Life Sciences

Medicare & Reimbursement Advisor Weekly, December 4th, 2009

Medicare & Reimbursement Advisor Weekly, December 4, 2009


Prior authorization costs: What are they?

Mild utilization and prior authorization requests not enough to gain preferred drug list status

How PDL committee tracks prior authorization trends

How practices deal with injectable administration denials; UnitedHealthcare among focus areas

Wholesale acquisition cost reimbursement uptake means more consistency for providers, payers

Prior authorization costs: What are they?

For those who are curious, prior authorizations (PA) may be a safety and utilization management tool but they come with a cost each plan must weigh, particularly for drugs that have high prescribing rates. Each PA can run a health plan anywhere from $40–$100, depending upon what the plan is reviewing, the level of medical information it has to reproduce, and other factors specific to the plan. For example, a plan may have greater efficiencies, therefore, lowering the overall cost. For a PA that Regence instituted for erythropoiesis-stimulating agent products (Aranesp, Procrit, and Epogen), the cost was in the mid-to-lower end of that scale because of a more in-depth review, said Lynn Nishida, RPh, a director in the clinical services department for Regence, a Medicare MA-PD plan.

Mild utilization and prior authorization requests not enough to gain preferred drug list status

The following is a brief lesson about the intricacies of Medicaid’s formulary committee process, use of data, and consideration of anecdotal feedback.

Donnie Battie, MD, a member of Loui- siana’s pharmacy and therapeutics committee, had recently received a number of requests from outside groups to reconsider placing the antibiotic Omnicef on the PDL for Medicaid patients. Battie raised the issue during a committee meeting earlier this year, although Omnicef’s drug class was not being reviewed. The committee allowed a brief discussion.

There has been significant switching from Omnicef to the PDL-covered options—about a 75% rate, said Kris Rawlings, PharmD, a representative of Provider Synergies, the company owned by Coventry Health Care. The switching has been on target with the committee’s savings expectation for this therapeutic class. There had been some utilization of Omnicef, suggesting that providers were seeking prior authorizations and getting them. The drug will be not be reconsidered for the PDL until the next class review.

Net spend and supplemental rebates

Coventry Health Care recently acquired Provider Synergies and First Health, making it the leading player, by far, in state Medicaid. If a therapeutic category has a net spend that shows up on Provider Synergies’ radar, it will demand a supplemental rebate from the pharmaceutical manufacturer. The weight of the category is assessed by total prescriptions and total spending.

If a category has dominant generic presence, then the risk is not as big of a deal, in which case, Provider Synergies will try to shift to the generic. Categories with solid brand presence are hot targets for supplementals.

How PDL committee tracks prior authorization trends

The chart below illustrates the number of prior authorizations (PA) approved by month in Louisiana for its Medicaid program. The yellow line represents July–December 2005; the orange line covers all of 2006; and the purple line gives you a glimpse of the first half of 2007 through June. The reason for the low number of PAs in September 2005 is because of Hurricane Katrina. Louisiana lifted PA requirements generally across the board in September 2005, and then once it reinstituted PA restrictions, the number of requests skyrocketed because “doctors were prescribing whatever drug they wanted without looking at the list,” says Germaine Becks-Moody, PhD, the state department of health and hospitals’ pharmacy program manager.

She notes that the P&T committee actually requested that the state track these data each month to help it understand the effect of its decisions. For example, if the committee opted to remove a drug from the PDL as of February 1, 2007, it might then look at the ensuing months to see whether physicians were switching to the PDL products, or requesting PAs, Becks-Moody explains. In this case, you can see from the chart that PA requests increased in March and then again in April “so the committee might ask us to look into the reason and, could, in theory, adjust its decision if the trend continued,” she says.

Editor’s note: To read Louisiana’s April 2008 formulary, click here.

How practices deal with injectable administration denials; UnitedHealthcare among focus areas

As you approach your commercial accounts, keep these trends in mind that are hurting your physician customers. Cheris Craig, MBA, practice administrator at Atlanta Women’s Obstetrics & Gynecology, has seen a double-digit percentage increase in inaccurate eligibility denials, particularly for plans out of the area, even though the Women’s Obstetrics & Gynecology’s practice verifies each patient’s benefits before an appointment. Craig has also seen an upsurge in payer denials for injectable administrations. For example, take the vaccine Gardasil. “When we administer the injection during a patient’s annual, several large insurers ... especially UnitedHealthcare, bundle the services by paying us for the injection, but denying the [current procedural terminology] code for the exam. We’ve had to appeal every one of those ... and we’re not the only practice. We have the same trouble if we bill for flu vaccines, so we don’t. We require cash up front,” Craig says. The practice does not have a large Medicare population and does not accept Medicaid patients, so the flu vaccine issue is not a problem. To deal with the Gardasil issue, Craig’s team initially required patients to return for an additional visit, but many did not show up, so now they simply do not bill the injection code. “With such a popular medication that’s given in a series, by the time you figure out insurers are not paying for the visits, you’ve already given two shots,” Craig says.

Tier position, specialty pharmacy a focus for PBM

Editor’s note: MRAW will be running a series of PBM and Medicare Part D plan interviews in August and September. The following is a look at a recent interview that 25 Part D plan pharmacy directors, and 52 commercial health plan pharmacy directors asked for copies of.

Using the Academy of Managed Care Pharmacy dossiers and clinical guidelines, such as the American Diabetes Association, and the United Kingdom’s Parkinson’s Disease Society as a pharmacoeconomic guide, PBM HealthTrans puts pharmaceutical products into three buckets. “We have a clinical bucket, where your drug is considered a significant advancement in therapy; so, in this case, we must make sure it’s available on a preferred basis. The second bucket is for products that are clinically inferior in some way—maybe they don’t have outcomes—so they’re nonpreferred. The third bucket is for me-too products,” says Ryan Haynes, RPh, pharmacy director and rebate director.

Like other commercial plans and PBMs, HealthTrans is trying to figure out what it can do to better manage its specialty medication spend. “We have all the [prior authorizations] and step therapy edits in place, but we’re considering other avenues,” says Haynes.

Under consideration are these options:

  • A specialty-only formulary, featuring different tiers focused on specialty products
  • Benefit design: 2% copay or a percentage copay for preferred, 10% for nonpreferred

“There are a few growth hormones for example, all quite expensive with similar indications and similar administration routes, so maybe we can drive utilization [by managing] that category,” Haynes says.

HealthTrans does build other types of formularies and benefit designs for plans and employers. Some of the union groups typically provide more robust benefits, including more brands, Haynes says, so we’re helping them shift less responsibility to their members.

Haynes previously worked with CareMark Advance PCS and McKesson Specialty. “I’m looking to start establishing relationships with pharmaceutical manufacturers,” he says. Asked what HealthTrans’ major needs from pharmaceutical account managers are at this stage, Haynes lists:

  • Educational opportunities for our pharmacists
  • Therapeutic review support
  • Pipeline presentations
  • Disease education

Wholesale acquisition cost reimbursement uptake means more consistency for providers, payers

The following are some trends circling in the reimbursement universe:

  • First Data Bank is listing pharmaceutical manufacturer–suggested pricing for drugs and biologics at 20%–25% of wholesale acquisition cost (WAC). On the flip side, another WAC model has emerged: it’s the list price that the wholesaler pays to the drug company.
  • Major managed care plans, such as CIGNA and Aetna, continue to use average wholesale price (AWP), but use the WAC as well—typically reimbursing at WAC +5% up to WAC +9%, says John Aforismo, Pharm, RPh, partner at RJ Healthsystems in Wethersfield, CT. RJ Healthsystems released a new WAC methodology this month for the commercial payers to use for reimbursing physicians, mail-order pharmacies, and specialty pharmacies.
  • Although more than 70% of commercial contracts are tied to AWP (usually AWP minus something such as 18%–23% for home infusion companies), there’s uptake in the WAC model because it carries less fluctuation than AWP, and payers and providers like that.
  • Plans are using average sales price (ASP), mostly for physician groups, and the ranges are often tied to various outcomes and other contractual arrangements, such as aligning around hematocrit level dosing guidelines. ASP +6% up to ASP +24% is a wide range but represents where payers are willing to go with ASP for certain physicians.