A Conversation with Michael J. Dillon, R.Ph.

The executive director of the Foundation for Managed Care Pharmacy speaks of the challenge of reining in escalating drug costs.

Michael J. Dillon has been in the front lines of the explosive growth of managed care and its effect on pharmacy over the last two decades. He began his career in 1979 as a staff pharmacist at Community Health Plan in Latham, N.Y., near Albany. At the time, CHP was a small not-for-profit staff-model plan with about 25,000 members. By the time he left, CHP was a half-million-member part of Kaiser Permanente’s Northeast division.

Dillon was director of pharmacy operations for CHP from 1988 to 1997, and then acting director of pharmacy services for Kaiser Permanente’s Northeast Division. Over the years, he has been responsible for the operations of a network of health center-based pharmacies, a mail-order prescription program, an oncology pharmacy services program and a network of 3,200 community pharmacies.

This fall, Dillon became the first executive director of the Foundation for Managed Care Pharmacy, a research and educational arm of the Academy of Managed Care Pharmacy in Alexandria, Va. He spoke with Senior Contributing Editor Patrick Mullen about the foundation’s work and the overall state of managed care pharmacy.

MANAGED CARE: What do you see as the defining difference between managed care pharmacy and what came before it?

MICHAEL J. DILLON: There isn’t much of a difference in terms of the delivery of pharmacy services. I still see the need for the concept of pharmaceutical care to be applied in all areas of pharmacy delivery. Managed care just happens to be a little bit more convenient setting for the delivery of pharmaceutical care. In the managed care setting, pharmacists tend to work as colleagues with other health care professionals, and their skills and abilities are recognized by other members of the health care team. That team concept wasn’t as structured in what came before managed care.

MC: Is pharmaceutical care a new concept, or is it simply an evolution of what pharmacists have been doing for decades?

DILLON: I believe it’s evolutionary. Pharmacists bring value in the form of their knowledge base and a very fine-tuned skill set. The concept of pharmaceutical care has come to the forefront primarily because of all of the work that has occurred in managed care. There are disease management programs, treatment guidelines, protocols, that all have pharmacy as a singular component of a well-integrated system. The effect that pharmacists are able to have on the use of medications benefits the end consumer, the public.

MC: Because of the cost pressures in managed care settings, and time pressures on physicians, to what degree are patients receiving counseling from pharmacists that may overstep the bounds of pharmacists’ knowledge?

DILLON: As to whether pharmacists are overstepping their bounds, those bounds might be somewhat loosely drawn, in that the sheer potential of the pharmacists’ role in health care only now is being realized. Pharmacists are extremely valuable resources. There’s research that suggests pharmacists may have immediate recall type familiarity with, on average, 300 medications while physicians are familiar with about a dozen. That knowledge base is the key to a pharmacist’s ability to interact with other members of the health care field.

MC: To what degree do physicians recognize the knowledge of pharmacists?

DILLON: It’s not universal. There may be some treatment areas in which a pharmacist’s potential has been realized — certainly asthma and diabetes. These are areas in which there’s a wide body of knowledge supporting the pharmacist’s role in working towards better therapeutic outcomes.

MC: What are some areas where pharmacists’ skills are not being recognized?

DILLON: That’s more of a geographic question than a disease-state question. There are areas of the country that are very advanced in promoting the pharmacist’s resources. There are also areas throughout the country that may be underserved medically. They may not have enough primary care practitioners or allied health professionals and, therefore, provide a great opportunity to establish a protocol and allow pharmacists in the community to treat an asthmatic child or a diabetic patient.

MC: We see an onslaught of direct-to-consumer advertising of drugs. So now, not only are physicians prescribing drugs but, more and more, patients are asking for particular agents. What effect does that have on pharmacy?

DILLON: The pharmaceutical industry put well over a billion dollars into advertising drugs to consumers last year, and plans to exceed that this year. It has had a profound effect, if you take a look at trends in drug costs. I think most people would agree that direct-to-consumer advertising is a very important factor.

MC: How would you characterize the impact?

DILLON: We see 59 percent more patients requesting brand-name drugs this year than last year. If you advertise brand-name drugs, that’s a great return on investment. But is direct-to-consumer advertising really a benefit to the public? That depends on which approach you’re taking. If it’s disease specific and not drug specific, it’s good. If the advertising is simply out there to improve the market share of one particular symptom-relief product in a nonessential category, the value can be questioned. We have patients asking for rather expensive brand-name drugs when traditional tried-and-true generic antihistamines will do a very effective job. It’s that kind of demand that’s being created that causes a problem. Remember, two thirds of prescriptions are being covered by third-party plans. Patients only have to pay $5 or $10 per prescription, and they don’t realize that the drugs that are being thrown at them through TV or other advertisements can cost upward of $100. So they aren’t bearing the true cost of the drugs. When advertising creates a demand and the population does not have financial accountability for that demand, there are economic problems.

MC: That puts the pharmacist smack in the middle of two powerful forces, pharmaceutical manufacturers who are spending a billion dollars to promote brand-name products, and health plans that are trying very hard to encourage use of generics to lower their drug costs. What is a pharmacist to do in that situation?

DILLON: The answer to that question speaks to the nature of pharmacist training. They can relate to the patient the fact that there’s more information beyond the advertising. There are many other medications that pharmacists have familiarity with. The pharmacist can say to the patient, “Let me tell you about them, and give you the opportunity to ask your physician to prescribe this generic form. While there’s no direct out-of-pocket financial implication, in the long term it will help keep your premiums lower.” Pharmacists can also attempt to influence physicians. When patients come in for widely advertised drugs, pharmacists can effectively counter-advertise the drugs that are on the formulary and provide useful information to the physician, particularly with respect to relative costs.

MC: To be effective in that role of talking about the formulary drug or countering the advertising message, there must be a relationship of trust between the pharmacist and the patient. That must be more difficult these days given the number of pharmacy chains that have been bought or merged. How big a problem is that?

DILLON: It could potentially be a problem. I would tend to think that plans and pharmacy-delivery systems should be able to communicate this issue of building relationships with members. A managed care organization can get help to smooth over some transitional problems that may occur by assuring patients that while some providers in the plan may have changed names, they are still the people the plan chose to deliver pharmacy services.

MC: That assumes that the patient has a level of trust in the managed care plan that in many cases might not be fully established.

DILLON: Well, that’s true. Their relationship with the plan may be rather short-lived, too. They may become a member of the plan and all of sudden they’re changing plans because they’ve changed jobs or their employer has changed their options and they’re changing pharmacists.

MC: How big a force in the market will lifestyle drugs like Viagra, that won’t save your life but will enhance some aspect of it, be over the coming years?

DILLON: I’m 44, and the answer to that is within the demographic profile of the baby boomers. As we age, we’re a very powerful economic force. So manufacturers are dying to come out with products that treat all those lifestyle problems that people who age get: impotence, hair loss, incontinence, you name it. I would point to the policy on Viagra that Kaiser announced earlier this year. It basically came out and said it won’t cover it because it’s too expensive. Kaiser would expect to pay $100 million a year for Viagra if it were to cover it, where it spent only $50 million to cover a treatment for HIV. The approach that Kaiser’s proposing is to establish a separate rider for coverage of lifestyle drugs. That puts the decision back into the hands of the employer to determine whether such products should be covered. If so, the cost and coverage will be applied to this rider. What we’re missing is the fact that, with managed care, we have a finite pool of resources to spend on prescription drugs. Although we’d love to treat all patients for all conditions with every new drug that comes out, unfortunately we can’t. Yes, we can replenish the resources by dramatically raising premiums but that’s not what we’re hearing from the marketplace. They don’t want to pay any more, yet they want the coverage for these new drugs. So instead of forcing plans to make the agonizing decision between covering some drugs for asthma or cancer, HIV or AIDS, or drugs for the inconveniences of aging, plans can treat lifestyle drugs separately from more established therapies for chronic diseases.

MC: It sounds like a variation on the point-of-service notion. If you want the basic coverage, fine, and if you want things that aren’t covered, we’ll arrange a mechanism for that, but you’ll pay for it.

DILLON: That’s becoming more and more popular with regard to nonformulary drugs. Formularies have taken a beating over the years because some have been thought to be too strict. Nonetheless many plans have developed a three-tier benefit system. The three tiers are coverage X for generic drugs, coverage Y for brand-name formulary drugs and coverage Z for drugs that aren’t on the formulary. So the plan is still offering coverage but at a higher cost, and that’s very similar to what we see in a point-of-service plan.

MC: How widespread is movement towards those three tiers?

DILLON: It’s gaining momentum nationally. I could have named just one or two plans two years ago. But I just came back from the AMCP’s educational conference and many plans are talking about rolling out such benefits over the next year.

MC: A Pacific Business Group on Health survey found that about half of physicians think that managed care plans do a poor job of communicating what’s on the formulary and when it changes. Where does that problem come from and how can it be solved?

DILLON: It is a problem. Given the current state of the formulary system, it’s conceivable that one physician might participate with four or five plans, each with its own formulary. There may be convergence among formularies around some therapeutic categories, but big differences on others. It’s always been a concern of managed care that to come together to attempt to resolve those differences might be considered anticompetitive activity. Before I became active in the foundation, I was involved in an effort to come together with competitors and other interested groups, such as independent practitioners and hospitals in an area served by a number of different managed care plans. We developed at least a common reference book that showed all the differences among all the formularies. So at least physicians didn’t have to look in twelve different books. I know that this has been going on in other areas of the country as well.

MC: Wouldn’t there be some opportunities to use information technology here?

DILLON: Certainly, and this is a relatively quick fix for this problem. There are a number of different plans that are employing online prescribing. One of the problems with the advancing technology is we need to get individual states to change some of their laws to allow it to happen. There are still some states that tend to restrict the use of electronic prescribing and who has access to the prescribing information.

MC: On what grounds?

DILLON: It’s just that they probably have not gotten around to looking at it. I had the opportunity to work at a plan that had an integrated medical records system. As prescriptions were being suggested in the exam room, they were being transmitted directly to the pharmacy for filling. As a physician prescribed a drug, the system indicated whether the drug was on formulary, and, if it wasn’t on formulary, which therapeutic equivalents were available. This is a very interactive system that alerts the physician in the examination room as he or she is conversing with the patient. That would be the optimum but we’re going to have to go quite a long way to get there universally.

MC: How long?

DILLON: I don’t know if we’ll see that within the foreseeable future. While such highly integrated technology is not commonplace, there are very effective systems that have been developed to connect retail pharmacies to physicians. Even systems that allow physicians and pharmacists to fax information back and forth are an important step to improving communication over the current state.

MC: What are some formulary-compliance tools that you have found make sense for all concerned?

DILLON: We clearly need to be able to get patients more involved in taking financial accountability for their prescriptions. We’ve seen such a tremendous rise in prescription drug costs. Is it a coincidence that drug costs have risen at roughly the same rate that the number of prescriptions covered by a third party has? That may imply that prescription drugs may be priced as high as they are because the patient isn’t bearing an appropriate proportion of the cost. If we establish a three-tier benefit design that puts a little bit more financial accountability for nonformulary drugs on patients, then we will see a little bit more formulary compliance than in the past. If you asked any patient leaving a pharmacy who’s gotten a prescription covered by a drug card to guess the value of that prescription, I’d bet the patient would underguess it by quite a bit.

MC: What’s your take on the current state of managed care overall?

DILLON: Well, it’s probably at a very critical point, simply because of the great degree of publicity that’s been associated with managed care. But if you take a look at the number of Americans who are covered by managed health care, it includes the majority. We’re at a point where there’s a great degree of potential in what can be achieved in managing the care of patients in the system and improving the quality of health care. The role that NCQA and HEDIS have played over the years has given us further fuel to show that the managed health care system provides a higher level of quality then perhaps we’ve seen in the past. If it were not for managed care, we would still be in a fee-for-service system that had much higher costs and uncoordinated health care associated with it. Is it a good thing that we’re only spending about 12 percent of the gross domestic product on health care now? Where would it have been without managed care? Even with managed care, recent suggestions from HCFA indicate that health care costs could double within ten years.

MC: New technologies and new pharmaceutical agents are a big piece of that.

DILLON: That’s an interesting point. Is it bad to have a cost increase in prescription drugs? Is that something we should be spending a great deal of time and attention on? So all of sudden, instead of managing the entire continuum of care, someone sees prescription drug costs are going up and decides that we must do something to control the cost of prescription drugs.

MC: Which ends up pushing costs up someplace else.

DILLON: Exactly. I can point to areas like congestive heart failure, where we’re now advocating that patients be placed on ACE inhibitors, which contribute effectively to reduce morbidity and mortality. From a pharmacy director’s standpoint, that’s going to increase drug costs. But isn’t that a good increase if our patients are more compliant? So having prescription drug costs increasing at the rate that they are deserves some attention, particularly to try to isolate and control factors that should be controlled, such as direct-to-consumer advertising. But there can be other effects that are far more favorable than having a higher cost of drugs.

MC: Disease state management efforts would help point out cases where higher drug spending at the front end may result in fewer surgeries or better outcomes down the road. Those things need to be measured a lot more than they are now.

DILLON: Very true. Some states have attempted to regulate formularies. There’s a notion that’s still around that formularies are just some cheap drugs, that people are making decisions on what drugs are added and deleted based solely on cost. That’s ludicrous. There are some therapeutic categories in which you really can’t distinguish among the products. When the only difference is the fact that one costs less than the other, deciding on the basis of cost is a rational decision. It’s going to allow us to have more money to spend on a prescription benefit because we’re economizing in one therapeutic category. Yet in other categories, there are established differences. If studies prove that a particular set of therapies is more effective, then we are going to promote those drugs even though they may be more expensive than the other drugs in the therapeutic category. Ultimately, the return on that investment will be much higher because we’re going to realize a net decrease in medical costs.

MC: In what situation should pharmacists be allowed to write prescriptions?

DILLON: There’s an old saying that the most expensive piece of equipment in a physician’s office is the prescribing pen. Certainly pharmacists working under a protocol should be able to make changes to drug therapies. That works best when the pharmacists are working hand in hand with other members of the health care team. There are some successful programs nationally that use pharmacists to initiate or change drug therapy, but it’s all protocol-driven.

MC: Thank you.

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