TransparentRx Thursday: Acquisition (Pharmacy) Cost for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. The bottom line; payers must have access to “reference pricing” then apply this knowledge to lower plan expenditures for stakeholders.

As of 10/03/2013 – Published Weekly on Thursdays
How to Determine if Your Company [or Client] is Overpaying


Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 10% or more price differential (paid versus actual cost) we consider this a problem.

 
Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

Include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to see if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

As Specialty Injectable Drug Sales Grow, Drug-Device Collaborations change the Competitive Landscape

As the underlying structure of their markets continues to change, injectable drug developers are relying increasingly on supply chain partners to address the evolving expectations of patients and their caregivers. In this environment, it is not unusual for drug product managers to include vendor device design engineers on their top level development teams and to hire human factors specialists to manage device concept ergonomic requirements.



While the injectable device ecosystem continues to expand, particularly in the areas of specialty design services and filling/finishing/packaging, device manufacturing is still concentrated in a small number of suppliers who have established the infrastructure, technology and track record to meet the go-to-market needs of drug developers targeting chronic indications.

For glass prefillable syringes (PFS), this list includes Becton Dickinson (BD), which continues to enjoy a significant global leadership position, German companies Gerresheimer and Schott, and a half-dozen smaller competitors.

For plastic PFS, Hospira dominates in devices for emergency medicine, while West Pharmaceutical and its Japanese partner Daikyo Seiko, Gerresheimer and its Japanese Partner Taisei Kako, and Schott all offer sophisticated devices based on COP or CCP polymers.

Prefillable safety syringes, perhaps the most highly watched market segment, are beginning to gain traction as Unilife, the former Australian company now based in the U.S., continues to sign partners and to ship product to Sanofi, its flagship customer for the Unifill prefillable safety syringe.

Once dominated by specialty device firms, the pen injector landscape is now divided between third-party device suppliers and drug developers that have brought pen manufacturing in-house.

Two-thirds of pen devices are still supplied by a handful of specialist design/manufacture firms, including Ypsomed which supplies pens and specialty injectors to more than a dozen pharmaceutical companies. But as this market continues to shift away from third-party manufacturers, Ypsomed is striving to change its business model to offset customer losses.

Autoinjectors, the fastest growing device segment, is highly competitive, led by a group of suppliers that include SHL Medical, Ypsomed, Owen Munford, Gerresheimer, BD and Haselmeier. Autoinjector growth will be particularly high for new specialty injectables that traditionally have been marketed in pen injectors.

Needle-free injectors (NFI) have struggled to compete effectively against the growing tide of user-friendly injection devices. Recent results for prefilled NFI products have been encouraging. But beyond niche markets, this segment continues to underachieve.

The market for point-of-care reconstitution devices is moving beyond niche markets as protein drugs for chronic diseases increase in number and share. Dual chamber cartridges and integrated dual chamber injection devices lead the way in this category. Germany’s Vetter is the clear leader in this segment, which will experience strong growth over the next three years.

A new class of injection devices, patch pumps (also known as wearable injectors), is finding success in a select few chronic disease applications, most notably insulin-dependent diabetes. This market will, however, find it challenging to maintain growth as formulation improvements, particularly in the area of sustained released, reduce dosing frequency and thus obviate a major benefit of wearable devices.

These conclusions are taken from a recent survey conducted by Applied Data Analytics. The survey’s findings can be found in a new and comprehensive report: Global Syringe & Injector Analysis and Assessment. (http://applieddata.org/Pharmaceutical_Biotech_Industry_Re…) This global report contains highly detailed data and knowledge on device designs, combination products, supplier relationships, market share information and data forecasts.

For more information, please visit:

http://applieddata.org/Pharmaceutical_Biotech_Industry_Reports.htm

About Applied Data Analytics

Applied Data Analytics assists life science management decision makers by providing analysis services and products that can reveal key relationships, patterns and trends affecting their businesses. These information tools encourage opportunity and risk discovery by promoting comprehensive, timely, and insightful analysis, allowing managers to make informed tactical and strategic decisions.

TransparentRx Thursday: Acquisition (Pharmacy) Cost for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. The bottom line; payers must have access to “reference pricing” then apply this knowledge to lower plan expenditures for stakeholders.

As of 9/26/2013 – Published Weekly on Thursdays
How to Determine if a Pricing Problem Exists


Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 10% or more price differential (paid versus actual cost) we consider this a problem.

 
Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

Include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to see if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

Fewer Employers Plan to Offer Retiree Prescription Drug Plans

The percentage of employers that plan to continue offering prescription drug plans to Medicare-eligible retirees has dropped dramatically in the past two years, according to a study released May 29 by Buck Consultants L.L.C.
Fifty-five percent of employers that now provide pharmacy benefits for Medicare-eligible retirees said they plan to continue offering the benefit, down from 75 percent in the New York-based consulting firm’s 2011 survey.
Another 33 percent of employers said they were unsure if they would continue offering prescription benefits to Medicare retirees after 2014, a significant increase from the 19 percent who were unsure in the 2011 survey.
“Employers have options for controlling prescription drug costs for Medicare-eligible participants,” Paul Burns, an Atlanta-based principal at Buck Consultants, said in a statement.
“For example, since retiree drug subsidy payments are no longer tax-exempt and do not keep pace with rising drug costs, some employers are considering moving to an employer group waiver plan to take advantage of additional subsidies available as a result of the Patient Protection and Affordable Care Act,” he said.

Courtesy of Forbes.com

The subsidiary of Norwalk, Conn.-based Xerox Corp. surveyed 250 human resource and benefit managers across a range of industries and employer sizes, from less than 2,000 full-time workers to more than 20,000.

Active employees
On the whole, 99 percent of employers surveyed provide pharmacy benefits for active employees, a three-percentage-point increase from 2011, while 48 percent offer prescription coverage for Medicare-eligible retirees, according to the study.
Among employers covering retirees older than 65, the study indicated 45 percent used the Centers for Medicare and Medicaid Services’ retiree drug subsidy to offset plan costs, a decrease of five percentage points from the 2011 survey.
That decrease should not come as much of a surprise, the study noted. The healthcare reform law ended tax exemptions for CMS’ retiree drug subsidies beginning this year, and the subsidies themselves no longer keep pace with annual growth of pharmaceutical costs.
According to Buck’s study, nearly three-quarters of employers spend 16 percent or more of their total healthcare budget on pharmacy benefits.
“If not managed effectively, prescription drugs can represent a constant financial drain on company resources and undermine the return on investment of a plan sponsor’s entire healthcare benefits program,” Mr. Burns said in the statement.
Looking ahead, only 43 percent of employers said they plan to retain their current pharmacy benefit plan for retirees older than 65 after 2014. Another 31 percent said they were not sure if they will alter their plans.
The study also noted a steady rise in the percentage of employers turning to third-party pharmacy benefit managers in search of better prices, as well as plan administration and claims management services. Sixty-one percent of employers polled in this year’s survey indicated they contract with a PBM, compared with 57 percent in 2011 and 47 percent in 2009.
“With many medications having double-digit price increases and with the continued consolidation among PBMs, this is a buyer’s market for PBM pricing,” Mr. Burns said, noting that employers should not be shy about taking an “aggressive” stance in negotiations with potential PBMs. “Any PBM contract that is 18-24 months old should be reviewed for pricing competitiveness as well as up-to-date contractual language.”
Contraceptives
Buck also surveyed employers’ positions on compliance with certain pharmacy-related provisions of the Affordable Care Act, specifically the controversial rule requiring most employers and/or their insurers to provide cost-free contraceptive prescriptions and other preventive care benefits. Small employers with fewer than 50 full-time workers that do not offer employee health benefits—as well as certain types of religious employers—are exempt from the contraceptive coverage requirements.
According to Buck’s study, one-quarter of employers polled said they plan to provide no-cost coverage for name-brand and generic contraceptive prescriptions, while another 25 percent said they would only waive co-payments for name-brand contraceptives when they are deemed medically necessary versus generic equivalents.
Twenty-seven percent of employers said they plan to waive co-payments for generic and name-brand contraceptives without a generic equivalent. Eighteen percent of employers indicated they planned to take some other approach to complying with the coverage requirement, while 5 percent said they were unsure how they would proceed, according to the 2013 Prescription Drug Benefit Survey.
This report appeared in Business Insurance magazine, a Chicago-based sister publication of Tire Business.
By Matt Dunning, Crain News Service

TransparentRx Thursday: Acquisition (Pharmacy) Cost for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. The bottom line; payers must have access to “reference pricing” then apply this knowledge to lower plan expenditures for stakeholders.

As of 9/19/2013 – Published Weekly on Thursdays

How to Determine if a Pricing Problem Exists


Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 10% or more price differential (paid versus actual cost) we consider this a problem.

 
If you discover multiple price differentials then your organization or client is likely overpaying. REPEAT these steps once per month.

Include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to see if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.

Employers Unhappy with Their Brokers

Many brokers might want to change the way they do business. A majority of employers are not happy with the service they provide, according to a new Zywave white paper.
What employers are looking for from their broker is changing more than ever, explains Dave O’Brien, division president of insurance solutions at the Milwaukee, Wisc.-based company. The annual “Broker Services Survey” asked more than 5,500 employers in a range of industries what they would be looking for if they were to consider changing their broker.
In the past, the ability to negotiate a lower premium always ranked highest. Last year, 61% of employers said that was highly important — that number dropped to 27% this year.

“Brokers focus on price, price, price, but the top reasons employers left their broker was because they did not provide the level of service expected, did not keep them abreast of regulatory and legal issues, and did not properly manage insurance options,” O’Brien says.

Further, Zywave says, as employers demand more service from their brokers, what brokers are actually delivering has decreased, from the employer’s point of view. Employers want to hear from their broker monthly in light of all the change going on in the industry.

In the survey, 97% of employers say providing updates on health care reform and other legislation is important, but 23% are unsatisfied with their broker’s current way of providing information.

O’Brien explains a broker likes to tell a story when prospecting. “You will see the broker go in and talk about their years in the industry and history,” he says. “Employers are saying that is not all that important. What is really important to them [is] … updates on health care reform and employee communication.”
Other survey results include:
  • 91% of employers say it is important that their broker create a strategic plan to align with company goals — but 43% are unsatisfied with their current broker
  •  95% say offering employee benefits and consumerism communications is important — but 41% are unsatisfied with their current broker
Some ways for brokers to change their story include turning to technology products, of which Zywave is a provider. O’Brien says you can’t meet all the new demands the old-fashioned way, and technology is becoming “more of a must have than a great have.”
Further, brokers need to do more than say they provide great service — they need to provide examples of it. “Imagine if five brokers walk in and say, ‘It’s our people and our service.’ You have to do more to distinguish that and define what service means,” O’Brien says. “How are you going to distinguish? Do you spent a lot of money [on training] making great people?”
The broker/employer relationship needs to be powered by performance and results. “When you talk about service, you have to defend what does that mean and how are you going to do it?” he says. “Give examples of things clients have received in the past. Tell them what you do, show them and tell them again.”
The survey was conducted during April to May and had 5,536 respondents, of which 33.4% were HR professionals, 15.3% C-suite and 8.7% benefits professionals. Of the employers who responded, 55% have 100 lives or less, 20% 100-249 lives and the rest 250 lives plus.

TransparentRx Thursday: Acquisition (Pharmacy) Cost for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. The bottom line; payers must have access to “reference pricing” then apply this knowledge to lower plan expenditures for stakeholders.

As of 9/12/2013 – Published Weekly on Thursdays

How to Determine if a Pricing Problem Exists


Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 10% or more price differential (paid versus actual cost) we consider this a problem.

 
If you discover multiple price differentials then your organization or client is likely overpaying. REPEAT these steps once per month.

Specialty Drug Users May Feel Co-pay Pain

The Affordable Care Act might not make care much more affordable for some Californians who need expensive prescription drugs to treat chronic illnesses or just to stay alive.

The health plans to be marketed in the California insurance exchange, established under President Barack Obama’s health reform law, will follow the lead of Medicare and a growing number of commercial insurers by charging co-insurance payments ranging from 10 to 30 percent on a number of high-cost “specialty” drugs. These include medications for treating rheumatoid arthritis, multiple sclerosis, hepatitis C, breast cancer, leukemia and other conditions.

Advocates for the sick are unhappy that Covered California has decided to adopt this model, which imposes much higher costs on many patients than more traditional policies that offer the drugs for a flat co-payment.

“It’s disappointing that the state is in a way institutionalizing what we believe is a practice that harms those who are in the greatest medical need,” says Lisa Nelson, director of state government affairs for the Leukemia and Lymphoma Society.

Whether sick patients would be financially worse off in the exchange depends on their current insurance coverage — and on which of the four basic exchange plans they choose, since each has different premiums, co-insurance levels and annual caps on patient out-of-pocket spending.



Covered California’s spokesman, Dana Howard, said the exchange officials had to balance several important factors, and in the end they believed the decisions they made were “the most feasible way to provide health plans that are affordable both in terms of premiums and cost sharing.” He noted that lower-income people, who would be most affected by the high drug costs, are also the ones who will benefit the most from subsidies intended to reduce their premiums and out-of-pocket costs.

Sonja Radovic, a 45-year-old working mother of two who was diagnosed with breast cancer five years ago, would not qualify for any of those subsidies. She said her expense for Feraston, a hormonal drug, could skyrocket by as much as 10 times should she ever need to buy coverage through the exchange — from the current $860 a year to $8,600 under the plan with the lowest premium.

She is confident that her employer, a small business with 11 employees, will keep its current coverage, though that could conceivably change should the economy sour again. “What part of ‘Affordable’ are they not understanding?” Radovic asks. “And that’s just on one drug. What about other even more expensive specialty drugs?”

Feraston is far from the most expensive medication. The average cost of treating a variety of cancers with one of five specialty drugs is $3,682 per month, or $44,184 a year, according to Express Scripts, the giant St. Louis-based pharmacy benefit-management company. For multiple sclerosis, the average cost is $3,584 per month, and for hepatitis C the monthly price tag is $3,284.

Kalydeco, the only effective therapy for cystic fibrosis, can carry a price tag of up to $180,000 per year, says Suzanne J. Tschida, a vice president at Optum RX, a Minnesota-based pharmacy benefit-management company whose main operations are in Irvine.

In 2012, specialty drugs accounted for 24.5 percent of all U.S. prescription drug spending, even though less than 2 percent of the population is affected by the related illnesses, according to Express Scripts.

Still, if you are one of the unlucky 2 percent and you’re paying 20 or 30 percent of even the somewhat-less-stratospherically-priced drugs, it could quickly overwhelm your household budget. For plans in Covered California, the amount patients must pay out of their own pockets each year before their insurers will cover 100 percent of their medical expenses is as high as $6,350 for individual plans and $12,700 for family plans.

“I think it shows that these benefits designs essentially discriminate against people who have these serious illnesses,” says Dan Mendelson, CEO of Avalere Health Inc., a Washington, D.C.-based medical data company.

An Avalere study showed that when monthly out-of-pocket payments hit $100, 10 percent of patients stopped filling their prescriptions. At $500 a month, 25 percent stopped. That can lead to sicker patients and an even greater financial burden on the health care system down the line, many observers argue.

Not everybody buying coverage in the exchange will be affected equally. In Covered California’s second least-expensive plan, individuals with incomes between $15,856 and $22,980 will face much lower co-insurance payments, reduced or no deductibles and an out-of-pocket maximum of just $2,250. Howard acknowledges that it might still be “a strain” for those people to cope with their medical expenses, but “we think this $2,250 annual limit on their payments will help many avoid bankruptcy.”

Mendelson notes that Covered California did not invent this type of health-plan design. It is merely following a trend that started with Medicare’s Part D drug benefit and has been adopted in recent years by many commercial insurers. The proportion of private commercial plans that make enrollees pay a percentage of specialty drug costs rather than a flat dollar co-payment rose from 14 percent in 2008 to 34 percent last year, according to Avalere.

“In some ways, the implementation (of such plans) by the exchange makes the affordability of specialty drugs a more visible problem, but it’s not introducing a new problem for the people who need these drugs,” says Ha Tu, a senior researcher at the Center for Studying Health System Change, a Washington, D.C.-based think tank.

Joan W. Clements, a 70-year-old Costa Mesa resident who was diagnosed with chronic myeloid leukemia nearly 12 years ago, knows that as well as anybody. She has been kept alive for more than a decade by Gleevec, a revolutionary drug that has turned her disease from fatal to manageable. Over the past decade, Clements has seen the total cost of her Gleevec nearly double, from $6,000 to $11,000 a month.

With a 30 percent co-insurance payment under her Medicare drug plan, and a gap in coverage known as the “donut hole,” Clements’ out-of-pocket payments for the drug would be unaffordable on the modest Social Security income that she and her husband, Jerry, receive each month. Luckily for her, Novartis, which manufactures Gleevec, provides a subsidy to cover the amount that Medicare doesn’t. Otherwise, says Clements, “I would be dead.”

Nelson, of the Leukemia and Lymphoma Society, says California could have chosen differently. She notes that the insurance exchange in New York limits patient liability on specialty drugs to a flat dollar co-payment that tops out at $70 per prescription.

Tu argues that such a generous benefit will lead to a spike in premiums that will deter the young and the healthy from buying insurance and create an ever-sicker pool of insured people whose medical needs will only reinforce the escalating cost of insurance. In California, that is unlikely to happen, she says, though the high co-insurance payments are “a horrible thing for people who are sick.”

Why some drugs cost so much…

By 2019 or 2020, specialty medications are expected to account for half of all drug spending. Managing their fast-rising costs is key to keeping health insurance premiums affordable for all. 

Sources:  Express Scripts; Ha Tu, Center for Studying Health System Change; Avalere Health Inc.

Contact the writer: 714-796-2440 or bwolfson@ocregister.com

States Scramble to Drive Down Medicaid Drug Costs

A little-known provision of the 2010 health care law has states and their governors scrambling to take advantage of potential savings in how states distribute medication to Medicaid patients.

The Affordable Care Act (ACA) allows states to receive drug rebates even if they move their Medicaid prescription benefit to managed-care organizations. The federal government has also asked states to fix the wide disparities in dispensing costs for drugs distributed through Medicaid.

That has created a rush by states and businesses to capitalize on the changes as evidence shows they are having an effect. For the first time, New York has reduced Medicaid spending. Alabama, which had one of the highest dispensing rates for Medicaid drugs, has created a commission to determine the best way to distribute medication.

“It’s clearly been a trend over the last several years,” said Andrea Maresca, director of federal policy and strategy at the National Association of Medicaid Directors. “I think there’s money to be saved.”

The increase in spending for Medicaid, the federal-state health care program for low-income Americans, has bedeviled states for decades. Spending for medication was no different, and states have tried preferred-drug lists that point beneficiaries to cost-effective medications, requiring prior authorizations of drugs, requiring discounts from manufacturers, negotiating additional rebates and entering multi-state joint-buying programs.


Although some approaches have succeeded in reducing costs, they have also created a patchwork in which states such as Alabama pay $11 per prescription to dispense Medicaid drugs but with low ingredient fees, while other states pay $2 in dispensing fees and higher costs for ingredients. Neither approach is transparent.

The battle for change now pits pharmaceutical manufacturers, pharmacy benefit managers and both physical and mail-order pharmacies against one another. They are lobbying state legislators around the country to encourage the use of certain medications, incentives and rebates. At the same time, drug costs have increased, and people are using more medications as they develop chronic diseases such as heart disease or diabetes.

One approach is moving to managed care. Managed-care plans mean the state contracts out its pharmaceutical services to a group that agrees to provide services for a lower cost. Rather than a pharmacy charging a set amount every time a person fills a prescription, a managed-care system gets paid more the more money it saves. 

This can be good for the patient in that there are fewer opportunities for drug duplication. However, there have been concerns that insurers will not pay for medications a doctor prescribes, such as for behavioral health issues, or that quality will be cut along with costs.

Big pharmacy management providers say they can save the states as much as $33 billion over 10 years, according to a 2011 report commissioned by the Pharmaceutical Care Management Association. A new report that assumes Medicaid expansion in all the states because of the Affordable Care Act estimates $90 billion in savings, according to the Lewin Group.

The ACA allowed states to expand their Medicaid programs to cover more people. Some of the nation’s most populous states, such as California and New York, have expanded, while others, such as Texas, have not. Expansion can provide a windfall to any drug provider in Medicaid.

“Medicaid expansion puts a premium on this,” said Mark Merritt, CEO of the Pharmaceutical Care Management Association.

A PAINLESS SOLUTION?

Merritt called moving to managed care “relatively pain-free,” saying that it allows states to reduce costs without reducing benefits. Others in the field, however, say it creates pain for business that will lose their markets to out-of-state corporate management firms.

“For a long time, the evidence has been that the states have been very generous to the pharmacies,” said Adam Fein, founder of Pembroke Consulting, a management advisory and business research firm.

Changing the system can allow states to cut the overly high payments to pharmacies, Fein said. States haven’t saved as much money as anticipated from using generic medications, because of the way they reimburse pharmacies.

Now, however, the law lets states create maximum allowable costs for drugs based on the cost of the drugs to the pharmacy. The upper limit under the law is 175% of the manufacturing average costs, but the final federal rule has not been issued. When it is, Fein said, the federal reimbursement rate for states and pharmacies will be cut.

That means pharmacies will then tell the government how much they paid for the medications, and the government will pay that amount plus a dispensing fee to the pharmacy, Fein said. That makes for a more-transparent process and eliminates under-the-table negotiations. Alabama, Colorado, Idaho, Iowa, Louisiana and Oregon use this system already.

“Managed care could be better or worse,” Fein said. Medicare uses managed care, and there are proven methods to save costs, such as systems that steer patients to less-expensive medications, preferred pharmacies and mailed-medication programs. “Some are working better than others, but it’s buyer-beware, just like anything else.”

OTHER OPTIONS

Managed care isn’t the only option, Maresca said. “Some states just don’t have the market,” she said. “Rural states may not see it as feasible.”

But, because there are federal funds for coordinated care, it may become feasible at a local level, she said, such as within a hospital or for a specific population of patients.

“There’s a recognition that the states need to be a bit more sophisticated to deliver managed care,” she said.

THE NEW YORK EXPERIENCE

New York changed to a managed pharmacy program for Medicaid in October because the state had a 13% annual growth rate for Medicaid, which was eating 40% of the state budget. Jason Halgerson, the state’s Medicaid director, said the results have been dramatic. “We’re seeing $400 million in savings in a year,” Halgerson said. “We had hoped for $200 million. We reduced drug spending by about one-quarter.”

States had worried they would lose federal rebates for medications and would be unable to negotiate for lower prices if they moved to managed care.

“There are legitimate concerns,” Halgerson said. “In behavioral health, it can be difficult to get medications approved, and we worried that it would be challenging for providers to get medications approved.”

Pharmacies have been receptive, Halgerson said, because they have experience with managed care and were worried more about “downward reimbursement payments and mail order pharmacy.”

“We’re all under fiscal pressure,” he said.

Alabama just created a commission to look ways to save in the Medicaid pharmacy program.

“We’re nothing close to that,” Don Williamson, Alabama’s state health officer, said of New York’s $400 million in savings. “Our program is only $600 million total.”

But Alabama still needs to save money, Williamson said, because “our Medicaid demand exceeds our resources.”

Alabama faces different problems from New York because much of the state is rural, and the national pharmacy chains don’t have the same reach as they do in cities. So, Alabama is trying to work with local pharmacies and providers, rather than an outside corporation, to create regional managed drug benefit programs, Williamson said.

“For us, it’s going to be an interesting balancing act,” he said.

He cited Colorado and Oregon as states that have moved in that direction. His commission will present its findings Dec. 1.

by Kelly Kennedy, USA TODAY

Follow @KellySKennedy on Twitter.