The Medicare Part D Prescription Drug Benefit

1
The Medicare Part D Prescription Drug Benefit

• Understanding the Formulary Requirements and
  Related Implications

Michael Sharp, R.Ph, Pharmacy Consultant Office
of Medicaid Policy and Planning, State of
Indiana Michael.Sharp_at_fssa.in.gov
2
Areas of Focus

• Basic benefit principles, fundamental formulary
  requirements and CMS review processes
• Exceptions/Appeals overview
• Formulary implications for dual-eligibles and the
  Indiana Medicaid approach
• Implementation considerations, timeline and
  recommended resources

3
Medicare Coverages
Part A Hospital insurance for inpatient stays, some skilled nursing facility care, hospice care and home health care
Part B Medical insurance for physician services, outpatient hospital care, durable medical equipment, some medical supplies and selected drugs
Part C Medicare Advantage (MA-PD) for benefits through private health plans old MedicareChoice
Part D Prescription drug benefit for persons eligible for Part A or enrolled in Part B
4
Medicare Prescription Drug Benefit, 2006
and Beyond

• Beginning in 2006, beneficiaries have choice
  of  
•  
• Traditional Medicare, with access to private
  drug-only plans (PDPs)
• Medicare Advantage (MA-PD) plans for Medicare
  benefits and Rx drugs
• New plans provide standard prescription drug
  benefit or its actuarial equivalent
• Plans have some flexibility to determine which
  drugs are covered and cost-sharing requirements,
  subject to certain constraints
• Premium and cost-sharing subsidies for low-income
  beneficiaries with incomes up to 150 poverty and
  modest assets
• Medicaid will no longer pay for Medicare D
  covered drugs after December 31, 2005

5
Medicare Prescription Drug Plans

• Must offer basic drug benefit
• Standard benefit
• May offer supplemental benefits
• Alternative Benefit
• Enhanced benefit
• Can be flexible in benefit design
• May look different than standard benefit
• May have different co-pay or co-insurance
• Cannot change actuarial equivalence

6
Part D Sponsors Risk-Bearing Entities

• Prescription Drug Plans (PDPs)
• Pharmacy Benefit Managers
• Private Insurance Companies
• Medicare Advantage-Prescription Drug (MA-PDs)
• Must offer at least 1 option for Rx coverage
• May offer plans with no drug coverage for
  beneficiaries who decline Part D coverage
• May offer Special Needs Plans, focusing on Duals
  selected diagnoses

7
Formulary Coverage Fundamentals

• CMS says clinically appropriate medications, at
  lowest possible cost
• Formularies must not discriminate against
• Individuals with HIV/AIDS, mental health and
  other cognitive disorders
• The Dual eligibles
• CMS utilizes the USP formulary classification
  model as the minimum benchmark for formulary
  appropriateness
• USP model consists of 146 therapeutic
  classifications and related pharmacologic
  categories
• Plans must accommodate all medically necessary
  medications at all levels of care

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Medicare Prescription Covered Drugs

• Prescription drugs, biologicals and insulin
• Medical supplies associated with injection of
  insulin (syringes/swabs/etc)
• Cases where a drug is not FDA approved for an
  indication but it has clinical literature to
  support its use
• Vaccines not covered by Part B
• Viagra, Levitra and Cialis
• Brand name and generic drugs will be included in
  each formulary
• Less for generics or preferred Rx, more for
  brands. Multi-source brand name products can be
  excluded.

9
Formulary Requirements

• Plan formulary must be developed by a Pharmacy
  and Therapeutics Committee
• Formulary must include at least 2 drugs in each
  therapeutic category and pharmacologic class of
  covered Part D drugs and in certain categories,
  must contain all or substantially all of the
  following medications

• Antidepressants
• Antipsychotics
• Anticonvulsants

• Antiretrovirals
• Antineoplastics
• Immunosuppressants

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Part D Drug Exclusions

• Drugs for
• Anorexia, weight loss, or weight gain
• Fertility
• Cosmetic purposes or hair growth
• Symptomatic relief of cough and colds
• Prescription vitamins and mineral products
• Except prenatal vitamins and fluoride
  preparations
• Non-prescription (OTC) drugs, with the exception
  of OTC insulin
• Barbiturates
• Benzodiazepines
• Outpatient drugs for which the manufacturer seeks
  to require that associated tests or monitoring
  services be purchased exclusively from the
  manufacturer or its designee as a condition of
  sale
• Plans may choose to pay for OTC products as an
  administrative cost, with the member not
  incurring a co-pay, these products do not count
  towards formulary requirements.

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Part D Drug Exclusions (cont)

• Part A Prescriptions
• In skilled nursing homes up to 100 day stay
• Related to the terminal illness for hospice
  patients
• Part B Outpatient Drugs
• Durable Medical Equipment Drugs (e.g., inhalation
  therapy, insulin w/pumps some
  chemotherapeutics)
• Immunosuppressive Drugs
• Hemophilia Clotting Factors
• Selected Oral Anti-Cancer Drugs
• Selected Oral Anti-Emetic Drugs, up to 48 hrs
  after chemotherapy administration
• Erythropoietin for persons on dialysis
• Intravenous Immune Globulin, provided in the home

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PT Committee Requirements

• Membership includes the following
• The majority are practicing physicians and
  pharmacists.
• Various clinical specialties that reflect the
  needs of the plan beneficiaries.
• At least one practicing physician and pharmacist
  who are experts in the care of the disabled or
  elderly.
• CMS provides extensive guidance on the
  expectations surrounding the composition and
  activities of the PT committee

13
Formulary Review Rationale

• Medicare Modernization Act requires CMS to review
  formularies and related processes to ensure
• Beneficiaries have access to a broad range of
  medically appropriate drugs to treat all disease
  states, and
• Formulary design does not discriminate or
  substantially discourage enrollment of certain
  groups

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Formulary Review CMS Validations

• Checks for appropriate utilization management
  strategies
• Checks for two drugs per USP category and class
• Checks for Key Drug Types as defined by USP
• Checks for the most common drugs used in the LTC
  population
• Checks all or substantially all requirement

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Formulary Considerations

• Safety and Efficacy
• Cost-effectiveness
• In general, formulary design will be similar to
  that of commercial plans today, with the added
  benefit of CMS oversight for adherence to
  published guidelines.
• The federal government cant negotiate or
  mandate pharmacy payment rates or manufacturer
  rebate levels

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Provision of Notice Regarding Formulary Changes

• Prior to removing/changing drug from formulary
  the plan must
• Provide 60 days notice to prescribers, network
  pharmacies, pharmacists and other health plans
• CMS will review and approve modifications
• For enrollees, must provide either
• Direct written notice at least 60 days prior to
  date the change becomes effective, or
• At the time a refill is requested, provide a 60
  day supply of drug and written notice

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Exception Requests

• Enrollees or their authorized representative may
  request an exception when
• A non-formulary drug is prescribed and is
  medically necessary
• The cost-sharing status of a drug an enrollee is
  using changes
• A drug covered under a more expensive
  cost-sharing tier is prescribed because the drug
  covered under the less expensive cost-sharing
  tier is medically inappropriate
• The enrollee is using a drug that has been
  removed from the formulary
• Ensures access to medically necessary Medicare D
  covered prescription drugs

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Cost and Utilization Controls

• Prior Authorization
• Step Therapy
• Quantity Limits
• Frequency Limits
• Generic Substitution
• Drug Utilization Review-Prospective and
  Retrospective
• Tiered formulary design

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Appeal Processes

• 1st Step Plan Re-determination
• 7 days to respond
• 72 hours, if expedited
• 2nd Step IRE Reconsideration
• Independent Review Entity (IRE), CMS contractor,
  which reviews plan redeterminations
• 7 days to respond
• 72 hours, if expedited
• 3rd Step Administrative Law Judge
• Must satisfy minimum amount requirement
• 4th Step Medicare Appeals Council
• 5th Step Federal District Court

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Characteristics of Medicare Population
Nursing Home/Assisted Living Resident Under Age
65 Disabled Dual Eligible Cognitive
Impairment Rural Fair to Poor Health1
Functional Limitation Low-Income lt 150 FPL
Excludes Part A only beneficiaries
Percentage of Total Medicare Population
Sources Kaiser Family Foundation based on
Medicare Current Beneficiary Survey, 1997-2002
and Low income estimate from CBO, July 2004
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Issues for the Duals

• What happens, when they
• Ignore notices regarding Rx changes
• Dont know how to use their assigned plan
• Learn the drug Medicaid paid for isnt covered by
  their new Medicare plan
• Have higher out of pocket costs for copays, non -
  covered drugs

22
Formularies Transition Process

• Plans have flexibility, but CMS guidance expects
• 1-time transition supply for new enrollees
• Ambulatory 30 days
• Nursing Home 90 to 180 days
• 1-time temporary emergency supply for others
• For changes in level of care (nursing home, acute
  hospital, hospital, etc.) or during appeals

Drug plans that want to serve Medicare
beneficiaries enrolling in the new prescription
drug benefit next year must meet strict standards
to assure that older and disabled Americans will
be able to make the transition to the new
coverage smoothly. Mark B. McClellan, March 16,
2005, CMS Press Release
23
Indiana Medicaid Specific Approach for Dual
Eligibles

• Indiana Medicaid will continue to cover
  Medicare D excluded drugs to the extent that they
  are covered in the Medicaid program today.
  Current dual population estimated at 100,000
  lives.
• Examples
• Over the counter drugs on the Indiana Medicaid
  formulary
• Agents for treating symptoms of cough/colds and
  prescription vitamins
• Barbiturates and benzodiazepines

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Everyone Agrees Its Difficult to Comprehend
all the Details

• You choose a prescription drug plan and pay a
  monthly 35 premium. Okay, now it gets a little
  complex
• - Readers Digest, April 2004

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Decisions for Medicare Beneficiaries
Medicare Beneficiary
Do Not Enroll in Part D Plan
Enroll in Part D Plan

• Medicare Advantage
• HMO
• PPO (regional)
• Private
  Fee-for-Service

• Traditional Medicare
• Prescription Drug-Only Plan (PDP)

Apply for Low-Income Subsidy
No Rx Coverage (late enrollment penalty)
If Dual EligibleAuto-Enrolled
Creditable Employer Plan (no low-income
subsidies)
Social Security
Medicaid

• Decisions to be Made
• Premiums
• Covered Drugs
• Cost-Sharing

If meet income and asset test, qualify for
subsidy
Medigap Coverage (but not creditable late
enrollment penalty)
Below 100 FPL (9,570 in 2005)
Below 135 FPL (12,920 in 2005) Assets
6,000/single 9,000/couple
Below 150 FPL (14,355 in 2005)
Assets 10,000/single 20,000/couple
Source www.kff.org
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Unfortunately, you have what we call no
insurance.
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Issues for Practicing Physicians

• Assisting beneficiaries with understanding the
  new coverage available
• Motivating patients to take action and apply for
  the benefit that comes closest to meeting their
  needs
• Navigating multiple drug formularies
• Coordinating prior authorizations appeals
• Comprehending the ongoing changes that will
  likely occur

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Medicare PrescriptionDrug Benefit Positive
Effects

• Enhancement of existing Medicare benefit package
• Access to subsidized prescription drug coverage
• Improved availability and compliance with
  treatment regimens
• Improved health and reduction of adverse health
  effects

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Medicare Prescription Drug Benefit Timeline

• January 21, 2005 - Final Rule Published
• June 6 - Bid submission
• July - Finalization pharmacy contracts
• September 14 - PDPs announced
• October 1 - Marketing begins
• October 13 - Prescription Drug Plan Finder Tool
  rollout
• November 15 - Enrollment begins
• January 1, 2006 - Benefit begins
• May 15, 2006 Last day to enroll before late
  enrollment penalty

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Sources of Information

• CMS Website
• www.cms.hhs.gov/medicarereform/pdbma
• www.hhs.gov/medlearn/drugcoverage.asp
• www.cms.hhs.gov/medicarereform/factsheets.asp
• www.cms.hhs.gov/medicarereform/drugcoveragefaqs.as
  p
• www.cms.hhs.gov/partnerships/news/mma/default.asp
• www.cms.hhs.gov/mailinglist
• www.cms.hhs.gov/providers
• http//www.cms.hhs.gov/medlearn/drugcoverage.aspt
  rain
• 1-800-Medicare
• Social Security Administration
• www.ssa.gov Look under Medicare Outreach
• Kaiser Family Foundation
• www.kff.org/rxdrugs/index.cfm
• United States Pharmacopoeia (USP)
• www.usp.org/HealthcareInfo/mmg/