Evidence-based Pharmaceutical Delivery

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Abstract

Efforts to use research evidence about drugs? effectiveness, safety, cost, etc. to drive decisions about coverage and purchasing, as well as, increase access to more effective drugs, and improve quality. These changes are implemented through preferred drug lists (PDLs), disease management, provider informing, and changes to claims processing system.

Purpose of health policy or idea

In the United States, spending for prescription drugs grew from a little over $40 billion in 1990 to over $140 billion in 2001, an increase of about 250%.  During 2001 alone, Medicaid spent a total of $24.2 billion on prescription drugs, approximately 11% of total Medicaid spending.[1]  States are especially hard hit by rising drug costs.  (See Background Note on Medicaid Program below)

• States purchase pharmaceuticals for many groups of people, including Medicaid beneficiaries, State Children's Health Insurance program (SCHIP) enrollees, their own employees and retirees, and prisoners. 
• States have been struggling with the cost of continuing to provide public coverage during the recent economic downturn, which not only decreases state revenues but also increases the number of people who need assistance.  The rising cost of drugs has been one of the most significant pressures on state Medicaid spending.
• Drug spending is regarded by the managers of programs that provide health coverage to state retirees as a key factor in the overall rise in health costs, and they are struggling to find ways to manage costs without jeopardizing retirees' access to drugs. [2]

Although prescription drugs are costly, states recognize that advances in pharmaceutical therapies save lives, improve health status and quality of life, and potentially contain costs for other types of health services.  The proper use of drugs for certain conditions has been shown to reduce the likelihood of complications requiring hospitalization or other expensive treatments.

These facts present a challenge to states that are trying to contain pharmaceutical costs and facilitate appropriate access.  As a result, states are implementing different strategies to contain pharmaceutical costs and promote appropriate access.  Examples of the strategies that states have implemented include the following.

1. States have implemented disease management programs that help patients better manage their conditions.  Disease management programs range from basic disease-specific commercial programs offered through managed-care organizations to comprehensive care coordination programs for the fee-for-service and primary care case management (PCCM) populations.  Florida, Washington, and Indiana, among others, use disease management in their Medicaid programs, and CalPERS uses it for state employees. 
2. States including Florida, Georgia, Illinois, Kentucky, Louisiana, Maryland, Michigan, Oregon, and Texas, already use or are developing a preferred drug list (PDL) in their Medicaid programs. According to a recent survey, 18 of 43 responding states reported using PDLs.[3]  Other states are in the process of developing them.  In these states, Medicaid beneficiaries still have access to the full panel of drugs, but physicians must take special action before prescribing any drug that is not on the preferred list.  Different states establish different rules.  For example, Michigan requires physicians to get permission from the Medicaid agency before prescribing a non-preferred drug while Oregon simply requires physicians to indicate on the prescription that it should be "dispensed as directed."  Typically, when states use PDLs, drugs are chosen for inclusion based on safety, effectiveness, need, potential for misuse, and cost (net of manufacturer rebates).  Manufacturers can increase the likelihood of their product's inclusion on the PDL by offering supplemental rebates to the Medicaid agency thus lowering the cost of the drug to the agency.  In other words, PDLs create cost saving by changing the behavior of manufacturers, physicians, and consumers.  Some states, like North Dakota, have not established a formal PDL, but have instead added edits to their payment system to ensure that medications are only used within medical guidelines that include safety, age, gender, appropriate dosage, and appropriate use of time release products.
3. Sales representatives from pharmaceutical manufacturers often visit physicians to "detail" the benefits of their product.  Some states have begun counter-detailing programs to ensure that physicians are aware of the full range of products available to them and the associated risks, benefits, and costs.  Maine, for example, identifies beneficiaries who have multiple prescriptions that might have harmful interactions and discusses these cases with the beneficiary's physician.

Among these three approaches implementing a PDL is the most likely to be used by state Medicaid agencies-and much of the rest of this report focuses on that approach.

Different financial and non-financial incentives exist (or can be created) for the various stakeholders (patients, physicians, pharmacists, manufacturers, and payors) involved in implementing these policies.  Essentially, however, these incentives can be reduced to three that effect each to some extent..

• Payment: If pharmacists fill a prescription for a non-preferred drug without using the exception process to obtain approval for filling that prescription the pharmacist is not paid.  Also, manufacturers that offer a reduced cost (among equally safe and effective drugs) obtain a greater share of market than those who do not.
• Administrative Burden:  Although there is an exception process in every state, obtaining an exception requires time and effort.  This encourages physicians, pharmacists, and patients to adhere to the list-unless there is a clear need for a non-preferred drug.  Different states have established different exception processes and, therefore, the strength of this incentive also varies by state.
• Desire for Good Patient Outcomes: Because these lists are based on scientific research into safety and effectiveness (as well as cost) these policies help ensure that patients obtain safe, effective drugs.

Background on the Medicaid Program- from Policy Brief #3):  Title XIX of the Social Security Act is a program which provides medical assistance for certain individuals and families with low incomes and resources. The program, known as Medicaid, became law in 1965 as a jointly funded cooperative venture between the Federal and State governments to assist States in the provision of adequate medical care to eligible low-income and needy persons. Medicaid is the largest program providing medical and health-related services to America's poorest people. The program has essentially been a State/Federal funds match in which state dollars spent for Medicaid beneficiaries are matched by the Federal government Within broad national guidelines which the Federal government provides, each of the States: 1. establishes its own eligibility standards (the neediest populations are required); 2. determines the type, amount, duration, and scope of services;  3. sets the rate of payment for services; and  4. administers its own program.

Thus, the Medicaid program varies considerably from State to State, as well as within each State over time. For example, outside of the neediest population which is required to be covered, a person who is eligible for Medicaid in one State may not be eligible in another State, and the services provided by one State may differ considerably in amount, duration, or scope from services provided in a similar or neighbouring State. In addition, State legislatures may change Medicaid eligibility and/or services during the year.

A State's Medicaid program must offer medical assistance for certain basic services to most categorically needy populations. States may also receive Federal matching funds to provide certain optional services.


[1] Office of the Actuary, National Health Expenditure Projections 2002-2012,  (Centers for Medicare & Medicaid Services, February 2003). http://www.cms.hhs.gov/statistics/nhe/

[2] Jack Hoadley, How States Are Responding to the Challenge of Financing Health Care for Retirees (Henry J. Kaiser Family Foundation, September 2003).

[3] Jeffrey S. Crowley, Deb Ashner, and Linda Elam, Medicaid Outpatient Prescription Drug Benefits: Findings from a National Survey, 2003, Kaiser Commission on Medicaid and the Uninsured, December 2003.

Main points

Main objectives

The main objective of these efforts is to better manage the pharmacy benefit (in terms of cost, access, and quality) through the application of research evidence to coverage and purchasing decisions.

Type of incentives

There are both financial and non-financial incentives offered to various stakeholders.  For example,

• Manufacturers are incented to lower the net cost of their products to state purchasers in order to be included on a PDL.  Inclusion on a PDL/formulary protects existing sales and can also increase sales if other products are no longer easily available to covered patients.
• Physicians are incented to use the products on the list because they do not have to complete the prior authorisation process to prescribe those products to an individual patient. 
• Patients who join a disease management program receive help in managing their condition and care.  Some insurers also create tiered co-payments so to create an incentive for patients to use the preferred drug-and pay a lower co-payment.

Groups affected

Medicaid beneficiaries, state employees and other groups of people for which states purchase health care., Physicians, pharmacists, and other health care providers, Pharmaceutical manufacturers, 4. State purchasers of health care (Medicaid agencies, SCHIP programs, State employee and retiree benefits purchasing agencies, etc.)

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral

• This policy/approach shows much promise in producing better outcomes and containing costs based on individual state assessments of their programs. (In other words those that use this approach show experience favourable changes in cost and utilization.)  
• This approach also shows some promise for application in other areas, such as medical technology assessment and coverage.

Political and economic background

These changes were not driven by a change in government or political direction.  Instead rising health care costs, state budget shortfalls, and a continuing need for states to provide those they cover (Medicaid beneficiaries, state employees, etc) with access to quality health care drove these changes.  These factors created the need for states to develop means for better management of the pharmacy benefit (access, cost, and quality) within the current national and state regulatory structure.

Medicaid regulations make the use of a closed formulary very difficult, but prior authorization programs are expressly permitted-and used by states to manage many other services.  Also, a pharmacy rebate program was created as part of the Omnibus Budget Reconciliation Act (OBRA) of 1990-all states already have systems and processes in place for collecting these rebates.  These factors made using the combination of prior authorization, and manufacturer rebates extremely attractive to states.  The introduction of research evidence into these purchasing decisions helps states ensure that these decisions do not compromise patient care-and help overcome the resistance of providers, participants, and advocates to these changes. 

Nonetheless, pharmaceutical manufacturers challenged state use of these procedures-impelling CMS to issue a letter to state Medicaid Directors supporting the use of prior authorization, rebates, and research evidence to manage the pharmacy benefit (SMDL #02-014, issued September 2002; www.cms.hhs.gov/states/letters/smd91802.pdf). 

Manufacturers also challenged these processes by taking some of the pioneering states, such as Michigan, to court and on March 28, 2003 the U.S. District Court for the District of Columbia ruled that Michigan's preferred drug list, prior authorization and supplemental rebate policies were acceptable under federal law.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Origins of health policy idea

Please see earlier description on the genesis of this approach.  In summary, however:

• The primary architects of this idea where state government, especially Medicaid agencies and they remain the driving force behind the idea because they believe it to work (i.e. promote access and quality while containing costs)
• The among the first states to implement a Preferred Drug List were Michigan (implemented 2/02) and Florida (implemented 8/01)
• This approach builds on earlier strategies to manage cost and utilization by interjecting research evidence into the purchasing process.
• These approaches are usually implemented on a state-wide basis, by therapeutic class.

Stakeholder positions

The use of evidenced to better manage pharmacy services has had strong supporters and opponents.  In general:

• State purchasers (primarily Medicaid agencies and state health benefits agencies) have strongly supported the approach.
• Many state legislative leaders have also supported this development
• The federal government has also supported state's ability to use these management strategies.
• Provider reactions have been mixed, depending on the provider type, as well as, the approach used to develop and implement the strategy.  Overall many providers have been opposed-some more strongly opposed than others.  For example in most states mental health practitioners have been very opposed.
• Pharmaceutical manufacturers have generally opposed the approach.

Over time, most stakeholders have come to accept or support the approach.

Many policy papers have been formulated-mostly by individual states or organisations including, universities, provider and consumer advocacy organisations, etc.

Influences in policy making and legislation

In most cases the policy required state legislation before implementation and was, in some cases, changed during the legislative process.  For example, legislation establishing a PDL may have been changed to exclude psychotropic drugs or limit the use of prior authorization to reinforce the requirements.

Legislative outcome

success

Adoption and implementation

The participation of all of the stakeholders identified above is needed for successful implementation of the policy.  State experience has shown that even those who strongly object to the policy are likely to participate.  For example, pharmaceutical manufacturers are generally opposed to any strategies that might create a barrier to a patient's use of their drug-but the manufacturers nonetheless do usually decide to participate in the effort.

The process of adopting/implementing the policy is spearheaded usually by a state agency that purchases prescription drugs.  They can be considered the 'moderator' of the process.  The tools needed to successfully implement this policy include:

• Research evidence on the effectiveness and safety of various prescription drugs-and a way to keep that information current
• Changes to claims processing systems to reinforce the policy
• Prescriber and pharmacy input and education so that they understand, and in the best case, support the policy
• Beneficiary outreach and education so that beneficiaries and consumer advocates understand, and in the best case, support the policy.

Monitoring and evaluation

Although most states have not established a formal review process the state budget process will bring these policies (PDLs) under public scrutiny on an annual basis.  They are, of course, also evaluated on an ongoing basis by the state purchasing agency to ensure that they are producing sufficient changes in utilization and cost.

Since each state acts independently these evaluations can be conducted internally, or contracted out.  But, most examine changes in pharmacy cost and utilization as measures of the success of the policy.  State purchasers wish to see reductions in cost and shifts toward using those drugs that are included on the list.  They believe that these changes in utilization will produce better patient outcomes, but it is difficult to identify whether changes outside pharmacy are related to the changes in pharmacy services because there are so many other factors that also impact services and outcomes.

Expected outcome

This policy is expected to improve access and quality while containing costs.  It appears, based on state report, to be achieving those objectives.  However, the policy does create a clear barrier to obtaining some prescription drugs-it is possible that some would benefit from the 'non-preferred' drugs and they will have difficulty obtaining them.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch

States that use this approach report that they see changes in cost and utilization that indicate that the policy influences prescribing.  The extent of the impact does vary among states.  Given that these policies are based on scientific evidence about relative safety, effectiveness etc. of specific drugs these changes should improve the quality of care-they clearly reduce pharmacy costs.  It is difficult, however, to determine the impact of these changes impact on services other than pharmacy (such as hospitalization) because there are many other factors that could influence changes in other service areas.

References

Sources of Information

Neva Kaye. Affording Prescription Drugs: State Initiatives to Contain Cost and Improve Access.(National Academy for State Health Policy, July 2002). www.nashp.org/_docdisp_page.cfm?LID=666CB5DC-7948-11D6-BD1700A0CC76FF4C

Jack Hoadley. How States Are Responding to the Challenge of Financing Health Care for Retirees. (Henry J. Kaiser Family Foundation, September 2003).

Jeffrey S. Crowley, Deb Ashner, and Linda Elam. Medicaid Outpatient Prescription Drug Benefits: Findings from a National Survey, 2003. (Henry J. Kaiser Family Foundation, December 2003). www.kff.org/medicaid/4164.cfm

Cathy Bernasek, et al. Oregon's Medicaid PDL: Will an Evidence-Based Formulary with Voluntary Compliance Set a Precedent for Medicaid? (Henry J. Kaiser Family Foundation, December 2003). www.kff.org/medicaid/4173.cfm

Peter Neumann, "Evidence-Based and Value-Based Formulary Guidelines," Health Affairs 23(1) January/February 2004, pp. 124-134.

Center for Evidence-Based Policy. Drug Effectiveness Review Project. (website) www.ohsu.edu/drugeffectiveness/description/index.htm

Author/s and/or contributors to this survey

Neva Kaye, National Academy for State Health Policy

Empfohlene Zitierweise für diesen Online-Artikel:

Neva Kaye, National Academy for State Health Policy. "Evidence-based Pharmaceutical Delivery". Health Policy Monitor, February 2005. Available at http://www.hpm.org/survey/us/c4/3