Life Sciences

Medicare & Reimbursement Advisor Weekly, September 4th, 2009

Medicare & Reimbursement Advisor Weekly, September 4, 2009

Inside:

RN group expands as viable managed market target

Mercer, Gallagher open up about pharmacy benefits, design, and unmet needs in DM

Could fewer formulary restrictions across settings reduce readmissions?



RN group expands as viable managed market target

New rebate program highlights Medicare D reform

The three major nurses’ organizations in the country have come together to form the largest RN union and professional association in U.S. history. For more informa- tion, visit www.healthleadersmedia.com/content/238318/topic/WS_HLM2_HR/Three-Nurse-Groups-Merge-to-Create-Super-Union.html.

Rebates: Part D reform

Congress’s health reform bill (HR 3200) would:

  • Create a new rebate program that under various circumstances would require pharmaceutical manufacturers to pay the federal government the difference between the statutory rebate under Medicaid and the rebates paid to Medicare’s prescription drug plans. Specifically, this policy would apply to covered drugs dispensed to full-benefit dual-eligible individuals, which are beneficiaries who are enrolled in both Medicare and Medicaid.
  • Phase out the doughnut hole by extending the benefit’s initial coverage limit and lowering the catastrophic threshold at specified rates. This would result in elimination of the doughnut hole by 2022.
  • Apply to covered drugs dispensed to full-benefit dual-eligible individuals for beneficiaries who are enrolled in both Medicare and Medicaid. Since the statutory rebate provided under Medicaid is usually larger than those negotiated by the plans providing the Medicare drug benefit, the provision would reduce federal spending.

Medicare beneficiaries would see their Part D prescription drug benefits rise by 5% in 2011, according to the Congressional Budget Office.

However, beneficiary spending on prescription drugs—apart from those premiums—on average would fall.



Going beyond the contract

Mercer, Gallagher open up about pharmacy benefits, design, and unmet needs in DM

Editor’s note: This article features two interviews in my series with employer benefit managers, including a new conversation with Mercer’s managed pharmacy director David Doss. Additional interviews will appear separately.

Wyndham Hotels had a minus 3% drug spend last year, a sharp contrast to most employers who experienced an upward trend closer to plus 5%.

Although it’s difficult to pinpoint a single reason, Wyndham pays for at least two genetic tests (one for Coumadin®, one for Tamoxifen) to see whether employees will benefit from those therapies. It also has a high generic fill rate.

“They’re innovators in that way, the exception,” says Mike Thomas, PharmD, who oversees clinical pharmacy operations for Gallagher Benefit Services (GBS), one of the leading U.S. employer benefit managers.

David Doss, the head of Mercer’s managed pharmacy practice, says a large technology company has asked the employer benefit manager (EBM) to tie genomics and testing into its health benefit design, so the trend is emerging.

BACKGROUND

Mercer’s managed pharmacy practice is the largest of its five specialty groups. It features 22 staffers, including eight clinical pharmacists who do nothing but pharmacy consulting. They work primarily with mid-size to large private and public employers, mostly self-funded businesses, advising on everything from benefit design to clinical health plan and PBM management, PBM selection, and collective purchasing agreements.

GBS, meanwhile, has 84 U.S. offices specializing in healthcare benefits for employers. Thomas’ team reviews employer drug spend, pharmacy plan design, specialty drug use, formularies, out-of-whack trends, and helps employers choose the right PBM and carve out pharmacy benefits.

Thomas, who has a medical management degree from the University of California, Irvine, spent 11 years running the pharmacy department for a two-million member plan with $150 million in drug spend. His background as a retail pharmacist, pharmaceutical consultant, and hospital pharmacist led him to run Express Scripts’ finance operations for eight years before deciding he wanted a challenge: to help employers make rational decisions about benefit design. “I thought it would be too easy to help pharmaceutical companies get their products on formulary,” Thomas says.

WORKING WITH PHARMA

Doss says Mercer doesn’t currently rely on clinical monographs or pharmaceutical companies for clinical information. Rather, it looks to an associate professor of medicine at Harvard.

“We never work with pharmaceutical account managers, but I could see a fit for them in our DM approach to evidence-based design,” Doss says. Some of Mercer’s larger public and private employer customers require patients with certain diseases, such as diabetes, to participate actively in a DM program to get a lower copay on brands and generics. “Pharma projects would have to be approved here,” Doss says, “but we did propose to help one company build an online evidence-based design tool recently. I’d say the big need is in programs to improve health outcomes, and focused on adherence coaching, since there’s disparity in the quality of this in the market. We’d be open to ideas there, but we’d have to do so it wouldn’t compromise our objectivity with employers.”

Gallagher’s Thomas used to contract with pharma in the late 1990s, but not anymore. “I know how they contract, but I also believe there’s a conflict when we’re dealing with PBMs and employers now, so we stopped doing the contracting with manufacturers,” he says. Typical pharmaceutical support that generally works includes:

  • Educational programming for employers
  • Health fairs at employer sites (although Thomas says these are infrequent and difficult to coordinate)
  • Employer conferences

Thomas thinks disease state programs have an important place in the medical management of conditions affecting employees, as long as they are provided in the context of education. “There are certainly opportunities around diabetes especially and the specialty area for pharmaceutical companies to provide support,” he says.

BENEFIT DESIGN

Two of Mercer’s largest employer customers implemented value-based design earlier this year. To access low copays on brand and generics, the employee must participate actively in the DM program. “The initial results are positive, but we’re in the transition year, so we’ve seen significant uptick in the percent of people enrolled in DM,” Doss reports. They don’t expect to break even in 2009, but the initial cost-avoidance numbers are good. “More people are taking their meds, which is a good thing if appropriate, so pharmacy spend is up, but we’re seeing lower numbers of ER visits and other resources dropping. We don’t necessarily want to see MD visits go down, though,” Doss says.

On the horizon, Doss sees EBMs playing a greater role in employer productivity studies. “This hasn’t happened yet, but the biggest part of cost avoidance in evidence-based design is presenteeism in the workplace,” he says.

The recent wave of interest in value-based insurance design is surprising to Thomas since the concept started around 1999. “I do see the ROI for employers who support a more open design with zero-dollar copays. Pitney Bowes did this 10 years ago, looking at the diabetic population and adherence, and had all brands and generics at a low copay, equally available, and found a 4:1 return on investment from this approach, compared to the standard, more commercial-oriented design,” he says. This suggests an appetite for appropriate access on tier 1 and 2 to brands that have a value story.

There’s also a slower movement toward the consumer-driven designs. Just 6% of plans do this. “Louisiana State University does this, and it’s actually working very well,” Thomas says, “but I’m not sure it has broad applicability until the model is simplified. It’s very confusing for lay people to navigate.”

But the conversation between EBMs and employers is less about generic fill rates and design. Employers aren’t really openly asking for value-based design. “Instead, they just want us to tell them what’s right or wrong,” Thomas says. This is interesting because it suggests that employers are leaning on EBMs to help them develop the right design for their population, but, in some cases, the most ethical design, as is the case with Wyndham Hotels and its decision to cover certain genetic tests and be open to controlling spend in out-of-the-box ways.

Controlling specialty spend is the most challenging area. “There’s been some increase in cost share put on the employee, but not to the level I think it would have increased, and one reason is that compliance/adherence would suffer once you reach $150 for copay,” Thomas says.

THERAPEUTIC AND FORMULARY FOCUS

“On formularies, we’ll look at them and often tell employers what they’re missing, tell them if there’s too much on the formulary, help them move specialty drugs appropriately to the pharmacy benefit, and definitely focus on these four therapeutic areas: specialty drugs, cardiovascular, diabetes, and asthma,” Thomas says.

AWP AND PBMS

GBS conducts comparisons between PBMs to help an employer understand whether switching to a new PBM will cause disruption and where (such as a rise in copays for a particular drug used by many employees). It’s interesting that the level of discussion with some employers often revolves around the PBM process. Two PBMs will bid for an employer contract, one will offer a discount of AWP minus 18%, the other AWP minus 16% (or some other discount off the selling price), and many employers simply want to go with the better discount without understanding that the PBM may have a more expensive formulary or benefit design.

THE NUMBERS

Seventy-five percent of employers want the lowest cost design and formularies, and 25% want low drug costs but an effective design, one that will really help improve productivity and outcomes. “I spend an inordinate amount of time with employers trying to push the latter and get them to understand that the cost of their drug spend is not indicative of the value of their drug spend,” Thomas says, adding that “you have to consider downstream costs, but on the flip side, I also tell employers about the incredible waste they have in some drug spend.” Thomas has noticed a real upswing in interest among employers in the pharmacy benefit and a lot of employers with formularies that are promoting drugs people don’t need. “Everyone in the known universe doesn’t need Nexium®, for example, or many of the cholesterol medications. I know there are people genetically disposed to high cholesterol and other conditions, but there are other answers outside of pharmacy we advise employers to look to,” he says.

WHERE EBMS GET CLINICAL INFORMATION

EBMs can go to the P&T Community and the Formkit.com sites for formulary evaluations. “We follow clinical news from all of the major PBMs since we are linked into their clinical research e-mails,” Thomas says. “We also do our own research if needed.”



Could fewer formulary restrictions across settings reduce readmissions?

We asked skilled nursing facilities and hospitals this summer as part of a transition of care study to provide suggested solutions to reduce readmissions and rate how much their suggestions could reduce hospitalizations and rehospitalizations.

Participants were given a rating on a scale of 1–7, where 1 represented highly unlikely to help reduce, 4 represented no opinion, and 7 represented highly likely to help reduce.

In the open-ended question, five solutions garnered a 6 or 7 rating (highly likely to reduce readmissions) among at least 50% of the 443 skilled nursing facilities and 352 hospitals participating in this study. Responses were open-ended and grouped into categories.

Chronic obstructive pulmonary disease, sepsis, congestive heart failure/acute coronary syndrome, renal disease, diabetes, and urinary tract infections were the six diseases/conditions nursing homes rated most susceptible for readmission among hospitals.

Results of the complete study, including suggested solutions as well as disease category–specific responses, will be published shortly.

To qualify, hospital respondents were RNs in charge of their institution’s case management or care management department; nursing home respondents were RNs in charge of care coordination, administration, or the nursing staff.

From a payer/formulary perspective, these responses tell us that changing medications for nonmedical reasons can in some cases disrupt continuity of care, potentially leading to downstream costs or adherence issues.

Customer comment

Here is one comment from one of the survey participants:

“For short-term admissions in particular, we try not to change too many medications so as not to further complicate the discharge/treatment plan,” says Lynn Veith, RN, administrative director of care coordination at McLean Care in Simsbury, CT. “We evaluate the cost of the drug during the SNF stay, the cost to the patient postdischarge (to enhance continuity), and efficacy, but the bottom line is multiple changes in meds confuses the already changing situation, and very often patients do not know which drugs to take upon discharge, are frequently hesitant to stop a drug they already have and fill a new script. There is such a large amount of clinical time involved in verifying orders and so many inconsistencies in formularies or restrictions; forcing medication changes seem counterproductive, costly, and not in the best interest of the patient.” bcote@hcpro.com

Seven scripts vs. two per month

Dual-eligibles: They are modestly profitable to plans with the right controls in place and obviously a key customer for managed markets since they account for most of the pharmacy utilization in LTC—at over seven scripts per month, compared to 2.5 for all Part D beneficiaries combined. Plan approach to duals has evolved. Part D plans weren’t initially as aligned on benefit design as they should have been given the mechanics of reimbursement for these members, but that is changing, and some plans will get back into the benchmark business where premiums are highest. Stay tuned for the story in the next edition.