Status Report on Development of a Medicaid

Preferred Drug List Program

Presentation to:

PDL/PA Implementation Advisory Group

Cynthia B. Jones, Chief Deputy DirectorDepartment of Medical Assistance Services

September 11, 2003Richmond, Virginia

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Presentation Outline

Background

Actions Taken Thus Far

Next Steps

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Medicaid Coverageof Prescription Drugs

Prescription drug coverage is an optional benefit that all state Medicaid programs provide.

In Virginia, this coverage is provided through fee-for-service and managed care programs.

The focus of this PDL program is on the 220,000 clients that are in the fee-for-service program. These clients live in areas of the State that currently do not have a managed care organization available or who are excluded from managed care (such as persons in nursing facilities, community based waiver programs, and foster care).

The 300,000 Medicaid recipients in one of the five managed care programs are already subject to a preferred drug list or similar program.

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Fee-For-Service (FFS) Pharmacy Costs Have Increased 89% Since 1997

$201.2 $222.0$262.4

$298.4$342.0

$379.6

$0.0$50.0

$100.0$150.0$200.0$250.0$300.0$350.0$400.0

1997 1998 1999 2000 2001 2002

Pharmacy Costs

Annual FFS Pharmacy Costs

(Millions)

Source: Statistical Record of the Virginia Medicaid Program

Net of drug rebates

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FFS Pharmacy Costs As A Percentage of Total Medical Costs Is Increasing

8.9% 9.5%10.7% 10.9% 11.3%

11.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1997 1998 1999 2000 2001 2002

Source: Statistical Record of the Virginia Medicaid Program

FFS Pharmacy Costs As A Percentage of Total Medical Costs

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2003 Appropriations Act: Preferred Drug List (PDL) Program

Item 325(ZZ.1) of the 2003 Appropriations Act directs DMAS to:– Implement PDL program no later than Jan. 1, 2004– Seek input from physicians, pharmacists, pharmaceutical

manufacturers, patient advocates, and others– Form a Pharmacy & Therapeutics (P&T) Committee– Ensure drugs on the PDL are safe and clinically effective before

considering cost effectiveness– Include several key provisions: 72-hour emergency supply; 24-

hour prior authorization process; expedited review of denials; and consumer/provider training and education

– Report to General Assembly on main design components Program must generate savings of $9 million GF in FY 2004, and $18

million GF in subsequent fiscal years.

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2003 Appropriations Act: P&T Committee Responsibilities

The P&T Committee shall recommend to the Department:– therapeutic classes of drugs to be subject to the PDL and

prior authorization requirements– specific drugs within each class to be included on the PDL– appropriate exclusions for medications, including atypical

anti-psychotics, used for the treatment of serious mental illnesses such as bi-polar disorders, schizophrenia, and depression

– appropriate exclusions for medications used for the treatment of brain disorders, cancer, and HIV-related conditions

– other appropriate exclusions and “grandfather” clauses

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Additional Responsibilities of P&T Committee (cont’d)

Conduct clinical reviews of preferred and non-preferred drugs as needed to maintain the PDL

Conduct clinical reviews of new drugs Provide advice to DMAS and Contractor on clinical issues

regarding all aspects of the PDL program, including the prior authorization process for non-preferred drugs

Provide clinical advice/input to DMAS and Contractor on prior authorization of “more than 9 unique prescriptions”

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DMAS’ Responsibilities

Ensure PDL program conforms to all statutory/regulatory requirements

Support P&T Committee Members and activities Procure services of a PDL Contractor

– monitor Contractor and ensure performance meets required quality and service standards

Review and approve all Contractor-written communications to clients, providers, and others prior to release

Provide Contractor with all necessary and current client eligibility and utilization data

Coordinate Contractor’s support of P&T Committee– ensure Contractor is responsive to P&T Committee

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DMAS’ Responsibilities(cont’d)

Interpret policies and make final decisions regarding all aspects of program– Appropriations Act requires that DMAS establish a

process for acting on the recommendations of the P&T Committee and documenting any decisions that deviate from recommendations of the Committee

Review and approve all supplemental rebate agreements Handle all media inquiries

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PDL Contractor Responsibilities

Provide information and staff support to the P&T Committee Establish and maintain the PDL based on clinical

recommendations of the P&T Committee– cost effectiveness is to be considered only after drug is

determined to be safe and clinically effective– exclude from the PDL and prior authorization program for

non-preferred drugs those classes of drugs previously excluded by DMAS

Manage the reference pricing process Ensure all program components required by the

Appropriations Act are implemented Negotiate and administer state supplemental rebates

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PDL Contractor Responsibilities(cont’d)

Administer the PDL prior authorization program for non-preferred drugs and the prior authorization program for “more than nine unique prescriptions”– administer a reconsideration and appeals process

Provide and maintain Call Center 24 hours/day; 7 days/week Provide PDL and prior authorization program education

services for clients and providers Ensure confidentiality of client/provider information

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PDL Development Process

All Therapeutic Classes of Drugs

P&T Committee Recommends Drug Classes To Be Subject to PDL & P.A.

P&T Committee Recommends Drugs Within Each Class That Are Clinically Effective and Safe

Preferred Drugs

Drugs at or below cost of most cost-effective drug

Non-Preferred Drugs

Drugs above cost of most cost-effective drug require

P.A.

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Overview of PDL With Reference Pricing and Supplemental Rebates

$0$10$20

$30$40$50$60

$70$80

Drug A Drug B Drug C Drug D Drug E

Final Price Supp. Rebate

Source: DMAS Staff Illustration

$27$27$27

$22

$11$29

$70

$38

$56

Non-Participating Manuf. Drug Available through P.A.

Original Price

Most Cost Effective Drug

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Presentation Outline

Background

Actions Taken Thus Far

Next Steps

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Actions Taken Thus Far:P & T Committee Activities

The Secretary of Health and Human Resources solicited nominations from provider associations for physicians and pharmacists to serve on the P&T Committee

The Secretary appointed eight physicians and four pharmacists to the P&T Committee

The P&T Committee has met four times: June 18, July 30th, August 12th, and September 3rd. Additional monthly meetings will be scheduled throughout the year.

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Members of P&T Committee

Member Background Randy Axelrod (MD) (Chairman) Anthem Chief Medical Officer Roy Beveridge (MD) Oncologist Avtar Dhillon (MD) Psychiatrist (CSB) James Reinhard (MD) Psychiatrist (DMHMRSAS) Arthur Garson, Jr (MD) Dean, UVA Med. School Mariann Johnson (MD) Family Practice Eleanor (Sue) Cantrell (MD) Local Health District Director Christine Tully (MD) Geriatrician, VCU/MCV Mark Szalwinski (Pharmacist) Sentara Health Care

(Vice Chairman) Gill Abernathy (Pharmacist) INOVA Health System Mark Oley (Pharmacist) Westwood Pharmacy Renita Warren (Pharmacist) Edloe’s Pharmacies

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Actions Taken Thus Far :P & T Committee Activities

The initial P&T meetings will determine which drugs will be part of the PDL program during the January 2004 implementation.

Future meetings will determine the drugs that will be part of the PDL program implemented in April and July of 2004.

The goal of this “phased-in” transition process is to minimize the impact of the program on clients and providers.

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Initial List of Key Classesof Drugs to be Excludedfrom the PDL Program

Therapeutic Class Description

Insulins Cholinesterase Inhibitors Platelet Aggregation Inhibitors Antivirals for HIV Cancer Chemo. Agents Anti-convulsants Immunosupressants Antiemetics Anti-psychotics, Atypical and

Typicals

Used in the Treatment of

Diabetes Alzheimers Clotting Disorders HIV/AIDS Cancer Seizure Disorders, Mental Health Transplant rejections, Arthritis Nausea in cancer patients, Aging Serious Mental Illness

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Actions Taken Thus Far:Therapeutic Classes Reviewed

July 30th Meeting

Proton Pump Inhibitors

Histamine Type-2 Receptor Antagonists (H2RA)

Antihistamines

Nasal Steroids

Decisions Made

All four classes were appropriate for inclusion in a PDL program. All drugs in these classes are considered clinically effective

August 12th Meeting

Selective COX-2 NSAID Inhibitors

HMG-CoA Reductase Inhibitors

Sedatives Hypnotics

Beta Adrenergics

Inhaled Cortiocosteroids

All five classes were appropriate for inclusion in a PDL program. All drugs in these classes are considered clinically effective

September 3rd Meeting

Angiotensin Converting Enzyme Inhibtors (ACEI)

Angiotensin II Receptor Antagonists (ARB)

Calcium Channel Blockers

Beta Adrenegic Block Agents (Beta Blockers)

All four classes were appropriate for inclusion in a PDL program. All drugs in these classes are considered clinically effective

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Actions Taken Thus Far: PDL Contractor

May 1, 2003: Issued a Request for Proposals to select a PDL contract administrator

May 15th: Mandatory Pre-proposal conference held

June 5th: Deadline for submission of proposal

July 1st: Published Notice of Intent to Award contract

July 18th: DMAS awarded contract to First Health

DMAS and First Health are working together to define and develop operational aspects of the program. FHSC is playing a secondary role to the P&T Committee.

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Actions Taken Thus Far: Enrollment Groups to be Excluded

from PDL Process

Third Party Liability enrollees Hospice enrollees PACE and Pre-PACE enrollees Qualified Medicare Beneficiaries Children who are the responsibility of Juvenile

Justice Refugees that are not covered in a Medicaid

group FAMIS enrollees

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Actions Taken Thus Far: Enrollment Groups to be Included

in the PDL Process All other Fee for Service enrollees who receive pharmacy

services will be subject to the new provisions, including:– Medallion– Aged, Blind, and Disabled– Nursing facility residents– Home and Community Based Care Waivers– Dual Eligibles– Client Medical Management– FAMIS Plus Children (formerly called Medicaid)– Those on Spenddown– Foster Care Children– Family Planning Waiver– Breast and Cervical Cancer Groups

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Actions Taken Thus Far: Public Comment

DMAS has met with over 30 different groups of stakeholders to solicit input into the design of the PDL program; meetings are continuing

Established a pharmacy web page at DMAS’ internet site (www.dmas.state.va.us) and e-mail address for PDL comments/input (pdlinput@dmas.state.va.us)

At each P&T Committee meeting, time is allotted for presentations on the clinical aspects of the therapeutic classes under review

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Actions Taken Thus Far: Status Reports to the General Assembly

Submitted first report on April 1, 2003, which provided a general overview of the approach to the PDL program.

Submitted memoranda to Chairmen of the Appropriations Committees and the Joint Commission on Health Care on June 16th and September 1st

Made several presentations to Joint Commission on Health Care and the Health and Human Resources Subcommittees of both House Appropriations and Senate Finance

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Actions Taken Thus Far: PDL/PA Implementation Advisory Group

Established a PDL/PA Implementation Advisory Group, which includes representatives of pharmaceutical manufacturers, providers, and advocates

Purpose: To provide advice to the agency regarding the implementation of PDL program, including the provider and consumer education and the prior authorization procedures for both the PDL and for “more than nine unique prescriptions”

First meeting is scheduled for September 11, 2003; meeting will be held in the Board Room

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Presentation Outline

Background

Actions Taken Thus Far

Next Steps

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Next Steps: PDL/PA Implementation Advisory Group

Next Meetings:

– Week of October 20th

– Week of December 10th

– Week of January 26th

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Next Steps

Schedule the remaining P&T Committee meetings for this year

Begin supplemental rebate negotiations with manufacturers

Develop emergency regulations and submit State Plan amendment to Centers for Medicare & Medicaid Services

Provide status reports to the General Assembly at key points in development process

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Next Steps(continued)

Incorporate other pharmacy-related prior authorization requirements – prior authorization for more than 9 unique prescriptions

in 180 days (non-institutionalized patients) or 30 days (institutionalized patients)

Modify Medicaid Management Information System (MMIS) to process PDL and prior authorization-related transactions

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Next Steps(continued)

Develop provider/consumer education and training program – PDL contractor will have major responsibilities– PDL/PA Implementation Advisory Group will play a key

role