Life Sciences

Medicare & Reimbursement Advisor Weekly, February 18th, 2009

Medicare & Reimbursement Advisor Weekly, February 18, 2009



Does your drug help customers meet quality regulations?

Nursing home residents are at high risk of falls and other injuries during the first week of admission, when the resident is new to the facility. Occasionally, the first fall causes serious injury, but often there is more than one fall with no injuries before a fracture or other serious injury occurs. No risk-screening tool alone will identify all at-risk populations or risk factors. In reviewing a resident’s current medications, the interdisciplinary care team—nurse, medical directors, consultant pharmacist—are now under more pressure to reduce the medications that could cause side effects that could lead to a fall, says Tawana McCrory, RN, director of nursing at Russellville (AL) Healthcare. In your approach to the LTC market, it will be important to figure out if or how your drug helps a facility meet quality regulations under Medicare, such as this F-tag, says Malcolm Fraser, MD, president of Bay Geriatrics in St. Petersburg, FL.

To help guide you, Barbara Acello, MS, RN, author and faculty member for HCPro, Inc., says risk factors typically identified at the time of admission include the following:

  • Resident has history of stroke, cognitive impairment, arthritis, incontinence, and various other cardiovascular, neuromuscular, orthopedic, or psychiatric diagnoses
  • Delirium
  • Resident is acutely ill or has a condition that alters the ability to metabolize and excrete drugs
  • Resident is taking antipsychotics, antianxiety drugs, sedatives/hypnotics, antidepressants, cardiovascular medications, laxatives, or diuretics
  • Resident takes four or more drugs daily
  • Resident has a history of previous falls

Editor’s note: Excerpted from HCPro’s The Long-Term Care Nursing Desk Reference.



Physician reaction

When brands are more cost-effective for Part D plans

Editor’s note: The following is an updated version of a column I wrote in 2008. We are looking to update this piece further, surveying both plans and physicians. If you’d like to discuss this topic, contact me at or 860/232-6377.

Under certain circumstances, it may be more cost-effective for Part D plans when a brand- name medication is prescribed. Here’s one hypothetical we’ve discussed before: Let’s say you work for a pharmaceutical company and have recently launched a medication in a fairly crowded class of drugs, and your team contracts aggressively with good discounts to the plans. Because many plans offer low to no copays for first-tier medications, the net price to the plan may actually be more for the generic than your branded agent, after rebate and member copay. Juxtapose this with the fact that many physicians write the generic for the Part D patient because of patient concerns about reaching the donut hole/coverage gap. This puts plan sponsors in a difficult position, since they heavily promote generics, but in this particular situation, it costs them more.

Do the plans stay on message, or promote your branded agent over generics? Another concern plan sponsors have is when physician’s prescribe the branded drug, but do so by giving the patient multiple lower strengths when a higher strength exists (e.g., four 2.5 mg pills vs. one 10 mg pill).

There has been a trend toward flat pricing across each dose (a relatively recent example is Forest’s Bystolic), so that each dose costs the same price. Plans like this because if the patient has a dose increase, the net price to the plan remains the same. This helps to reassure plans regarding “dose creep” concerns. However, when the doctor prescribes multiple lower doses rather than one higher dose, it drives plan prices up. Plans may require “dose optimization” quantity limits as part of the rebate contract before adding it to their formularies.

Prescriber preference

In a polling question posted earlier this month on the Physician’s Daily page of our HealthLeaders Media Web site, we found that 72% out of 210 responding physicians prefer to write a shorter-length prescription, such as a month’s supply, rather than a three-month supply for new medications the patient has never taken.

“I’m worried about the adverse effects if it’s a new medication or new to the patient, so a three-month supply doesn’t make clinical sense to me, but it seems we’re encouraged to prescribe that way,” commented one anonymous respondent from Indiana.



Survey snapshot

Clinical vs. contracting strategy: What works best for new line extensions?

How have manufacturers of the most recent line extension products to hit the market achieved unrestricted access to them, be it a tier-2 position or tier 3, without any step edit or prior authorization? What strategy—clinical or contracting—works best? The following is one view, suggesting a mixed approach:

  • Reduce WAC (wholesale acquisition cost), compared to the existing product pricing
  • Prove that the new product does not extend patent life
  • Offer incremental discounts on both products

Note: That strategy was shared by a few plans who asked not to be named.

Other plans say line extensions offer little clinical value to a payer, which is why most manufacturers need to take a contracting approach—period, sometimes even to the point where the plan may lose all rebates on the existing product unless the line extension is included, or may be a reduced rebate on the existing product.



Reporter's notebook

IBM backs UnitedHealthcare medical home pilot

A medical home pilot program is now open to UnitedHealthcare’s (UHC) employer-sponsored, Medicare Advantage and Medicaid health plan customers and will include four to six primary care practices from UHC’s physician network in Phoenix and Tucson, AZ. UnitedHealthcare will provide selected primary care practices with technology, infrastructure support, and care coordination; with the goal of leveraging improved information systems to enhance patient access to care, the quality and safety of the care experience, and patient satisfaction with healthcare providers. UnitedHealthcare is IBM’s largest health plan in Arizona, serving nearly 11,000 beneficiaries. In support of the pilot, IBM will encourage these employees to seek primary care services from the physicians participating in the pilot program.

BCBS of Rhode Island to raise reimbursement for primary care

In a move designed to entice medical students to enter into primary care and to give current primary care physicians (PCP) greater reimbursement for spending more time with patients and reducing hospitalizations, Blue Cross Blue Shield (BCBS) of Rhode Island plans to roll out an initiative soon. Currently, the plan pays PCPs $3 per member per month, but this will increase under the initiative, a spokesperson confirmed. The program dovetails with a pilot BCBS and UHC helped fund—with three nurse case managers being paid under the program to more closely manage patients. Results are expected in the fall of 2011.

Utilization could rise due to disease assessment rules

Opportunities for increases in drug utilization are likely a result of a revised regulation affecting your nursing home customers, but education is missing. “The MDS 3.0 [a nursing home documentation/regulation system] is intended to help increase incidence of disease recognition and, ultimately, treatment for certain conditions,” says Diane Brown, former CMS surveyor and current HCPro, Inc., regulatory specialist and instructor. Several pharmaceutical therapy categories have the potential to build up appropriate utilization and, in some cases, perhaps a greater outcomes story in the Medicare Part D evolution. The early winners are diseases of the central nervous system, mainly depression and pain management. Certified nurse assistants will play an increasingly greater role in meeting these regulations, but there are gaps in education and training to carry out the assessments, according to 92% of nursing directors at 161 nursing homes during an HCPro, Inc., online polling question February 9.

Interestingly, interviews with patients (i.e., residents) will become of more importance in assessment and treatment decisions, including cognitively impaired residents.

Editor’s note: A blog is dedicated to following this topic. Visit For more information or to schedule an in-service for your team about these changes and how to leverage them, contact the editor at



Medication monitoring changes in LTC segment

F-tag #329 is a requirement confronting your LTC facility customers as of January 2007 to reduce the unnecessary use of prescription drugs, gradually reduce doses, and mandate the clinical team to ensure that patients are meeting the goals of their therapy. Since the requirement took effect, physicians are resisting gradual dose reduction if they have a patient on a treatment plan that’s been working. “They don’t like the idea that they have to change what’s already working just because it’s a rule,” says Tawana McCrory, RN, nursing director at Russellville (AL) Healthcare. “The nursing home industry relies very heavily on pharmacists to help with this,” says McCrory.

“Sometimes the physician has revisited the issue of gradual dose reduction but simply fails to document that fact,” says Carol Rolf, Esq., senior partner at Rolf & Goffman in Cleveland. “A nursing facility needs to be able to prove that the issue was revisited at least quarterly, and if the decision is to continue with the medication, the doctor should document why he/she made that decision,” says Rolf. “F-tag #329 is becoming highly cited by Medicare surveyors. I don’t think I have a single client that hasn’t been cited on it this year.”

Facilities have to make sure they are charting the following:

  • Outcomes of the medication
  • Adverse reactions
  • Side effects
  • Dose changes

“There is a new aspect to the citations on PRN medications,” says Rolf. “In the past, if a resident was anxious, or even if they just requested the PRN medication for anxiety, for example, you gave them the medication, and the documentation was not questioned.” Now, Medicare surveyors are looking for specific documentation in the nurses’ notes of the medical symptoms present to justify the medication, as well as the alternative methods tried to relieve those symptoms before the PRN medication is administered, Rolf explains, adding that the interpretive guidelines suggest trying massage therapy first before an antianxiety drug is administered.



HMOs seek new model

HMO representatives in the Northeast have been attending educational sessions to learn about Medicare’s Part A payment system and how it works for LTC, says Diane Brown, HCPro, Inc., regulatory specialist and instructor. Anecdotally, we’re hearing that HMOs are having difficulty with Medicare Part C due to— among other things—the costly need for case managers in Part C. As a result, some have attended these Part A sessions “since they are considering adopting a Medicare Part A model” for their HMO, Brown says.



Blocking access: Closed formulary article generates wave of letters

In response to the closed formulary article in the February 4 MRAW, we received more than 30 letters and e-mails, including 13 from plans. Some managed markets readers say they have shared the article with their contracting folks to help them with forecasting. The idea that closed formularies can extend beyond the plan and change a physician’s behavior across all plans is an important takeaway, which many of you agreed with.

Losing new prescriptions if blocked out of a closed formulary has a kind of sentinel effect, according to some managed care plans because at the point of clinical decision-making, behavior begins to change. The patient, pharmacist, and physician may file for a coverage determination or perhaps switch to a generic or an on-formulary brand because of messaging at the retail pharmacy, but clearly the brand will lose many new prescriptions.

Paul Lakomski, RPh, MBA, regional pharmacy director at WellPoint NextRx, agrees to a point. “I agree [with this], although I would not call a [National Drug Code (NDC)] block a sentinel effect. We usually refer to sentinel effect for a product that has an edit on it (like a step or NDC block), even though you most likely will approve the medication. But just knowing there is an edit reduces the number of requests for the drug that most likely would not be approved. Plus, only those that truly need the therapy would apply for one,” Lakomski says.

Denied access agreements

Closed formularies create an environment that is difficult for manufacturers and prescribers to navigate.

For example, when manufacturers launch with aggressive campaigns to contract for access, there are a lot of plans that won’t entertain access agreements for a period that ranges from six to 12 months. NDC blocks make trial and usage by patients and doctors really difficult in those situations.

When Lakomski was a director at a small plan, he implemented a moratorium period on any new drug. This was actually quite common in hospitals, and many of the P&T physicians had a self-imposed moratorium of six to 12 months on new drugs as well. The reasoning behind this is that clinical trials often do not reveal all of the potential side effects when used in a real world population, so they did not want to use their patients as guinea pigs. There have been many instances, in which drugs once on the market have shown severe or even fatal side effects when used in the general population and not under the rigid control or guidance of a clinical trial, Lakomski says, citing Bextra/Vioxx and any of the other recently pulled drugs. This is a safety step.

“For drugs that are truly groundbreaking, there is always a way to get the medication through the appeals process and this also limits the trial-and-error uses that could be potentially harmful to the patient,” Lakomski says. “If we are talking about a new therapy that will extend life or significantly alter a disease state, there will be a way for the patient to get the medication. If we are talking about the latest once-daily antihypertensive, with a novel mechanism of action when there are a multitude of options proven not only to reduce blood pressure but reduce morbidity and mortality (which is often not the case for the new entry), an NDC block or moratorium is appropriate.”

Some plans ask why they would take a discount on a short-term basis to allow for the manufacturer to gain leverage. From the plan’s view, manufacturers ought to rely on their clinical studies and product labels if they want quick access. Plans also look at demand. If a plan has multiple coverage determinations for a new drug, they are typically more willing to consider a formulary position due to input from the prescriber community.

Separating THE noise from control

A key point for the industry will be to separate the noise from control. Closed formularies with NDC blocks and step edits have a lot of control, and result in lower plan costs. An open formulary with a lot of communication produces noise, but not much control. Communication could be retrospective formulary change programs designed to move patients from tier-3 agents to tier 2 or generics. These communications (e.g., faxes, letters, coupon programs aimed at doctors or consumers) have a much lower conversion rate compared to a closed formulary, but tend to be perceived as less disruptive.

Pharmaceutical manufacturers need tools to determine whether a given plan manages with edits or just noise. Tools may be internal models to look at actual share migration when formulary positions are lost. Manufacturers, if they haven’t already, need to inventory a plan’s ability to move share.

Without access, expect to lose 90% of Rx volume in closed formulary

In a closed formulary, the NDC block removes a lot of new prescriptions for a given brand. Your managed care customers are seeing migration to the generics and other formulary agents. Depending on how rigid a closed formulary is, your branded agent left out could lose 90%–95% of those scripts. Consider a company that invests in its sales force and generates 1,000 new scripts in one month: with an NDC block, the scripts aren’t filled, and, typically, the patient would end up with the generic or, in some cases, a script for the on-formulary brand.

If your company’s managed markets strategy is to get access to your product with closed formulary plans, that’s probably smart. Contracting is the key to access because, without it, you could lose around 90%–95% of your volume (i.e., 950 out of those 1,000 scripts). With step edits, the effect is less, but you could still lose around 50%–70% in volume if your drug is restricted in this way.

Pharmaceutical manufacturers will need to adapt their contracting strategies to accurately determine a plan’s level of control. It is imperative that manufacturers segment the market into plans with open versus closed formularies.

Most plans in Medicare D have some closed formularies, as you know. Closed formularies and the use of NDC blocking are a great cost-control strategy for plans because they drive the brand cost down. —BC