefit coverage for the employees and to help lower drug costs for the organization. MHS set out to inform physicians of the impact of rising health care costs on their patients and to empower employees to become more active in their health care decisions. Since generic drugs cost less and still afford the same efficacy as brand drugs, generic drug education was the main focus to reducing costs.

To assist employees in making cost-effective health care decisions, MHS actively engaged them with informative and objective news through the MHS Web site, quarterly Health Matters newsletters, and brochures distributed at in-house pharmacies. Topics included current health care trends, healthy lifestyle, and generic availability. Other cost-saving topics included tips on saving money on prescriptions, advice on DTC advertising, and facts about generic drugs. In addition to educational initiatives, the generic copayment was reduced in 2003, as shown in the table, to further promote generic drugs.

Table: Decreasing Generic Copay Increases Generic Dispensing

A physician educational campaign also was carried out to encourage physicians to re-examine the drugs they prescribe to their patients. To reach a high number of physicians, the message was communicated in several ways. The pharmacist met face-to-face with physicians to discuss generic drugs as well as other less costly alternatives, such as lifestyle changes and OTC drugs. By discussing the clinical and economic benefits of generics, physicians were encouraged to use generics as first-line therapy. A generic drug presentation also was given during medicine grand rounds for continuing medical education credit. To supplement the face-to-face meetings and grand rounds, a monthly newsletter, Prescriber News Flash, was distributed to provide updates on generic drug availability and up-to-the-minute clinical studies on cost-effective drug therapies.

Since 85% of prescriptions are filled at in-house MHS pharmacies, MHS pharmacists also received information about generic drugs. MHS pharmacies were given updates on the approval and release date of new generic drugs to ensure that generic drugs would be available for dispensing as soon as possible after market introduction.

The MHS educational activities were successful, saving approximately 5% of overall drug costs or $140,000. Results also were seen immediately in the 2003 generic utilization rate compared to 2002. MHS also experienced:
• Generic utilization increase from 40% to 45% by the end of 2003,
• Preferred brand (tier two) dispensing decrease from 45.8% to 41.4%, and
• Nonpreferred drug (tier three) dispensing decrease from 5.0% to 3.8%.

Additional savings of $89,000 was also realized by having a pharmacist overseeing the administration of the prescription benefit plan. The pharmacist was able to capture PBM claim and payment errors, improve utilization management, enhance use of generics, ensure receipt of proper amount of drug rebate dollars, and seek new savings opportunities.

The key for MHS in reducing drug cost was the ability to position a pharmacist within the human resources division to manage prescription benefits effectively. Having a pharmacist overseeing the prescription plan design allows MHS to exert direct influences on the plan administrator and to provide a continuum of care from its inpatient setting. The MHS educational program has generated increased acceptance and prescribing of generic medications by physicians because they now have a greater knowledge of generic drugs. Usage of generic drugs by employees also has increased because of the financial incentive of a lower copay and the understanding of the generic equivalency to brand.

Increasing brand-to-generic conversion was the first step in the cost-saving efforts for MHS. Changes were implemented slowly to ensure employees had the time to adjust and adapt to the changes in drug coverage. The next step is to encourage generic drug use that results from therapeutic class switches such as the use of a nonsteroidal anti-inflammatory drugs instead of COX-2 inhibitors. Other programs are underway to develop dosing protocols for expensive products and to develop drugs of choice within certain therapeutic classes to maximize MHS’ purchasing potential.

For more information about integrating pharmacy expertise into your prescription drug program, contact Kathy Chang, PharmD, at kchang2@memorialcare.org.