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Status Report: Medicaid Preferred Drug List Program
and Maximum Allowable Cost (MAC) Pricing
Presentation to:
Senate Finance Committee
Health & Human Resources Subcommittee
Patrick W. Finnerty, DirectorDepartment of Medical Assistance Services
January 26, 2004Richmond, Virginia
2
Presentation Outline
Background
Development of Preferred Drug List (PDL) Program
Status of PDL Program
Maximum Allowable Cost (MAC) Pricing Program
3
Medicaid Coverageof Prescription Drugs
Prescription drug coverage is an optional benefit. In Virginia, this coverage is provided through fee-for-service and managed care programs.
Virginia has instituted several provisions to control prescription drug utilization and spending: generic substitution, drug utilization review, manufacturer rebates, pharmacy lock-in for abusers, lower dispensing fees, and 34-day prescription limit.
Like most other states, Virginia is implementing a Preferred Drug List (PDL) Program to contain rising costs.
4
Fee-For-Service (FFS) Pharmacy Costs Have Increased 111% Since 1997
$201.2 $222.0$262.4
$298.4$342.0
$425.4$379.6
$0.0$50.0
$100.0$150.0$200.0$250.0$300.0$350.0$400.0$450.0
1997 1998 1999 2000 2001 2002 2003
Pharmacy Costs
Annual FFS Pharmacy Costs
(Millions)
Source: Statistical Record of the Virginia Medicaid Program
Net of drug rebates
5
FFS Pharmacy Costs As A Percentage of Total Medical Costs Is Increasing
8.9% 9.5%10.7% 10.9% 11.3%
11.9% 11.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1997 1998 1999 2000 2001 2002 2003
Source: Statistical Record of the Virginia Medicaid Program
FFS Pharmacy Costs As A Percentage of Total Medical Costs
6
Presentation Outline
Background
Development of Preferred Drug List (PDL) Program
Status of PDL Program
Maximum Allowable Cost (MAC) Pricing Program
7
What is a PreferredDrug List (PDL) Program?
PDL is a prior authorization program that divides Medicaid covered prescription drugs into two categories:– (1) Those that are available with no prior authorization, known as
“preferred” drugs.– (2) Those that are available with prior authorization, known as
“nonpreferred” drugs.
A “preferred” drug is selected based on safety and clinical efficacy first, then on cost effectiveness.
Many classes of drugs are not subject to the PDL program.
All clinical decisions regarding the PDL and prior authorization process are made by DMAS’ Pharmacy and Therapeutics (P&T) Committee.
8
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– Generate net savings of $9 million GF in FY 2003 and $18 million GF
in future fiscal years
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Role of P&T Committee
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
10
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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PDL Development Process
All Therapeutic Classes of Drugs
Pharmacy & Therapeutics Committee Recommends Drug Classes To Be Subject to PDL & PA
P&T Committee Recommends Drugs Within Each Class That Are Clinically Effective and Safe
Preferred Drugs
NO PDL PA Required
Non-Preferred Drugs
Drug requires PA
Cost Consideration
12
Key Drug Classes Were Excluded from 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
13
Critical Steps Taken in Development Process
Met with more than 30 interested parties (manufacturers, providers, pharmacists, advocates, state agencies, etc.) to solicit input into design of PDL program
Formed PDL Implementation Advisory Group
Developed a “Virginia-specific” program
Provided broad access to all PDL information through dedicated website and e-mail ([email protected])
ALL decisions regarding “preferred” and “non-preferred” drugs were made by the P&T Committee
14
Critical Steps Taken in Development Process
Developed extensive education program– Memorandum and reminder postcard sent to all providers– Information (English & Spanish) sent to all recipients– Regional and targeted training programs for pharmacists,
health systems, and provider associations– Extensive beta-site testing with community and long-term
care pharmacists– Individual, personal contact made with high volume Medicaid
prescribers and pharmacists
Implementation of initial drug classes has gone smoothly
15
Presentation Outline
Background
Development of Preferred Drug List (PDL) Program
Status of PDL Program
Maximum Allowable Cost (MAC) Pricing Program
16
PDL Program Is Being “Phased-In”
The goal of this “phased-in” transition process is to minimize the impact of the program on enrollees and providers.
Classes of drugs are being implemented on a quarterly basis: January, 2004; April 2004; and July, 2004 Additional phases/drug classes will be added as determined
by the P&T Committee
Implementation of each phase includes a period of “Soft” edits (message to pharmacist that future PA will be required) which precedes the “Hard” edits (PA required). “Soft” edits on the January, 2004 drug classes began on
January 5th; “Hard” edits are being implemented on a rolling basis beginning January 19 through February 23
17
13 Drug Classes Were Included in the PDL Program for January 2004
Therapeutic Class Description Proton Pump Inhibitors (PPIs)
H2 Antagonists
Nasal Steroids
Second Generation Antihistamines
Selective Cox-2 Inhibitors
HMG CoA Reductase Inhibitors (Statins)
Sedative Hypnotics
Beta Adrenergics
Inhaled Corticosteroids
ACE Inhibitors
Angiotensin II Receptor Blockers(ARBs)
Calcium Channel Blockers (CCBs)
Beta Blockers
Used in the Treatment of: Gastrointestinal Disorders
Gastrointestinal Disorders
Allergies, Asthma, Other Respiratory Illness
Allergic Conditions
Inflammatory Conditions
High Cholesterol and Dyslipidemia
Insomnia
Asthma and Other Respiratory Illness
Asthma and Other Respiratory Illness
Hypertension/Other Cardiovascular Illness
Hypertension/Other Cardiovascular Illness
Hypertension/Other Cardiovascular Illness
Hypertension/Other Cardiovascular Illness
18
Drug Classes To Be Added to PDL Program in April 2004
Therapeutic Class Description
Oral Hypoglycemics
Leukotrine Modifiers
Bisphosphonates
Traditional NSAIDs
Serotonin Receptor Agonists
Oral Anitfungals
Used in The Treatment of:
Diabetes
Allergic Conditions/Asthma
Osteoporosis
Inflammatory Conditions
Migraine Headache
Nail Fungal Infections
19
Review Of Additional Drug Classes
Ophthalmologic drugs will be added in July
P&T Committee will review antibiotics and long-acting narcotics at its February 9th meeting for possible inclusion in PDL in July, 2004
By April, 2004, the P&T Committee will have reviewed the top 50 therapeutic classes based on overall expenditures except those that have been excluded from the program and the antidepressants
20
Antidepressants (SSRIs)
Medicaid spent approximately $29.5 million in total funds (net of rebates) on SSRIs ($15.8), anti-anxiety drugs ($6.9), and new generation antidepressants ($6.8) in FY 2003
The SSRI drug class is the third highest in expenditures
– Generic forms of the SSRIs are coming onto the market
– “Grandfathering” patients currently on a SSRI eliminates concern regarding changing a patient’s drug regimen
Excluding the SSRIs, anti-anxiety drugs and new generation antidepressants from the PDL would cost approximately $5 million (total funds) annually; a “grandfather” provision would cost roughly half of this amount
21
Evaluation of PDL Program
DMAS will be conducting a thorough evaluation of the PDL Program to address the following key issues:– Has the PDL program been implemented in a way to ensure
a high rate of compliance without adversely affecting patient access/care?
– What impact has the PDL program had on Medicaid pharmaceutical spending?
– Has the PDL program impacted patient health outcomes for Medicaid clients?
22
Presentation Outline
Background
Development of Preferred Drug List (PDL) Program
Status of PDL Program
Maximum Allowable Cost (MAC) Pricing Program
23
Maximum Allowable Cost (MAC) Pricing for Generic Drugs
Currently, Virginia Medicaid reimburses pharmacies the Average Wholesale Price (AWP) of the drug minus 10.25% for brand and generic drugs
With multiple source generic drugs, pharmacies often can purchase them for far less than this amount (sometimes 40-60% or greater below brand costs)
Under a MAC pricing program, DMAS would reimburse pharmacies a “maximum” amount based on the cost that the drug can be purchased by pharmacies in the marketplace
– Provides an incentive for pharmacies to be prudent purchasers of generics
– MAC price would be set at a level that reflects pharmacies’ acquisition costs plus an appropriate profit
24
MAC Pricing for Generics
At least 35 other state Medicaid programs utilize MAC pricing for generics
MAC pricing is used throughout the commercial insurance market
State Medicaid programs and private insurers vary in how aggressive they are in setting their MAC pricing
The DMAS P&T Committee has recommended strongly that Virginia Medicaid implement a MAC Program
The MAC that is set for each drug must be reviewed and updated periodically to ensure appropriate pricing
DMAS estimates the net savings for its proposed MAC program to be $5.15 million (GF) in each year of the 2004-2006 biennium