SUMMER 2001
Volume 6 / Number 3
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Conference 2001 Session Summaries The Rising Role of Consumers in Prescription
Decisions The Rising Role of Consumers in Prescription Decisions Mark Reagen, Assistant Vice President of Marketing for AdavancePCS, focused his presentation on the ever-growing influence of the Baby Boomer generation, some 78 million in number. Baby Boomers tend to be highly educated and have significant disposable incomes. They also tend to rely on their own judgment rather than trusting authority or institutions and place great emphasis on good health. Importantly for benefit design, they are willing to pay more for something they really like and treat time as their most valuable asset Designing an effective health benefit for the Boomer generation means 1) giving them choices, 2) giving them information, 3) giving them good service, 4) using technology, and 5) focusing on the individual's health. This means tiered copayments work well for this group, as does education explaining the reasons behind various plan design elements. Web sites are an important information resource to Boomers. Prior to the widespread use of the Internet, providers controlled consumer access to health care information, as well as the content of that information. By some estimates there are at least 30,000 health-related Web sites today, and as many as one-third of all searches are related to health care. Reagen emphasized that health care will operate very differently in 20
years. Just as the baby boomers have changed every other market they have
ever touched, the health care industry will make the required changes and
develop new systems to satisfy this generation. The Impact of Independent Rebate Validation Data Niche Associates (DNA) contracts with all the major PBMs and 41 drug manufacturers to calculate and validate the rebate amount due PBMs. DNA receives claim data from the PBMs, inspects the data for accuracy, and then reports to the manufacturers how much is owed to the PBMs. Karian and Spotora noted that rebate validation is needed because the data submitted to the manufacturers in the past have had many errors. These errors occur for several reasons. The first involves computer systems. Even with newer systems there are often several different vendors and platforms involved. Another reason validation is needed is due to the enormous volume of transactions being processed. The final reason involves human error and lack of standardization. Spotora commented that about 5% of rebates end up being disputed
if for example a total of $50 million is typically paid in rebates, there
is a potential for $2.5 million in overpayment. Validating the rebates
due and standardizing the processes used by PBMs for submitting rebates
will improve the rebate system. This has provided plan sponsors with a
more accurate dollar figure that they can expect to receive and result in
improved PBM system accuracy and reporting. The Generic Revolution Dr. Mark Matusik, Regional Clinical Manager for Walgreens Health Initiatives, reviewed many of the drugs losing patent protection by 2005 (e.g., Prilosec®, Prozac®, Claritin®, Mevachor®, Biaxin®, Zestril®, Pepcid®), and several other drugs whose patents expired in the year 2000 (Vasotec®, Glucophage®, Hytrin® and Buspar®). Currently, 47% of all prescriptions dispensed are generics; by late 2002 that number is expected to increase to more than 50%. Matusik discussed a number of the tactics used by manufacturers to maintain brand drug use and preference. These include improving existing brands (for example adding a time released component to an existing product), introducing new brands with slight advantages, rebate incentives for new brands, among others. The point of discussing these strategies is to alert plan sponsors to the need to take advantage of generic drugs when they become available. Matusik also discussed a number of PBM and benefit plan design strategies to encourage generic drug use. These include using tiered copays to incent the patient, requiring generic drug use, requiring generic drug use as part of step therapy programs, therapeutic substitution programs, and patient education. In addition, there are legislative reforms being discussed that will make generics available more quickly. The FTC is, also, investigating certain pharmaceutical company practices that discourage generic drug introductions. Plan sponsors should take advantage of generic availability to reduce
drug costs wherever possible. The Effects of Benefit Design Changes on Self-Insured Health Plans Dr. Mark Lewandowski, Senior Vice President of Business Development for National Medical Health Card Systems discussed how a successful organization develops patterns of behavior based on its successes and eventually those patterns become habits. As the environment changes, those habits may no longer be effective and the organization may begin to experience failure. Failure leads to fear which leads to new and increased effort, which again results in success. This cycle can and has been observed in the management of pharmacy benefits. Lewandowski noted that clients often ask their PBM to rein in their prescription costs, but are reluctant to make any plan design changes. He emphasized that the three-tier copay is the hub of the "savings wheel," where the tiers are preferred, non-preferred and generics. He emphasized the importance of educating patients to be careful consumers of their prescription benefits. When patients are paying out-of-pocket for prescriptions, they are more likely to become partners in managing healthcare costs. Lewandowski reinforced the importance of continually altering and improving
the pharmacy benefit. If prescription benefits are not strategically managed,
they may simply disappear if employers believe they can no longer afford
to offer them. Creating an Effective Health Plan PBM Partnership Dr. Charles Signorino, Vice President and Medical Director for Molina Healthcare, a privately owned, for-profit health plan specializing in "underserved populations" in the Western United States, discussed some basic services to look for in a PBM. These services include: drug utilization review, claims processing, pharmacy network management and contracting with manufacturers. Ideally a PBM should also provide an on-site pharmacist who participates in plan committees, conducts one-on-one consultations with high utilizers, manages prior authorization programs, provides on-site access to the PBM's claims processing system, and provides other support as needed. The second member of this team presentation, Dr. Benjamin Schatzman, an RxAmerica employee, is the on-site pharmacist for the Molina Healthcare corporate office in California. Schatzman discussed how Molina Healthcare has managed utilization in its California program effectively through promotion of first-line drugs. New drugs are not always added to the formulary, and there is a heavy emphasis on generics as well as a wide over-the-counter drug selection. Prior authorization is required for several second-line drugs. The plan also makes use of provider profiling and one-on-one counseling with physicians to control utilization. In summarizing, Schatzman shared some factors that helped create this
successful partnership. These include a shared focus on managing drug cost
and the local PBM presence. It is also important to keep an open and regular
line of communication with the PBM. State of the PBM Industry Jill Brown, Managing Editor of Managed Care Week, tackled the subject of the ever-changing PBM industry by focusing on some particular issues affecting the industry, including mergers and utilization management issues. Recent mergers and acquisitions include Advance Paradigm's purchase of PCS Health Systems (now AdvancePCS), National Medical Health Care Systems acquisition of Pharmacy Associates, and Merck-Medco merger with ProVantage Health Services. According to Brown, utilization management issues center around the PBM industry's response to Medicare reform, direct to consumer advertising, tiered benefit designs, other new strategies being requested by payers and employers to manage their healthcare costs, and new pharmaceuticals being introduced to the market. The challenge for the PBM industry is to develop a coherent strategy that meets the needs of their varied client bases and can be managed and remain profitable for PBMs. Brown presented a variety of important statistics in her presentation.
For example, she indicated that 46% of all claims processed for three-tier
copay plans are for drugs in the preferred, or second tier (usually preferred
brands). Another 44% of claims are for drugs in the first tier (usually
generics) with only 10% for drugs in the third or highest copay tier (usually
non-preferred brands). Defined Contribution Models: On the Brink of Change Steve Lindstrom, founder and owner of Wellstreet International, focused his presentation on defined contribution health plans. These plans, also known as self-directed or consumer-directed plans, use a voucher payment system. This model, which transfers financial accountability to the employee, can take several forms. The individual can purchase his or her own coverage using a tax credit or contribution from their employer, a non-employer group can be set up to aggregate and negotiate for employees, or many different plans may participate as a group and an employee selects from among the plans. How would the widespread adoption of this approach affect healthcare? According to Lindstrom, the most profound change would be in creating true health care consumers. Under the current system, employees often do not know what their health care costs they may know what their contribution is, but not much beyond that. Successful implementation of a defined contribution system would require consumer education, as well as a method for pooling risk and negotiating rates. Lindstrom estimates that the move to defined contribution plans will take approximately15 years to catch on. Lindstrom believes consumer choice will establish customer-defined quality,
as well as simplifying and reducing overall pricing. He further emphasized
that a defined contribution health care model could impact the prescription
benefit management industry. Consumers may want to spend more money on
drugs as a result of direct-to-consumer advertising. Electronic Prescribing: The State of the Industry Paul Foley suggests that if plan sponsors want safer, higher quality care, the healthcare industry needs to redesign the systems of care, including incorporating technology to support clinical and administrative processes. With prescription costs expected to reach 300 billion by 2010, pharmaceutical-related organizations are scrambling to understand the role technology will play in improving healthcare and managing runaway costs. Many companies have developed handheld, wireless devices, designed for physician's to use the Internet as a portal for point-of-care, electronic prescribing. The goal of this new e-prescribing technology is to increase prescription formulary compliance, increase mail order refills, decrease medication errors, and improve pharmacy efficiencies and patient satisfaction. A recent study conducted by Allscripts reported significant increase in generic and formulary drug use resulting in overall drug cost decreases. Although there is a proven value to this technology, there are barriers
that are slowing its acceptance. These include legal and regulatory issues,
physician practice patterns, the sophistication of physician office technology,
among others. As these barriers are overcome, the technology will be more
widely used to everyone's benefit. Prescription Management in the Electronic Age This case study session focused on the electronic prescribing system implemented by Manatee County Government (MHN), an employer-owned PPO. Robert Goodman, Employee Health Benefits Manager is responsible for the healthcare benefits for this group of 15,000 covered lives. Focus group meetings in 1999 found employees to be fairly satisfied with their health plan. Focus group meetings with participating doctor groups uncovered a different story, low satisfaction with the Point of Service Plan. As a result, a Quality Initiative Committee was formed by Manatee with the goal of controlling costs, not shifting costs, and involving all health care constituencies; employers, providers, employees and their families, TPA's, and PBM's. Goodman's Quality Initiative Committee drafted a plan that included hiring a consultant to visit participating physician groups, review their technology, and work with the offices to align systems and secure messaging and reporting compatibilities. This proactive plan by the Quality Initiative Committee included a physician incentive program to incent adoption of immediate compliance standards and future prescribing goals. The 4-Step Physician Incentive Program started off with physician agreement
to implement and operate the technology provided by MHN at mutually agreeable
cost. This agreement requires two years to complete-beginning with electronic
claim processing and using electronic prescription management technology
in year two. When physicians improve their generic prescribing by 45% or
better they receive compensation accordingly. The fourth step requires physicians
to adhere to Preferred Drug List guidelines to receive an additional percentage
of compensation. MHN realized savings of $350,000 dollars as a result of
implementing the Prescription Management Incentive Plan in 2000.
Case Study: Evaluating The Impact of Changing Copay Structures Rand Skelton of United Drugs, offers PBM services through their cooperative of 1200 independent pharmacies. Skelton presented a case study of one employer group's conversion from a two-tier copayment structure to a three-tier copayment. This case study was presented within the context of increasing drug costs, moving utilization to lower cost drugs, giving employees choices, and reducing administrative burdens. Skelton emphasized that the design of the three-tier copayment structure is critical. He identified steps for assigning each drug to its tier, establishing differences in the copayment amounts for each tier, and communicating frequently with plan members as the key factors for the success of this conversion. The employer originally required a $12 brand copayment and a $7 generic
copayment. United conducted a number of "what-if" analyses to
measure the impact of various three- tier schemes. As part of this, they
estimated the impact of various degrees of success in moving utilization
from third-tier to second-tier drugs. The decision was made to use a $35
third-tier, $20 second-tier, and $10 first-tier copayment structure. This
combination delivered the cost savings the employer required, while maintaining
employee choice and accomplishing the shift to lower cost drugs. Skelton
asserts that focusing on the key factors identified previously is the formula
for a successful three-tier implementation.
Auditing Your PBM John Tripodi shared some of the reasons clients audit their PBMs. These included fiduciary responsibility, ensuring program safety and recovery plans, evaluating contract compliance prior to renewal, due diligence associated with mergers and strategic alliances, and validation of rebate program payments. Tripodi indicated an audit normally includes five major categories of review: anti-fraud procedures, disaster recovery and business continuity, retail and member claims processing, mail order operations, and program data integrity. Potential barriers to accomplishing audits include availability of data, access to contracts, access to PBM systems and processing screens, contractual audit rights and PBM cooperation. Audits often begin with a review of contracts and program documentation, as well as interviews with plan staff. A key component is the review of 12 to 36 months of claims. The data should be analyzed using rules-based technology and analytical tools; with specific program areas tested using computer models. Auditors normally look at high cost drugs, large quantities, significant drug-drug interactions, refills too soon, and other common problem areas. Upon completion of the review, an auditor writes a findings report that is discussed with the PBM. This provides an opportunity to uncover additional information that has a bearing in the report. The final report with recommendations is then provided to the client. The goal of an audit is not to alienate your PBM. The goal is to evaluate
their performance and to fulfill your responsibilities. The benefits of
conducting an audit can be an improved relationship with your PBM, increased
satisfaction, increased performance, and a transition to a strategic program.
Pharmaceutical Manufacturers' Role in Managed Care Don Dietz, outlined the pharmaceutical manufacturer's role in prescription drug benefits. Dietz believes that drug manufacturers are moving from a treatment of illness business model towards a model of prevention. Rather than simply treating symptoms, the goal is to prevent or manage the disease??? Employers are grappling with spiraling healthcare costs, tight labor markets, the need to improve worker attendance, awareness, wellness, and the belief that drug therapy is the least expensive treatment alternative. Some pharmaceutical companies have become interested in working with employers because they represent a large number of people and they have a fiscal responsibility for the benefit package. The pharmaceutical companies' goal is to help the employers manage costs and the healthcare status of these beneficiaries. Dietz described a number of partnerships between employers and drug manufacturers
focused on awareness, prevention, early diagnosis, strategies for individuals
coping with disease, and improving quality of life. The focus of the drug
manufacturers' efforts is provide a supportive care role through educational
resources that can help to keep patients at work, out of the hospital, and
actively participating in daily life. Role of Community Pharmacy in Disease State Management Charlie Callihan discussed the current form of disease state management being promoted by the PBM industry and HMO's as an information channel only, not true management. He does not view compliance programs, wellness publications, mail refill or therapeutic interchange programs to be disease state management. Callihan suggests a disease management model that emphasizes the role of the pharmacists can be a very successful. His organization works closely with pharmacists that are credentialed to manage diabetes. Based upon a case study managed by his organization, Callihan reported significant improvements in a variety of factors used to measure diabetes health status. Callihan reported a 7:1 financial return for this study. The primary mechanism for managing these patients was periodic meetings with the credentialed pharmacist to measure key clinical measures, to educate the patient, and to determine program compliance. During the course of this program, prescription costs increased and doctor office visits increased, but other medical costs, for example emergency room visits and hospitalizations, decreased.
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