Status Report: Medicaid Preferred Drug List Program and Maximum Allowable Cost MAC Pricing

1
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, Director Department of
Medical Assistance Services
January 26, 2004 Richmond, 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
Annual FFS Pharmacy Costs (Millions)
Net of drug rebates
Source Statistical Record of the Virginia
Medicaid Program
5
FFS Pharmacy Costs As A Percentage of Total
Medical Costs Is Increasing
FFS Pharmacy Costs As A Percentage of Total
Medical Costs
Source Statistical Record of the Virginia
Medicaid Program
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 (PT) 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 (PT) 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

9
Role of PT Committee

• The PT 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 PT 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) Edloes Pharmacies

11
PDL Development Process
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
  (pdlinput_at_dmas.state.va.us)
• ALL decisions regarding preferred and
  non-preferred drugs were made by the PT
  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 PT 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
• PT 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 PT 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 patients
  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 PT 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