Managed Pharmacy

MANAGED CARE May 2010. ©MediMedia USA

Pharmacy and therapeutics committee members say that expert opinion has very little effect on formulary decisions, but a new study suggests otherwise. Mark Oremus, PhD, an assistant professor of clinical epidemiology and biostatistics at McMaster University and lead author of a new study says that “people who run formulary committees need to think about whether expert opinion can be useful to help interpret evidence.”

Oremus surveyed formulary committee members who were considering hypothetical Alzheimer’s disease (AD) medications for insurance coverage. Formulary committees review efficacy data based primarily on changes in the score of outcome measures such as the Alzheimer’s Disease Assessment Scale-cognitive subscale (ADAS-cog). These scales are used because AD is a syndrome without definite clinical measures.

In the study, formulary members were provided two sets of scenarios involving symptomatic drugs (i.e., drugs that don’t slow the progress of the disease) and disease-modifying drugs (i.e., drugs that stabilize patients or slow down their decline). In the first set of scenarios, the researchers provided committee members with scale scores and information on statistical significance.

In the second set, the researchers added an element of clinical judgment. The judgments indicated whether or not the observed change in scale score was clinically significant. Formulary members were asked whether they would be likely to recommend that the drug be covered by insurance.

“In the case of a medication that modified disease, the addition of clinician judgment to the body of evidence would increase formulary committee members’ likelihood of recommending the new drug for insurability,” he says. “This is relevant because the next generation of AD medications will have the ability to modify disease.”

In the case of medications that symptomatically treated disease, the committee members indicated that the addition of clinician judgment would not influence their decision making.

A disease-modifying medication was more likely to to gain insurance coverage if, in addition to efficacy evidence, clinician judgment was a factor in decision making. The numbers in the chart represent the mean likelihood that a decision maker would recommend a medication for insurance coverage.

Source: Oremus M, Raina P, Eva K, Lavis J, et al. Impact of clinician judgment on formulary committees’ recommendations in Canada. 2010. J Health Serv Res & Pol;15(2):98–105.

MANAGED CARE January 2010. ©MediMedia USA

Although effective treatments are available, helping patients cope is a minefield of administrative and legal barriers

Martin Sipkoff

The World Health Organization states that 85 to 90 percent of cancer pain can be controlled with drugs, but according to a study by the Institute of Medicine, “for many Americans with cancer, there is a wide gulf between what could be construed as the ideal and the reality of their experience” in the treatment of pain.

WHO says that health care professionals, patients, and the health care system itself have created barriers. Doctors are often hamstrung in being able to prescribe adequate analgesic treatment — especially opioids — legally. Patients lack adequate knowledge about treatment alternatives. Health plans generally rely on formulary design to comply with a plethora of state and federal laws governing the most effective pain relievers, such as morphine and oxycodone.

The WHO found that only 50 percent of cancer patients receive adequate pain treatment. And although that figure is for the entire world, many pain treatment professionals believe that cancer pain is undertreated at approximately that rate in this country.

Charles Cleeland, MD, a member of the Pain Research Group at the University of Wisconsin Comprehensive Cancer Center, and his colleagues found, in a study of 597 outpatients with metastatic cancer, that 42 percent did not receive adequate analgesic treatment.

June Dahl, PhD, a professor of pharmacology at the University of Wisconsin School of Medicine and Public Health, says that “Cancer, in our lifetime, has started to be treated more and more often as a chronic disease. We’re talking about a whole lot of cancer survivors. Therefore, their pain management treatment is lumped in with sufferers of noncancer pain, and there are lots of barriers, including formulary restrictions, that apply to these patients, who may be suffering from a different form of pain. Neuropathic pain resulting from chemotherapy is an example. It is difficult to treat, and successful treatment may fall outside the boundaries set by formulary design.”

Pharmaceutical pain relief for cancer patients is improving, even if the system is a step behind. “Pain is consistently one of the most feared consequences of cancer for both patients and families,” says Edward Bruera, MD, of the University of Texas MD Anderson Cancer Center in Houston. He published a study of cancer pain treatment in JAMA, and found that “major improvements in the management of cancer pain in recent years” include better assessment of pain, recognition and treatment of opioid-induced neurotoxicity, and the “emerging use of opioid rotation and of methadone.”

Health plans’ approach

Notwithstanding pharmaceutical innovations, most health plans approach chronic cancer pain treatment as part of their coverage for the treatment of all chronic pain, as Dahl points out. For example, “Aetna provides coverage for medical and natural alternative pain management medication and therapies for cancer patients under most plans and according to applicable state laws. However, we do not have a specific pain management program for cancer patients,” says Tammy Arnold, an Aetna spokeswoman.

Same with Cigna. “Cigna does not develop guidelines for cancer pain management, but supports the use of guidelines created and disseminated by independent organizations such as the National Comprehensive Cancer Network (NCCN) and other professional societies,” says David M. Ferriss, MD, the company’s medical officer for clinical program development.

Cigna has a network of oncology case managers, as do several other health plans. Their responsibilities include informing patients of effective pain and side-effect management and guiding patients to “an extensive network of facilities and physicians recognized for their expertise and outcomes in diagnosing and treating cancer, as well as access to an extensive nationwide network of Cigna-credentialed hospice providers,” says Mark Slitt, a company spokesman, who adds that the company values “support for people as they manage their recovery and transition to life as cancer survivors, including those who have ongoing maintenance treatment or medication needs.”

Even with aggressive case management, getting the correct pain drug to a cancer patient who needs it can be problematic, given state and federal opioid laws. “Morphine is somewhat accessible in most locales and under most formularies, but morphine is just not the right drug for everybody,” says Dahl. “It accumulates and decreases kidney function. The best drug for treating many sufferers of neuropathic pain can be oxycodone, giving better pain relief with fewer side effects. But that is a very highly controlled drug.”

Laws differ widely from state to state in relation to the pain drugs most effective for chronic cancer patients. “Every state is different, and health plans within any given state differ widely in their policies,” says Penney Cowan, founder and executive director of the American Chronic Pain Association. “It is very hard for people to navigate the system.”

In its study of the treatment of cancer pain, WHO officials underscored Cowan’s observation. “A strict regulatory environment that closely monitors physicians’ prescribing practices further contributes to undertreatment of cancer pain. Restrictive regulation of controlled substances and problems of availability of treatment may constitute barriers to patient care.”

A survey of Wisconsin physicians found that because of concern about regulatory scrutiny, most doctors reduce the drug dose or the quantity of pills prescribed, limit the number of refills, or choose a drug in a lower schedule. Low priority is given to cancer pain treatment in the health system and in the training curriculum of health professionals, according to the International Association for the Study of Pain (IASP) in Seattle, which has promoted the WHO pain guidelines in several countries.

IASP and WHO have called for an aggressive approach on the part of health plans and state and federal officials, including the Food and Drug Administration, to develop clear and consistent guidelines.

“Most states have a combination of helpful policies that promote pain treatment and restrictive policies that deter adequate pain control by interfering with medical decision-making or even contradicting current medical opinion,” states the American Cancer Society in a study of state policy barriers to cancer pain management.

Cowan points to an example of the negative effect that state regulations and health plan policies can have. “It is called the ‘fail first issue,’” she says. “Doctors are mandated to try several drugs before they get to the one potent enough to be effective, even when it is that stronger drug the physician wants to use. When people are in the kind of pain associated with many cancers, we simply should not be telling them they have to wait to get the help they need.”

Contributing editor Martin Sipkoff can be reached at MSipkoff@ManagedCareMag.com.-

MANAGED CARE November 2009. ©MediMedia USA

Diet and exercise are increasingly seen as only the first steps in a journey that should include medication for weight maintenance

Tom Reinke

After an unfortunate run of bad luck with dangerous weight loss drugs, several manufacturers are on the verge of seeking approval for what could be a new generation of safer and more effective fat fighters.

Health plans and employers rarely cover the current FDA-approved weight loss medications, favoring diet and exercise programs.

The advent of new medications is causing experts to say that not enough attention has been given to the role that pharmacotherapy can play in combating obesity, and health plans may need to reevaluate their stand on obesity treatments.

Bad history

Part of the problem in treating obesity is that there is a very small number of drugs that can be used because of adverse side effects and even deaths from drugs such as fen-phen and Acomplia, which scared doctors, patients, drug developers, and the FDA. Only two drugs — Xenical (orlistat) and Meridia (sibutramine) — are approved for long-term use in controlling weight. Each has undesirable side effects: Meridia increases blood pressure, and Xenical causes oily stools and urgent bowel movements.

“Lifestyle programs are a common benefit through disease management programs but generally health plans provide limited coverage for weight loss medications,” says Susan Pisano, an AHIP vice president. “It’s not that health plans are against obesity medications. Safety and effectiveness are extremely important. We are as eager as everyone else for the right treatments.”

A study of 4.2 million Blue Cross members showed that use of weight loss medications, primarily Xenical and Meridia, decreased from 1 percent in 2002 to 0.7 percent in 2005. Few members used these drugs for longer than three months.

The drugs that are being developed focus their mechanism of action more precisely and claim only minor side effects.

“They are made possible by advances in neurophysiology,” says Jonathan Q. Purnell, MD, an endocrinologist and drug expert at the Oregon Health Sciences University. Many new weight drugs work on serotonin, a neurotransmitter in the brain. “Serotonin, though, is a ubiquitous neurotransmitter in the brain. If you affect serotonin receptors signaling broadly in the brain, as is what happens with current weight loss medication, then you increase the risk for unwanted side effects. But increased knowledge of the neurophysiology of the brain allows drugs to target receptors in specific areas, such as the hypothalamus, which controls appetite and metabolism.”

The new drugs offer other innovations. “Some of the drugs in development are combinations of agents with longstanding FDA approval so their side effects are known,” says Ken Fujioka, MD, director of nutrition and metabolic research at Scripps Health, a not-for-profit hospital in San Diego. “These combination agents take multiple simultaneous actions to stimulate certain receptors and block others in different areas of the brain.”

The FDA requirements for anti-obesity drugs are either (1) at least a 5 percent difference in mean weight loss between the treated and placebo groups, or (2) the portion of subjects who lose at least 5 percent of weight is at least 35 percent, and is double the placebo group. The FDA is closely watching side effects and improvements in blood pressure, lipids, and glycemia.

The three new drugs are lorcaserin, Contrave, and Qnexa. Lorcaserin is a single agent aimed at serotonin in the hypothalamus, which controls appetite and satiety. Arena Pharmaceuticals, the developer, says it plans to submit a new drug application in December.

Contrave is a combination of two approved drugs, bupropion (for depression and smoking cessation) and naltrexone (for alcohol and drug addiction). Both have been used for more than 20 years. Bupropion controls appetite while naltrexone blocks the body’s natural tendency to counteract weight loss.

Qnexa is a combination of phentermine and topiramate that also targets appetite and satiety. Phentermine was the safe half of fen-phen, and topiramate is used for migraines and seizures. Each drug by itself produces weight loss.

Lorcaserin and Contrave claim weight loss in the 5–7 percent range while Qnexa claims 14 percent. Diet and exercise regimens were used with the medications to achieve these trial results. All three manufacturers reported that their drugs were well tolerated.

Given the high incidence and high cost of obesity, the question is, why haven’t health plans stepped up to the plate?

“Instead of taking the initiative, they have chosen the convenient alternative of passing the medical problems and cost on to the Medicare program in the form of increased chronic conditions among the elderly,” says Ann Wolf, MS, RD, an obesity economics researcher at the University of Virginia.

(“Health insurers provide treatment and combat obesity in all age groups,” counters Pisano.)

There are more reasons. “The prevalent view is that obesity is simply a behavioral problem that an individual should be able to do something about with counseling and behavior change,” says Purnell. Furthermore, obesity medications are viewed as “lifestyle” drugs.

“If you view obesity from a risk- and cost-benefit perspective, lifestyle change is the logical first step,” says Frank Greenway, MD, director of clinical obesity at Louisiana State University’s Pennington Biomedical Research Center.

Arguing for pharmacotherapy

These explanations offer some insight as to why current medications have not been used widely. And while lifestyle change is a logical first step, experts are saying that it is not stemming the tide of obesity. Wolf says more action is needed.

Purnell says there is a role for medical management of obesity. “The key is sustained meaningful weight loss. I can put you on a 1,000 calorie diet and get you to lose weight, but unless you interfere with how your brain senses its weight and tries to compensate for weight loss, there is no guarantee that you won’t regain that weight.”

There are other arguments for pharmacotherapy. “We are at the same point with obesity that we were with hypertension decades ago. The disease is at the forefront of attention and we have limited options to deal with it. Only two weight loss drugs are available and they are not appropriate for everyone,” says Greenway. “It is possible that controlling obesity will be similar to controlling hypertension or diabetes, where patients are on combinations of drugs. We need more tools.”

The risk of complications with higher stages of obesity is another argument for drug therapy. “Hypertension, diabetes, and hyperlipidemia all have covered medications for patients at middle and upper risk levels. In obesity, lifestyle interventions work for people who are overweight, and people with BMIs over 35 or 40 can be treated with gastric bypass or gastric banding, but there are limited options for people in the middle,” says Greenway.

While no one expects the new medications to be widely adopted immediately, because of past drug horrors, the new medications and views on pharmacotherapy may signal a new day for health plans.

For further reading

Finkelstein EA, Trogdon JG, et al. Annual medical spending attributable to obesity: Payer-and service-specific estimates. Health Affairs. September/October 2009. 28(5):w822–831.

Wadden TA, Berkowitz RI, et al. Randomized trial of lifestyle modification and pharmacotherapy for obesity. N Engl J Med. 2005. 353(20):2111–2120.

U.S. Dept of Health and Human Services, Food and Drug Administration. Guidance for Industry, Developing Products for Weight Management. February 2007.

Tom Reinke specializes in health and business topics. Reach him at TReinke@ManagedCareMag.com

Unless something is done to interfere with how the brain tries to compensate for weight loss, the pounds might be regained, says endocrinologist Jonathan Q. Purnell.

Controlling obesity may be similar to controlling hypertension, in which a combination of drugs is used, says Frank Greenway, MD, of Louisiana State University. “We need more tools.”

Some of the drugs in question are “combinations of agents with longstanding FDA approval,” says Ken Fujioka, MD, of Scripps Health. The side effects should be known.

Health plans are “passing the medical problems and cost on to the Medicare program,” says Ann Wolf, MS, RD, an obesity economics researcher at the University of Virginia.

MANAGED CARE June 2009. ©MediMedia USA

Drugs for comorbidities cost far more than the drugs for the condition itself

Martin Sipkoff

At an annual cost of nearly $85 billion, the 4.5 million who suffer from Alzheimer’s disease in this country place great strain on the nation’s health system. Significantly affected are managed care plans that participate in Medicare. The number of Alzheimer’s patients is expected to quadruple by the middle of this century, with attendant financial effect, especially on Medicare.

The overall cost is that high because most of the medications currently used to treat Alzheimer’s disease are new, with no generic option. But Alzheimer’s patients also have multiple comorbidities that contribute to higher annual prescription costs than for other adults.

Because costly comorbidities and nursing home costs are so significant, more than 30 pharmaceutical companies have drugs in the FDA pipeline, most intended to slow the progression of the disease.

Those drugs will help control costs, says Elizabeth Gould, associate director of clinical care at the association. “The overall cost of the disease can increase as the disease progresses. Medical care can become increasingly complex and costly.” Her group estimates that the average monthly cost of prescription drugs for persons with Alzheimer’s is $246.46, or nearly $3,000 annually.

Alzheimer’s disease is progressive and fatal, “a neurodegenerative disorder manifested by cognitive and memory deterioration, progressive impairment of activities of daily living, and a variety of neuropsychiatric symptoms and behavioral disturbances,” says Jeffrey Cummings, MD, of the Reed Neurological Research Center at UCLA, who has studied drug therapies for the treatment of Alzheimer’s.

Comorbidities

There are three stages: mild, moderate, and severe. The primary focus of drugs in the FDA pipeline is on mild to moderate Alzheimer’s. The success of these drugs could have a positive effect on overall health care costs, say researchers.

That is because comorbidities are common and progressive in Alzheimer’s patients and contribute heavily to drug costs. In fact, most of the money spent on medications for patients with Alzheimer’s disease goes to treat other conditions, researchers found.

According to research by CVS Caremark, “Drugs to treat Alzheimer’s account for less than a third of these patients’ total prescription costs,” says Anna Theodorou, RPh, a researcher with the pharmacy benefit manager, who presented her data at a recent Alzheimer’s Association Dementia Care Conference.

“Current therapies are designed to ease symptoms and reduce cognitive decline,” says Cummings. “A significant number of agents are being studied now for controlling deterioration. The numbers underscore the urgency of seeking more effective therapeutic interventions for patients with Alzheimer’s disease.”

Advancing age is the major risk factor for dementia, with a doubling of risk every five years after age 65. One problem with management of the disease is that there are no definitive imaging or laboratory tests to confirm its diagnosis. “Evaluation depends on careful history taking in interviews with both the patient and a reliable informant, thorough physical and neurologic examinations, and the use of diagnostic criteria,” says Claudia Kawas, MD, of the University of California at Irvine. “Treatment can improve the quality of life, and overall costs and the use of medications should always be considered.”

Unpredictable

“Treatment requires accurate diagnosis and increasingly is based on an understanding of the pathophysiology of the disease,” he says.

However, in a study of the effect of drug treatment on early Alzheimer’s, Kawas found that “the response to medications for the treatment of primary and secondary symptoms of Alzheimer’s disease is not predictable, and the choice of dosage and the duration of treatment rely on clinical judgment.”

The drugs that have been effective so far for the symptomatic treatment of Alzheimer’s disease are the cholinesterase inhibitors, according to published studies. They slow the biochemical breakdown of acetylcholine. Of the cholinesterase inhibitors, only donepezil, rivastigmine, and galantamine have been shown to be efficacious and relatively safe, according to Serge Gauthier, MD, director of the Alzheimer’s Disease Research Unit at the McGill University Centre for Studies in Aging in Montreal.

Drug utilization

CVS Caremark reviewed more than 367 million prescription claims by 22.9 million PBM members for 2006. They included claims for Medicaid, Medicare Part D, national and local employers, managed care organizations, and government agencies. It had done a similar study in 2005.

In the 2006 analysis, 107,236 members used Alzheimer’s drug therapy. Use of Alzheimer’s drugs rose substantially over 2005 (46.7 versus 27 users per 10,000 eligible members), primarily because of the introduction of the Medicare Part D benefit, according to the researchers.

Donepezil (Aricept) dominates the market and is prescribed for 69.6 percent of all Alzheimer’s drug users. The drug accounts for 52.2 percent of all Alzheimer’s drug prescriptions and 54.4 percent of drug costs of Alzheimer’s patients. Memantine (Namenda) was used by 40.7 percent of Alzheimer’s drug users and accounted for 31.9 percent of prescriptions and 28 percent of drug costs.

Although patients taking Alzheimer’s drugs averaged a total prescription cost of $3,990 annually, only $1,054 of that actually was for Alzheimer’s drugs (26 percent).

Other medication classes accounted for most of the costs. Statins account for 8.1 percent of annual Alzheimer’s patients’ drug costs, and are used by 43.9 percent of Alzheimer’s patients. Proton pump inhibitors account for 6.6 percent, used by 34.2 percent of Alzheimer’s patients. Selective serotonin reuptake inhibitors account for 5.5 percent, and are used by 46.3 percent of Alzheimer’s patients.

Patients who filled a prescription for at least one Alzheimer’s drug had lower out-of-pocket costs than other adults insured in Caremark’s array of private and public insurers. That may be because a higher proportion of Alzheimer’s patients are on Medicare or Medicaid, according to the researchers.

Guidelines

New guidelines call for aggressive use of a combination of Alzheimer’s-related drugs. A panel convened by the Alzheimer’s Drug Discovery Foundation recently released consensus recommendations on the treatment of Alzheimer’s disease in managed care, published as a supplement to the American Journal of Geriatric Pharmacotherapy.

They call for the use of memantine based on staging of the disease. Patients diagnosed in the mild stage should be treated with a cholinesterase inhibitor and those first diagnosed in the moderate stage should be treated with a combination of a cholinesterase inhibitor and memantine.

Finally, those first diagnosed with late-stage Alzheimer’s should be treated with memantine as a first-line therapy, with a cholinesterase inhibitor added later.

The guidelines advise that Medicare managed care organizations “not try to restrict access to drugs in either class through administrative burdens, such as appeals or prior-authorization requirements.”

“This is an evolving process,” says Cummings. “Drugs are emerging that will have an effect on health plan-related treatment of this pervasive disease.”

MANAGED CARE June 2006. ©MediMedia USA

Despite the higher costs of SSRIs, compared to older antidepressants, limiting members' access can lead to undertreated depression

Martin Sipkoff

In a practice that is perhaps best described as penny wise and pound foolish, many health plans and pharmacy benefit management companies fail to include several selective serotonin reuptake inhibitors (SSRIs), among the most effective treatments for depression, in low formulary tiers. Many plans also restrict choice of SSRIs and other antidepressants, and some plans and PBMs fail to cover some SSRIs and other antidepressants at all.

"The more expensive a drug is, the lower the compliance rate," says John Piette, PhD, of the Department of Veterans Affairs Center for Practice Management and Outcomes Research at the University of Michigan. He has studied the effect of drug costs and accessibility on chronic disease outcomes.

The problem is that unlike "me too" medications, SSRIs and other antidepressants are not interchangeable. The newest antidepressants — the SSRIs — have demonstrated significant improvements over the older classes in reduced side effects and overall efficacy.

These newer agents are "a major expenditure for pharmacy budgets," says Paula L. Hensley, MD, of the University of New Mexico Health Sciences Center in Albuquerque, "so medication costs are an obvious focus for limiting costs in managed care organizations."

Hensley has written extensively about the effect of formulary restrictions on access to SSRIs. "The practice of having a single SSRI on the formulary for a health care plan seems ill founded," she said in a study published in Pharmacoeconomics. "Giving the primary care physician several antidepressant choices can provide options to continue treatment in the less expensive primary care setting. Formulary restrictions are far more likely to have the opposite effect," she says.

The concern of many physicians is that plans are forcing the use of some antidepressants over others with an eye toward saving on unit costs. The result, they say, is untreated depression.

Untreated or undertreated depression is extremely expensive, estimated to be about $51.5 billion a year in lost productivity alone. Experts estimate that the comorbidities associated with nontreatment or undertreatment also cost billions. About 18 million Americans suffer from the disease, and about 12 percent of those suffer from major depression.

The conclusion of a more recent study sponsored by the National Institute of Mental Health and published in the New England Journal of Medicine bears Hensley out.

The NIMH researchers said that a range of affordable choices is the most effective way to treat depression: "After unsuccessful treatment with an SSRI, approximately one in four patients had a remission of symptoms after switching to another antidepressant. Any one of the medications in the study provided a reasonable second-step choice for patients with depression."

"These studies show the importance of being able to switch or add different medications," says Michael J. Fitzpatrick, executive director of the National Alliance on Mental Illness, which has studied the role of managed care formulary design in treating depression. "It underscores the importance of preserving broad access to a range of medications."

Medicare Part D

Elements of the new Medicare drug benefit exemplify the issue. Researchers from the Kaiser Family Foundation concluded that there exists "considerable variation across plans with respect to virtually every key indicator, including the comprehensiveness of formularies, the treatment of covered drugs as preferred or nonpreferred, the amount enrollees pay for covered drugs, and the application of utilization management tools."

Many of the differences reflect encouragement in the use of generic drugs, says Jack Hoadley, PhD, a research professor at Georgetown University's Health Policy Institute. He draws no conclusion as to the efficacy of such plan variation, but notes that "variation across Medicare drug plans can have an impact on beneficiaries' access to needed medications and their out-of-pocket expenditures over the course of a year."

According to Centers for Medicare & Medicaid Services guidelines, plans must cover most or all drugs in this entire category. But the guidelines also say that plans are not required to cover the extended-release drug variants in spite of evidence of higher compliance rates with extended-release variants.

And they also explicitly allow plans to choose between two specific and common antidepressants, citalopram and escitalopram (Lexapro) — in spite of the fact that experts say the two drugs are not interchangeable among many patients, with sometimes significantly different side effects.

"Drug accessibility is critical in treating depression," says Piette. "Limiting choice among antidepressants is a good example of cost shifting."

Contributing Editor Martin Sipkoff is a health care journalist who lives in Gettysburg, Pa.

MANAGED CARE June 2006. ©MediMedia USA

As some pretty costly, yet very useful, drugs are introduced, will new formulary designs deny access to needy patients?

John Carroll

Contributing Editor

Last year, one of the managed care clients that works with the advisers at Towers Perrin had a single member whose drug bill topped a million dollars. It's the kind of money that quickly captures a lot of attention. With the drug pipeline brimming with pricey new biotechnology therapies, pharmacy benefit managers across the country have had to start preparing for the sort of price shocks that one usually associates with emergency care.

Insurers and employers have been shifting more and more of the cost of high-priced biologics and of questionably significant pharmaceuticals to members. Some have been able to get a lot more creative in their management by going beyond the traditional three-tier approach with fourth and fifth tiers that are classifying drugs — and stratifying prices — in brand new ways.

Feeling the pain

Whichever way they slice it, though, Ron Lyon, the national pharmacy practice leader for Towers Perrin, sees an underlying trend that marks each new plan.

"The move is to tie members' payments to the true cost of the drug," says Lyon. "The higher the cost of the drug, the more they'll pay and the more incentive they'll have to choose lower-cost medicines. Everyone will eventually be in this consumer-type engagement. Sometimes we privately refer to it as people feeling the pain."

As PBMs grapple with a host of pricey new "lifestyle" drugs for impotence or weight, and with a new generation of biologics — many with no less-expensive alternatives — these new wrinkles in the drug benefit are often a straight shot at simple cost-sharing. That trend in turn has triggered an argument over whether these new tiers and higher copayments are dissuading a growing number of people from getting the drugs they need to stay out of the emergency department.

Lyon and others in the field are also quick to add an important caveat: The debate over biologics is not always going to be that simple. Many members with serious ailments are finding that some health plans and employers are making important distinctions, lowering charges to make sure that members don't feel priced out of a market for a drug they avoid at significant peril to their health. And sometimes, new tiers that include only partial payment cover biotechnology therapies that were once completely off-formulary.

How it works

"There definitely has been an increase in movement to more than a three-tiered approach," says David Dross, a health care consultant at William M. Mercer. "Health plans and sponsors are seeing less value in the traditional three-tier structure and are implementing an alternative structure, with the fourth often for lifestyle drugs and the fifth for specialty pharmaceuticals."

Or vice versa.

"On the fifth tier, and these aren't exact," says Lyon, "there are often things like lifestyle drugs. We will cover, say, half of smoking cessation drugs, but there are many variations. A fifth tier could be 50 percent cost sharing for weight-loss drugs, Viagra, and so on."

That's not all bad news for members.

For a growing number of companies, the 50–50 split is a brand new subsidy — a new incentive for keeping workers on payrolls for years to come, says Lyon. Health plans with high attrition levels, though, often bow out of offering such drug incentives.

MCOs with lots of members are already starting to grapple with how they will approach tiering with plans that roll out in 2007. Dross says it's likely that we'll see more plans move "lifestyle" drugs like Viagra or fertility medications into a special tier. All the drugs are likely to be more expensive than the average therapeutic, but also likely to be drugs that the plan would want to provide some coverage for. The fourth tier could also be reserved for some biotechnology drugs that can cost $3,000 or more a month.

Long haul

That's not a short-term expense.

"They are the kind of drugs where the members are going to need to take them for the rest of their lives, or a very long time," says Dross. Health plans are acutely aware of the expense. "A greater and greater dollar spend is on biotechnology drugs. Out of the top 20 drugs by cost, three, four, or five will be specialty biotechnology drugs that are taken by a very, very small percentage, but because of their expenses show up on the top 20 lists."

Copayments for these drugs are designed to be significantly higher, often running $100 or more. But Dross is quick to add that that is still a deep discount from what they would cost members if they were left to pay completely out of pocket.

"They're trying to manage it better," adds Dross about insurers. "There really isn't a generic alternative. It's really more about [shifting cost]."

The Employer Health Benefits 2005 Annual Survey, published by the Kaiser Family Foundation and Health Research and Educational Trust, shows that average copayment in the fourth tier jumped from $48 in 2004 — the first year it was tracked — to $74 in 2005 (see "Among Covered Workers Facing Prescription Drug Copayment Amounts, Average Copayments, 2000–2005"), far and away the biggest single leap in copayments of any tier that they track.

Generic drug copayments, by comparison, stayed flat at $10 and nonpreferred copayments edged up from $33 to $35. While only 4 percent of workers were in drug plans with four or more tiers last year, that's up from 3 percent in 2004, says Jon Gabel, a vice president at the Center for Studying Health System Change. He believes the trend is clearly up for companies considering multitier options.

"I do think we'll see an increase," says Gabel, which will in turn breed a likely response. Also, as many of these drugs in top tiers have no lower-cost alternative, "I think by imposing higher copayments you will reduce the use of these drugs."

Referenced base pricing

"With specialty drugs, there really is no silver bullet. There are a lot of silver-plated bullets," says Ron Smith, vice president for corporate pharmacy at BlueCross & BlueShield of North Carolina.

The plan added a fourth tier for biologics last October, with coinsurance requirements instead of copayments. There's an out-of-pocket maximum of $100 for a prescription.

Smith is acutely aware of the high barrier that $100 presents to members.

"Based on our research, if the copayment is greater than $25 to $30, members begin to make different choices."

As a result, he adds, wherever it could, the plan has named a preferred biologic and put it in the third tier with a $40 or a $50 copayment. That would encourage a member to try, say, Enbrel for rheumatoid arthritis before moving to a more expensive agent.

Smith is quick to add that such an approach doesn't always work. If a member needs an expensive biologic for hepatitis, the best strategy is to lower cost barriers and get the therapy the member needs. The same is true for what other plans might designate a lifestyle drug. Smith keeps obesity drugs in the plan's third tier, because the Blues operation believes that being overweight is an important health issue. However, if a member wants to buy drugs for purely cosmetic reasons — such as hair loss — he's on his own.

Tough choices

As members' share of the biologic drug cost keeps going up, workers on the bottom rungs of the income ladder are facing some tough choices about what they can afford.

When members choose to cut down on their medications or to forgo them entirely, the result can be a dramatic rise in adverse reactions. Instead of saving money, that kind of outcome can wind up costing plans much, much more.

Research undertaken by CuraScript Pharmacy — a specialty pharmacy division of the PBM Express Scripts — shows a direct link between higher member costs and noncompliance. "A 10-percent increase in the price generally leads to a 2-percent to 3-percent decrease in utilization," says Emily Cox, CuraScript's senior director of research. That may not sound like a huge shift by itself, but if the member price shoots up 100 percent, compliance declines 30 percent.

Finding the balance

That may not mean they simply stop taking the drugs, she adds. Often, they cut back, which can derail any intended therapeutic effect while maintaining some exposure to cost. So as copayments are calculated, payers have to balance the cost they're sharing with the loss of compliance. For payers, says Cox, the trick is to avoid analyzing drug costs as a separate expense. Instead, they need to balance everything that eats away at a health care dollar, whether it is the medical benefit or the pharmacy benefit, while always pushing for the best pricing strategy that can be negotiated.

If insurers can get better prices and wider use of much cheaper generic drugs, he says, then they have more flexibility when it comes to the balancing act required for effective use of biologics.

In some cases, the backlash against cost-sharing and the prospect of noncompliance developed swiftly. Instead of pushing higher copayments, some plan sponsors like Pitney Bowes have been responding by highlighting the drugs that their employees need and paying for them with only a small amount assessed on the member.

Against tiers

In regions where managed care is strongest, the sentiment has been running decidedly against adding new tiers.

"There are two different schools of thought," says Lyon. "Employers in the East are more likely to use that approach, while places like California or some more of the managed-care-influenced states will say, 'Why should we punish the member because he needs a drug that is very expensive? We'll keep a standard three-tier approach.'"

Some insurers are capping exposure. For example, if a member needs a drug that costs $2,000 a month, he may face a 20 percent coinsurance payment. But instead of actually paying the $400, the payer may cap the out-of-pocket price at $250.

When Lyon worked at Trigon Blue Cross (which was acquired by Anthem), the plan routinely assessed lower amounts for some of the more expensive drugs that delivered badly needed results.

"Enbrel is the gold standard for arthritis," says Lyon about this line of reasoning, "and we'll put it on the lower copayment. I think the value is being thought through more."

Thinking about value

So is the effect of an increasingly complicated drug benefit on members.

"I think sometimes the concern I hear from sponsors is that it's relatively difficult to communicate that plan structure to people," says Dross. "Can we explain it in such a way that they can understand? Beyond the three tiers, it's more complex, harder to understand."

The economics driving the tiering trend are impossible to ignore. Significantly for PBMs, copayment levels are rising.

At a time when health plans are pushing members toward lower-cost generic alternatives in record numbers, new biotechnology drugs have helped swell the drug development industry's overall financial return.

In 2004, according to IMS Health, which tracks the global pharmacy market, 11 blockbuster drugs were developed by biotechnology companies. In 2005, biotechnology drug sales leapt 17.2 percent to $32.8 billion, with drugs like darbepoetin alfa (Aranesp) and pegfilgrastim (Neulasta) from Amgen joining Genentech's rituximab (Rituxan) and other new entries.

Rheumatoid arthritis drugs have been among the biotechnology industry's swiftest success stories, with drugs like etanercept (Enbrel), infliximab (Remicade), and adalimumab (Humira). With only 1 in 10 RA patients receiving one of these drugs in 2005, according to IMS, the market is expected to expand quickly.

Sales growth expected

Biotechnology drugs accounted for 27 percent of all active R&D pipeline work and 10 percent of pharmaceutical sales in 2004, says IMS. That company expects double-digit sales growth for biotechnology drugs for at least several years.

As new biologics come on the market, drug developers are able to charge some record prices. La Merie, a "business intelligence" company, reported recently that 19 of the 20 top selling biologics achieved sales of over a billion dollars in 2005. The strongest growth rates were for therapeutic antibodies, which included bevacizumab (Avastin), up 141 percent; Humira, up 64 percent; and trastuzumab (Herceptin), up 48 percent.

At a time when competition from generics has held the cost of many medications down, pharmacy benefit managers have been concerned about the spike in specialty pharma costs. You can see that high copayments for tiers 4 and 5 would be attractive. Time will tell whether that strategy's disadvantages will outweigh its attraction.

MANAGED CARE July 2001. ©MediMedia USA

Pharmaceutical makers invest enormous sums in R&D – but they also reap enormous profits. States are impatient with the appearance that creates.

Bob Carlson

Contributing Editor

Last year, Pharmaceutical Research and Manufacturers of America sized up prescription drug reimportation as a major threat. This year, PhRMA has another import, of sorts, in its cross hairs — reference-based formularies, used now in British Columbia, New Zealand, and Germany. The flash point is Salem, Ore., where lobbyists for PhRMA and individual drug companies are working hard against a bill that would establish a reference-based formulary for the Oregon Health Plan."We just want a management tool to deal with drug costs," says Kurt Furst, executive policy adviser in Oregon's Department of Human Services and Gov. John Kitzhaber's point man on the bill, HB 3300.

It's the latest skirmish in a running battle between states — which are trying to manage exploding prescription drug expenditures — and the pharmaceutical industry, which prefers the status quo.

Oregon Health Plan, Kitzhaber's Medicaid program, projects a 61 percent increase in drug expenditures for the 2002–2003 biennium. Saddled with a budget crisis, Kitzhaber, a Democrat and a former ER physician, proposed a formulary similar to some used in other countries.

Under HB 3300, the state would identify one drug that best combines clinical efficacy and price in each class. The price of this "reference" drug would become the maximum amount covered by Oregon Health Plan for products in its class. Beneficiaries would pay the difference between the price of a reference drug and that of a more expensive product.

"NSAID utilization has gone up tremendously because of the introduction of Cox-2 inhibitors," says Furst, by way of example. "These are innovative drugs, but to give everybody a $2.50 Vioxx or Celebrex pill instead of ibuprofen is neither clinically nor financially wise."

Proton-pump inhibitors are another widely prescribed class. Soon, Prilosec will lose patent protection, and its maker is launching a new PPI, Nexium. Furst says this product is a classic "me-too" drug that isn't a real clinical improvement over Prilosec, but costs much more. OHP could save "a ton of money," he says, if generic Prilosec, expected to sell for less than a dollar per pill, were the PPI-class reference drug, given that the replacement product could sell for $2 or $3 a pill.

Some classes, such as antipsychotics, probably would not be considered for a reference approach. A range of effective alternatives is important in this class because patients often have to try several antipsychotics before finding one that works.

Largest cost component

At 32 percent, prescription drugs are the biggest chunk of OHP's $1.65 billion biennial budget — more than physician fees or hospital costs. The state's legislative financial office estimates that OHP drug costs will be $847 million in 2002 and 2003.

"Because of the prominence that pharmacy has in state budgets these days, I've got a feeling that other states would want to try it," Furst says.

That may explain why PhRMA has pulled out all the stops to defeat HB 3300. A restrictive formulary threatens the ability of drug makers to price and market their products at will in the U.S., the only major unregulated pharmaceutical market.

You won't hear that kind of talk from the industry. Instead, PhRMA Assistant General Counsel Marjorie Powell charges that HB 3300 would mean a single, mandatory statewide formulary that would apply to OHP, to state employees, and to all health plans offered in the state; that patients would be required to "fail" on the reference drug before another drug could be tried; and that a reference-based formulary would interfere with access to medications.

"I don't believe that's accurate," responds Rep. Alan Bates, D.O., a Democrat and chief sponsor of HB 3300. Bates, who practices family medicine on weekends during Oregon's legislative session, explains that private insurers would be free to adopt the formulary voluntarily, and that HB 3300 applies only to OHP enrollees when receiving outpatient care from fee-for-service physicians.

Proponents think physicians will prescribe less-expensive drugs once they are aware of the differential between clinically equivalent products, though doctors could still prescribe any drug at their discretion. "There's no preauthorization, no hoops to jump through — they just write 'do not substitute,'" says Bates. "It's a simple physician- and patient-friendly formula, one we think has promise for helping to control pharmaceutical costs."

Powell contends that there are other ways for OHP to control costs. She suggests better fraud enforcement, eliminating duplicate therapies, and going after inappropriate prescribing. In any event, Powell maintains, spending more on drugs isn't necessarily a bad thing, noting that proper use can reduce other health care costs — such as ER visits or hospitalizations for people with asthma, for instance.

As for the projected increase in OHP's drug budget, PhRMA's Oregon lobbyist, Jim Gardner, has an explanation: Oregon has not accounted for the rebates HMOs get from drug makers. Furst responds that the amount is "small" and that the managed care drug line in the next biennial budget has been reduced by 7 percent in expectation of rebates.

There's a legal issue at hand, too. The Health Care Financing Administration's Medicaid regulations permit only "nominal" drug copayments by Medicaid beneficiaries. For that reason, Gardner believes HB 3300 would be DOA, even if it passes.

Observers in Salem describe the lobbying as some of the most creative in memory. There are advocacy groups no one has heard of, out-of-state officials volunteering endorsements, and enough "fuzzy math" for a presidential campaign. PhRMA can't afford to lose in Oregon — not after Florida Gov. Jeb Bush signed Senate Bill 792 on May 31.

That new law mandates a restricted formulary for enrollees in MediPass, Florida's Medicaid program. A new 11-member pharmacy and therapeutics committee will begin choosing drugs this month. The committee will consist of five physicians, five pharmacists, and one consumer advocate. One of the 11 will represent the pharmaceutical industry.

The law also authorizes the Florida Medicaid Pharmacy Services Bureau to negotiate supplemental rebates on top of HCFA's federal rebates.

"In order to be considered for the formulary — and I underline considered — the total of the federal plus supplemental rebates must be at least 25 percent off the average manufacturer price," says George Kitchens, R.Ph., Florida's Medicaid pharmacy services bureau chief. "Then we go through P&T review and look at clinical and cost issues."

Any drug that doesn't wind up on the Florida formulary will require advance authorization.

While the goal would be to have a choice of drugs, Kitchens says it's possible there may be only one drug in some classes if some manufacturers decline to participate in the new rebate program.

Florida's MediPass drug spending for fiscal year 2001 is $1.5 billion, which could increase to $1.8 billion without the new cost-saving measures.

Passion without proof?

Some experts find some of big pharma's arguments unconvincing. For example, does increased drug use prevent other health care spending?

Maybe for certain diseases and categories, but not all, says Stephen Schondelmeyer, Pharm.D., Ph.D., professor and director of the PRIME Institute, Century Mortar Club Endowed Chair in Pharmaceutical Management and Economics, and head of the Department of Pharmaceutical Care and Health Systems at the University of Minnesota College of Pharmacy. Newer AIDS therapies work much better than AZT, he says, but whether these new drugs save money in the long run is uncertain.

"I don't recall any health plan or state Medicaid program saying it actually reduced expenditures in an absolute sense. So if greater drug utilization is really saving money, it's not showing up," says Schondelmeyer. "It's more of a theory than a reality. I haven't seen a definitive study that systematically evaluated that issue, and I don't think it's out there."

To support the contention that restrictive formularies lead to higher overall costs in the form of office visits and hospitalization, Gardner cites a 1996 American Journal of Managed Care study, "Intended and Unintended Consequences of HMO Cost-Containment Strategies" by Susan Horn, Ph.D.

The study, sponsored by six HMOs and the National Pharmaceutical Council, generated widespread controversy. The Academy of Managed Care Pharmacy strongly disagreed with the conclusions and criticized the researchers for failing to establish a cause-and-effect relationship between formulary restrictions and service utilization.

Then there's the argument that formulary restrictions interfere with patient access to medications. Powell, of PhRMA, says a reference-based formulary hasn't worked in British Columbia, and that Canadians come into Washington State because they can't get the drugs they need at home.

"I find it amusing and perhaps disingenuous for drug companies to argue that Oregon is limiting access," says Schondelmeyer. "Oregon's really saying, 'We can't cover everything, but here's how much we can spend to help you with your health care.' Beyond that, it's the drug's price that limits access."

PhRMA seems reluctant to discuss drug pricing. Furst, who managed governmental relations for two large drug companies before joining the Kitzhaber administration, knows why.

"Instead of eliminating competition, a reference-based formulary creates a competitive model that terrifies the industry," says Furst. "They don't want to have to explain why we should pay $2.50 a pill for Celebrex or Vioxx when we could pay 6 cents a pill for ibuprofen for initial non-narcotic treatment of pain and inflammation. They don't want to explain why we shouldn't use generic Prilosec instead of Nexium when the therapeutic benefit probably isn't enough to justify the cost difference."

In the current market, buying decisions that weigh a drug's price against its therapeutic benefit are rare, and threaten the industry's bottom line.

"The pharmaceutical industry has given us wonderful new drugs, but their cost is a burden I don't think we can sustain," says Bates. "It's time for the industry, physicians, and insurers to start dealing with this. The battle in Oregon over this bill, which strikes me as not Draconian at all, is an indication that the pharmaceutical industry is not willing to work with us to control pharmaceutical costs."

With PPO enrollment nearing 100 million, HMOs are getting a healthy dose of competition. Is the PPO here to stay — or just a temporary distraction?

Michael D. Dalzell

Senior Editor

A few items from the news in July:

• In St. Louis, members of United HealthCare of the Midwest and Mercy Health Plans learned that their copayments for preferred drugs would go from $12 to $20. The culprit? High pharmacy costs.
• For the same reason, Massachusetts-based Tufts Health Plan sought state permission to raise copayments for some Medicare members from the current $8 for generics and $15 for brands.
• A study of Quebec's 1996 decision to increase annual pharmacy copayment limits for the poor and elderly from $100 to $750 tied it to a steep boost in rates of illness and hospitalization — the result of fewer people filling their prescriptions.

The debate over the effects of rising copayments will intensify in the coming months, as health plans and employers try to dodge double-digit drug-price inflation and pass on more cost to users. While higher copayments can reduce pharmacy utilization — many pharmacy benefit managers can link the two with reasonable accuracy — the hypothesis that higher copayments encourage appropriate utilization is speculative; there are plenty of anecdotes, but there is far less in the way of scientific evidence. Arbitrary decisions about copayment levels can backfire when superimposed on the complexity of noncompliance and the unpredictability of physicians' prescribing patterns.

As a cost-sharing device, the pharmacy copayment is on trial. As higher copayments and three-tiered structures spread, the effects on utilization, compliance, and outcomes will be picked over like a truckload of produce. If higher copayments fail to curb pharmaceutical expenses or force higher medical costs because of lesser compliance with mission-critical drugs, the next phase in cost control may be (1) basing copayments on something other than only a drug's price, (2) shifting back to flat-percentage coinsurance, or (3) in the extreme, the end of the pharmacy benefit altogether.

Up, up, and away

You don't need to be a mathematician to understand what's driving higher pharmacy copayments and the proliferation of triple-copayment structures. While HMOs' premium increases were moribund, per-member, per-month drug expenditures jumped from $11.63 in 1995 to $15.57 in 1997. Something had to give, and that something was the member's contribution. After creeping up about 4 percent each year from 1993 to 1996, the average copayment for brand-name drugs in 1997 vaulted 18 percent — $1.37 — to $8.96.

"It's not uncommon to see medication therapies cost $2 to $3 a day," says Nicholas Page, Pharm.D., a clinical pharmacist with Ohio Health Group, a Columbus-based physician-hospital organization and health plan. "Our plan offers 90-day supplies of maintenance medications. The total for some of these prescriptions can be $300 to $500, while the patient's copayment may be as low as $30."

At about the time copayments started to jump, health plans were also beginning to embrace three-tiered structures as a cost-containment strategy. It was a good PR move, too, because they weren't saying no to members wanting "nonpreferred" drugs, usually some of the most expensive new agents; it simply meant that members would have to decide how much the top-shelf medications were worth.

"You want copays to have enough of a difference to capture people's attention," says Carol McCall, vice president for pharmacy management at Humana. Studies suggest that a $7 differential turns heads, she says, but "$10 is better if you're going to try to get the member more involved in the choice."

James Bonnette, M.D., chief medical officer for North Carolina-based ProMedex, which runs disease management programs, pins down the cost-utilization equation. In his pre-DM days, Bonnette worked at a PBM. "We looked at going from a $3 to a $10 copay," he recalls. "In terms of utilization changes, it was in the 20-percent range."

When the copayment goes over $10, he says, dramatic changes ensue. "If maintenance medications wind up at $25-plus — which is where a lot are heading — you see 50-percent drops in adherence after two or three months. Most of these folks are on more than one medication. They spend a significant amount per month, and pretty soon, that drives utilization down."

That concerns David Gross, AARP's senior policy adviser, particularly when patients with low incomes are advised that a high-copayment drug is, medically, the most appropriate choice. "There should always be a mechanism for the doctor to say, 'No, no, this patient needs this drug. Give it to him at a lower copayment.'"

But high copayments don't necessarily stop people from taking medications. Generally, says Bonnette, patients switch to those with lower copayments — which is a relief to employers, few of which request copayments above $25. "It comes down to a balancing act," says Edward Kaplan, vice president for the Segal Co.'s National Health Care Practice. "If we make it so prohibitive, it's not a matter of cost-effectiveness, but of quality. Employers are very leery of that."

What goes where?

Merck-Medco Managed Care, the PBM, estimates that a three-tier copayment program shaves 5 to 9 percent off pharmacy expenses. Exactly where the savings fall, though, depends on the degree of formulary restriction. What shows up on the third tier can have far-reaching implications for pharmacy and medical costs.

A simple assumption would be that "lifestyle" drugs are third-tier candidates, while medications for chronic conditions would go on lower levels. But 70 percent of prescription drugs are for chronic illnesses, and because there are multiple agents in most therapeutic classes, differentiation is needed.

Rebates and discounts play a big role. Humana considers what it calls the "net net" cost of a drug — factoring in all possible discounts for therapeutically equivalent agents. "If there are five drugs in a class, and most of those are 'me-too' drugs, I might pick two of them, get better pricing, and so those become my preferreds," says McCall. "You set the other three at higher copayment levels."

But while the costs of drugs is important, compliance issues transform decision making from an actuarial affair to an art. "With some drugs, compliance is really important," says McCall. "Asthma inhalers are a good example. If you don't comply, you might wind up in the ER." And so those tend to end up on the lower tiers in Humana's plans.

When applied prudently, low copayments — or no copayments — can improve a health system's finances. In Temple, Texas, Scott & White Hospital and Clinic, in conjunction with Scott & White Health Plan, tried a pilot program waiving pharmacy copayments for asthmatic children and giving away meds to those without coverage. "The overall cost of treating children's asthma came down a fair amount," says Michael Weir, M.D., professor of pediatrics at S&W Hospital.

But hold your conclusions; though total expenses declined, there was little change in cost for the subset receiving free medications. "Asthma patients are expensive for a while, then they're not, and then somebody else is expensive," Weir explains. "We may have taken patients who were going to be expensive and kept them from stepping into an expensive group. Did we do something? Yes, but it's hard to say exactly what."

Still, for certain drugs, says Bonnette, raising copayments can reduce costs without harming patients. "One example is nonsedating antihistamines. I don't think they benefit patients much, and they are an exorbitant cost to the plan. I can't think of a reason in the world not to make nonsedating antihistamines 50-percent copays."

But Kaplan can. "Some studies show a direct relationship between sedating antihistamines and productivity and absenteeism," says Kaplan, whose clients include large employers and governments. Further, he adds, a less-expensive medication may be wasted expenditure if, thanks to untoward side effects, people won't use it.

Kaplan thinks newer antiulcerants belong in lower tiers, too. "Some are so effective, you don't take long-term maintenance drugs. Here's a case where expensive medications are cost-effective."

One class meeting stiff resistance from formulary managers is Cox-2 inhibitors. "We don't want everyone jumping on the bandwagon just because they're the hottest thing," says Michael Barberi, senior vice president for Merck-Medco.

To encourage appropriate use of new medications, he says, Merck-Medco builds in red flags. "We might say, 'If you're over 65, have been on a nonsteroidal anti-inflammatory and an antiulcer medication, and you're prescribed a Cox-2, OK.' In those situations, it's a pretty safe bet there's a strong medical necessity." Otherwise, he says, "We'll ask, 'Have you tried other things that could work?'"

Bonnette thinks that such methodical approaches are lost on many health plans, which often worry that inappropriate use of a drug will preclude its high price being offset by lower medical costs.

"What plans see is, 'I don't know if this will save money, because I don't know if it's going to be written for the right people.'" Because of this, Bonnette predicts Cox-2s will remain third-tier indefinitely.

"I see people saying, 'This belongs in the third tier because it's expensive, and this belongs in the lower tier because it's not.' My concern is that there needs to be a rational medical decision about how you drive utilization of a specific class, not just what the drug costs."

Red herring

A 30-day supply of a certain popular antihistamine costs $87 retail, according to congressional testimony in July. Is $25 unfair?

Barberi puts it this way: When indemnity plans were the predominant vehicle for prescription coverage, patients pulled about 30 percent of pharmacy costs. "Today, in a typical 10/5 plan, it's 18-percent cost share for retail, 7 percent for mail service," says Barberi. So, as boosting copayments goes, "You'd have to get pretty Draconian to get to where somebody is discouraged from getting a prescription."

Weaning people from low copayments may be difficult. McCall cites a Milliman & Robertson study where drug use fell 7 percent when copayments went from zero to $1. "The biggest drop was if it had to come out of pocket at all," she says. Similarly, McCall has seen data that suggest that increasing zero-copays for prescriptions and office visits to $8 and $15 to $20 respectively cuts drug utilization in half.

Barberi suggests that higher office-visit copayments, as a way to discourage inappropriate pharmacy use, are worth a long look because some visits to the doctor may be unnecessary.

"Consultants say that 85 to 90 percent of the time, when people go to a physician's office, they walk out with a prescription," he says. "Often, physicians are compelled to write a prescription, because it's evidence that a service was rendered."

Even if the prescription was unnecessary?

"Physicians say one of their biggest fears is loss of patients," he says. "They want to satisfy them."

Bonnette would believe it. "Most physician prescribing is by whim, not rationality. Physicians get used to writing one thing, or they just like a product or a company, and they write it for no good reason."

In an audit Bonnette did for a large HMO, just 18 percent of people prescribed selective serotonin reuptake inhibitors had been diagnosed with depression. "For legitimate reasons," he says, "HMOs have concerns about what physicians will do if something is added to the formulary."

But Page, at Ohio Health Group, worries that boosting copayments for doctor visits will discourage patients from seeking needed medical attention. A better idea, he suggests, may be to motivate patients by pegging drug copayments to compliance.

Say a patient takes a hypertension medication once a week. "Is that patient receiving any long-term benefit from that drug? Are we doing anything to prevent blindness, kidney failure, or heart disease, which uncontrolled hypertension can lead to? No. So then why should the health plan incur the cost of that therapy, when its benefit is zero?"

ProMedex plans to begin using financial incentives to encourage compliance in some of its disease management programs. "If you take your medicine and you're compliant throughout the year, then at the end of the year we'll send you a rebate for copayments for specific medications," Bonnette says.

One idea with potential, he says, is to put low first-month copayments on some drugs, with refills costing more. "It gives an incentive to a patient to get the physician to figure out what's wrong, rather than just leaving a patient on an expensive drug."

Another alternative is to cover over-the-counter drugs. Page says there's a perception that prescription medications are better than other products, but a health plan's blessing might change that.

"It would be more cost-effective for a plan to pay $3 for an over-the-counter product than $60 for a prescription drug," he says, adding there's substantial data to suggest that many prescription products are no more effective than over-the-counter drugs.

Kaplan suggests swapping copayments for coinsurance: "In no other benefit do you have such a simple design for such a wide array of products. There's little ability to manage cost." Kaplan has designed a coinsurance plan where acute and maintenance drugs are 90-percent covered if generic, 80 percent for brands. Wellness drugs are covered on a 70/50 basis. "I've modeled it against the typical 10/5 plan, and it saves a significant amount," he says.

Whatever the future, the status quo is likely to go. If the goal, says Page, is to provide a pharmacy benefit for all Americans, then finding the most appropriate way to manage it becomes imperative. "If we stay on the system we're on now, it will soon be more than the health care system can afford. And the entire benefit may just go away."