EFFECTIVE PREFERRED EFFECTIVE PREFERRED DRUG LISTSDRUG LISTS

National State Attorneys General Program of National State Attorneys General Program of Columbia Law SchoolColumbia Law School

Presented byPresented byJ. Kevin Gorospe, Pharm.D.J. Kevin Gorospe, Pharm.D.

Chief, Pharmacy PolicyChief, Pharmacy PolicyCalifornia MedicaidCalifornia Medicaid

Formularies v. Preferred Drug Formularies v. Preferred Drug ListList

Terms often considered to mean the same Terms often considered to mean the same thingthing

Perspective different between private Perspective different between private sector and Medicaidsector and Medicaid

Statutory differentiation in the Social Statutory differentiation in the Social Security ActSecurity Act

Method of PDL implementation is Method of PDL implementation is different in private and public sectordifferent in private and public sector

Medicare Part D is a hybrid of public and Medicare Part D is a hybrid of public and private sector PDL implementationprivate sector PDL implementation

FormulariesFormularies

Traditionally a formulary can be Traditionally a formulary can be closed or openclosed or open

Open – everything is available with Open – everything is available with few or no restrictionsfew or no restrictions

Closed – products can be excluded , Closed – products can be excluded , i.e. non-benefitsi.e. non-benefits

Social Security Act, section 1927 Social Security Act, section 1927 provides specific requirements for a provides specific requirements for a formulary under Medicaidformulary under Medicaid

FormulariesFormularies

Provides ability to exclude drugs Provides ability to exclude drugs from coveragefrom coverage

Requires written explanation Requires written explanation available to the publicavailable to the public

Provides for prior authorizationProvides for prior authorization Committee meetings are generally Committee meetings are generally

open to the publicopen to the public

Preferred Drug ListsPreferred Drug Lists

Benefits are typically tiered (private sector)Benefits are typically tiered (private sector) Tier selection primarily a financial decisionTier selection primarily a financial decision Typical 4 tier benefit – generic, preferred Typical 4 tier benefit – generic, preferred

brand, non-preferred brand, and non-brand, non-preferred brand, and non-covered drugscovered drugs

Co-payments provide patient centric Co-payments provide patient centric decision making through lower co-payments decision making through lower co-payments for less expense drugsfor less expense drugs

Drug selection in various therapeutic Drug selection in various therapeutic categories can be limited categories can be limited

Preferred Drug ListsPreferred Drug Lists

Private sector relies heavily on mail Private sector relies heavily on mail order to lower costsorder to lower costs

Drug selection in various Drug selection in various therapeutic categories often limitedtherapeutic categories often limited

Cost more often the primary driver Cost more often the primary driver of decisionsof decisions

Generic heavy (only?) PDLGeneric heavy (only?) PDL

Medicaid PDLMedicaid PDL

Prior authorization programs as Prior authorization programs as described in the Social Security Actdescribed in the Social Security Act

Almost all drugs are benefitsAlmost all drugs are benefits Typically two tiers, prior Typically two tiers, prior

authorization and non-prior authorization and non-prior authorizationauthorization

Lack of co-payments and entitlement Lack of co-payments and entitlement do not provide for cost-effective do not provide for cost-effective patient decision making patient decision making

Medicaid PDLMedicaid PDL

Utilization control driven by the Utilization control driven by the Medicaid programMedicaid program

PDL created differentlyPDL created differently Two general designs:Two general designs:

• Non-PA to PA vs. PA to Non-PANon-PA to PA vs. PA to Non-PA Both are acceptable to CMSBoth are acceptable to CMS One should provide better control One should provide better control

Non-PA to PANon-PA to PA

All drugs start out available without All drugs start out available without PAPA

May have some utilization controlsMay have some utilization controls Individual drug or categories of drugs Individual drug or categories of drugs

reviewedreviewed Drugs moved to PA only based on Drugs moved to PA only based on

reviewreview Decisions based on evidence and cost Decisions based on evidence and cost

factorsfactors

PA to Non-PAPA to Non-PA

All drugs start out available through All drugs start out available through PA onlyPA only

Individual drug or categories of drugs Individual drug or categories of drugs reviewedreviewed

Drugs moved to PDL only based on Drugs moved to PDL only based on reviewreview

Decisions based on evidence and cost Decisions based on evidence and cost factorsfactors

This is Medi-CalThis is Medi-Cal’’s designs design

Drug ReviewsDrug Reviews Begin with:Begin with:

• Manufacturer petitions – a letter, FDA approval Manufacturer petitions – a letter, FDA approval document and official labelingdocument and official labeling

• Medi-Cal self initiates drug or category reviewMedi-Cal self initiates drug or category review AMCP dossier and other documents followAMCP dossier and other documents follow Request for input is sent to the Medi-Cal Request for input is sent to the Medi-Cal

Contract Drug Advisory Committee Contract Drug Advisory Committee (MCDAC) for input(MCDAC) for input• Physicians (3)Physicians (3)• Pharmacists (3)Pharmacists (3)• Beneficiary representative (1)Beneficiary representative (1)

MCDAC provides written input – advisory MCDAC provides written input – advisory onlyonly

Drug ReviewDrug Review

A pharmacist is assigned as primary A pharmacist is assigned as primary reviewerreviewer

Meeting arranged with Meeting arranged with manufacturer representativesmanufacturer representatives• Therapeutics – Evidence Based!Therapeutics – Evidence Based!• Cost proposalCost proposal

Primary reviewer prepares Primary reviewer prepares documents to address the 5 criteriadocuments to address the 5 criteria

The CriteriaThe Criteria

Efficacy – how well does it work?Efficacy – how well does it work? Safety – how safe is it?Safety – how safe is it? Misuse Potential – overuse or Misuse Potential – overuse or

inappropriate use?inappropriate use? Essential Need – does it need to be Essential Need – does it need to be

available without PA?available without PA? Cost – what is the cost effectiveness?Cost – what is the cost effectiveness?

Evidence BasedEvidence Based

Clinical features are reviewed using Clinical features are reviewed using a variety of literature resourcesa variety of literature resources

Studies – published and un-Studies – published and un-publishedpublished

Compendia – statutorily mandatedCompendia – statutorily mandated Personal contact with practitionersPersonal contact with practitioners Input from MCDACInput from MCDAC

Evidence BasedEvidence Based

Provides a clinical assessment of 4 Provides a clinical assessment of 4 of the 5 criteriaof the 5 criteria

Any single criterion can be the Any single criterion can be the overriding emphasis on approving or overriding emphasis on approving or denying a drug addition to the PDLdenying a drug addition to the PDL

Discussions are internal – Discussions are internal – pharmaceutical consultant staff onlypharmaceutical consultant staff only

Cost as Cost as THETHE Criterion Criterion

When the efficacy, safety and misuse do When the efficacy, safety and misuse do not distinguish one drug from anothernot distinguish one drug from another

Lack of an essential need for a drugLack of an essential need for a drug Less costly alternatives availableLess costly alternatives available Can a manufacturer buy their way onto Can a manufacturer buy their way onto

the PDLthe PDL What does What does ““COSTCOST”” truly mean truly mean ManufacturerManufacturer’’s definitions definition Medi-CalMedi-Cal’’s definitions definition

Cost as Cost as THETHE Criterion Criterion

What does What does ““COSTCOST”” truly mean truly mean ManufacturerManufacturer’’s definitions definition

• Price competitive with other drugs ORPrice competitive with other drugs OR• Other health savings Other health savings • Sometimes both?Sometimes both?

Net cost to the manufacturer is their Net cost to the manufacturer is their primary concernprimary concern

Cost as Cost as THETHE Criterion Criterion

Medi-CalMedi-Cal’’s definitions definition• Price competitive with other Price competitive with other

drugs/medical interventions drugs/medical interventions ANDAND• Provides improved outcomes Provides improved outcomes which which

lead tolead to• Improved health resource use Improved health resource use ANDAND • Cost effectiveness is sustainable over Cost effectiveness is sustainable over

timetime

Addressing Drug CostAddressing Drug Cost

Net Cost has two componentsNet Cost has two components• Payment to pharmaciesPayment to pharmacies• Discounts from manufacturersDiscounts from manufacturers

Pharmacy reimbursementPharmacy reimbursement• Contractual in the private sectorContractual in the private sector• Set by statutes and state plans for Set by statutes and state plans for

MedicaidMedicaid• Profit margins for pharmacies small Profit margins for pharmacies small

compared to manufacturerscompared to manufacturers

Manufacturer RebatesManufacturer Rebates

Discounts = RebatesDiscounts = Rebates Federally required rebate in Federally required rebate in

MedicaidMedicaid State supplemental rebates obtained State supplemental rebates obtained

through contracting associated with through contracting associated with drug reviewdrug review

Allowed by state and federal statutesAllowed by state and federal statutes How successful has Medi-Cal been?How successful has Medi-Cal been?

Medi-Cal Budget NumbersMedi-Cal Budget Numbers

Pre-Medicare Part DPre-Medicare Part D• Expenditures Expenditures - - $4.8 Billion$4.8 Billion• Federal Rebates Federal Rebates -- $1.4 Billion$1.4 Billion• State RebatesState Rebates -- $0.7 Billion$0.7 Billion

Post Medicare Part DPost Medicare Part D• Expenditures Expenditures - - $3.1 Billion$3.1 Billion• Federal Rebates Federal Rebates -- $0.8 Billion$0.8 Billion• State RebatesState Rebates -- $0.4 Billion$0.4 Billion

RebatesRebates Rebates 38% of gross expendituresRebates 38% of gross expenditures Supplemental 13% of gross Supplemental 13% of gross

expenditures, previously 15%expenditures, previously 15% Not all drugs have supplemental rebates; Not all drugs have supplemental rebates;

primarily brand name drugs on the PDLprimarily brand name drugs on the PDL 82% of expenditures are for brand name 82% of expenditures are for brand name

drugs, but only 37% of the drug claimsdrugs, but only 37% of the drug claims Shift to generic drugs – reimbursement Shift to generic drugs – reimbursement

changes neededchanges needed

Barriers to an effective PDLBarriers to an effective PDL

Ineffective prior authorization programIneffective prior authorization program Non-PA to PA design – continuing careNon-PA to PA design – continuing care Mandatory coverage of drug Mandatory coverage of drug

categoriescategories• HIV/AIDSHIV/AIDS• CancerCancer• Mental HealthMental Health• DiabetesDiabetes

Lack of a evidence based reviewLack of a evidence based review

Barriers to an effective PDLBarriers to an effective PDL

Cost is THE criteria trapCost is THE criteria trap Use of Pharmacy Benefit Use of Pharmacy Benefit

Management companiesManagement companies Inability to move market shareInability to move market share Group purchasing (multi-state) Group purchasing (multi-state)

coupled to individual state PDLcoupled to individual state PDL Lack of follow-up analysisLack of follow-up analysis

Follow-upFollow-up

Was the decision correct?Was the decision correct? What are the clinical outcomes?What are the clinical outcomes?

• System to capture and analyze dataSystem to capture and analyze data• Use of standards to apply data findings Use of standards to apply data findings

toto• Establishing new standardsEstablishing new standards• Educating providers and patientsEducating providers and patients

Medi-Cal recognized this deficiency Medi-Cal recognized this deficiency and is changing the dynamicand is changing the dynamic

OutcomesOutcomes

Commit resources to analysisCommit resources to analysis Data tools to enable workData tools to enable work

• Rebate Accounting and Information Rebate Accounting and Information SystemSystem

• Data Mining softwareData Mining software• Commitment of staff Commitment of staff • Use of outside consultants (DUR)Use of outside consultants (DUR)

Education of providers, patients and Education of providers, patients and family – CalMEND as a modelfamily – CalMEND as a model

InnovationInnovation

““A government that robs Peter to pay A government that robs Peter to pay Paul can always depend upon the Paul can always depend upon the support of Paul.support of Paul.””

-George Bernard Shaw-George Bernard Shaw