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In this month's piece we briefly describe some of the
trends in the rising utilization and costs of pharmaceuticals
in the U.S., and we summarize strategies and techniques
in prescription drug management utilized by employers,
insurers, physicians, and patients.
Trends
Expenditures for prescription drugs were $122 billion
dollars in 2000, nearly double the amount spent in 1995.
According to the Office of the Actuary for the Centers
for Medicare and Medicaid Services, these expenditures
are expected to reach $161 billion in 2002 and to increase
at an average annual rate of 12.6% through 2005. As
a percentage of total U.S. national health care expenditures
in 2000, prescription drugs accounted for 9%, compared
to 32% for hospital care and 22% for physician/clinical
services.
A number of factors have contributed to the growth
of pharmaceutical expenditures. Increasing utilization
(the numbers of prescriptions dispensed), rising prescription
costs, and the introduction of newer, more expensive
drugs have all had a significant effect. Also, the introduction
of "blockbuster drugs," such as Vioxx and
Celebrex, and large increases in Direct-to-Consumer
(DTC) advertising by pharmaceutical companies have had
noticeable effects.
Role of Employers
As purchasers of health insurance benefits, many employers
are reconsidering their cost-sharing strategies to contain
prescription drug spending. Employers that contract
the pharmacy benefit of their health insurance plan
through managed care organizations (MCOs) and pharmaceutical
benefit managers (PBMs) have adopted the cost-containment
strategies of these organizations, notably the three-tier
formulary. The most common three-tier formulary has
the following structure: patients have one copay for
generic drugs, a higher copay for preferred drugs, e.g.,
brand name drugs with no generic equivalent, and the
highest copay for non-preferred drugs, e.g., brand name
drugs with a generic equivalent.
Self-insured employers have been slower to adopt multi-tier
formularies. Studies by Bymark and White and by Mercer,
Inc. indicate that (1) these employers do not believe
that the potential cost-savings justify the increased
complexity and new rules for enrollees, and (2) these
employers have both a lower tolerance for employee dissatisfaction
and greater sensitivity to productivity issues related
to prescription drugs.
Surveys by Hewitt Associates of employers of various
sizes revealed that the pharmacy benefit design tactics
(e.g., use of a three-tier formulary, increasing copays,
reviewing exclusions, and having a closed formulary)
are still fairly standard throughout private industry.
The two design tactics that were most favored by respondents
in 2002 were the use of a three-tier formulary (60%
of respondents) and increasing copays (51%).
Role of Insurers
Prescription drug strategies employed by managed care
organizations (MCOs) can be categorized as: increased
patient cost sharing, restrictions on choice of drugs,
and restrictions on the choice of pharmacy. To implement
these strategies, MCOs use copayments, deductibles,
and tiered-formularies that encourage generic and therapeutic-equivalent
substitution.
Presently, the most popular MCO strategy is the three-tier
formulary with copayments. According to a Scott-Levin
report, 44% of HMO members had a three-tier pharmacy
benefit in 2001, with a projected increase to 62% in
2002. A growing number of MCOs, including Humana, are
either implementing or considering a four-tier formulary
pharmacy benefit. The fourth tier would include lifestyle,
biotech, cosmetic, and self-injectable drugs. The four-tier
approach would represent a dynamic shift in formulary
design since it would force patients and providers to
switch from the current brand- versus-generic model
to a low-cost/high-cost model that focuses on the cost-effectiveness
and efficacy of a particular drug.
MCOs must exercise great caution when implementing
radical pharmacy benefit design. Not only must they
carefully scrutinize each new drug that they add to
the formulary based on cost and efficacy, but they must
tailor the formulary to meet the needs of their constituents
- employers, providers, and patients. MCOs must engage
in considerable efforts to educate providers and patients
regarding the rationale behind the formulary and demonstrate
to employers that the formulary is providing cost-savings.
Role of Physicians
Physicians control the vast majority of discretionary
spending on prescription drugs through their prescribing
patterns. Strategies to impact physicians include evidence-based
academic detailing, multidisciplinary education, drug
utilization review (DUR), and pre-authorization. Another
tool for altering physician prescribing behaviors is
the use of automated decision support systems. (See
THCI 's Topical Issue, May/June 2002, Quality and Clinical
Decision-Support Systems.)
Physicians can take steps to increase their adherence
to a formulary and to educate their patients. One important
action is to promptly review a new or revised formulary,
taking note especially whether drugs they prescribe
frequently are formulary items. Another recommendation
for physicians is to make a "cheat sheet"
composed of a grid of each plan's preferred, covered
drugs for the most commonly prescribed therapeutic classes.
Long-term and very expensive medications should be highlighted.
Physicians should also note pricing issues regarding
different dosages and the methods in which a prescription
for a medication can be filled.
Finally, pharmaceutical care can be improved through
collaboration between physicians and pharmacists. Pharmacists
often have a more complete picture of a patient's current
prescription profile and can provide useful feedback
to a physician regarding a patient's care. (For more
on this topic, see THCI's online course, Emerging Roles
of Pharmacists in Collaborative Care Delivery.)
Role of Patients
Patients are aware of increasing copayments for prescription
drugs. According to the Kaiser Family Foundation's "Employer
Health Benefits 2002 Annual Survey," average copays
in three-tier formularies have increased significantly
from 2000-2002, especially for nonpreferred drugs (brand
name drugs with generic equivalents), up to $26 in 2002
vs. $16 in 2000.
Patients' out-of-pocket costs accounted for 34% of
drug spending in 2000, which was actually lower than
the 1990 figure of 59% (Kaiser Family Foundation, 2001).
Insurers and employers are trying to engage patients
in managing these costs by informing them of their benefits
and the options; for example, by pointing out the substantial
price differential between generics ($19.33 average
prescription in 2000) vs. brand name drugs ($65.29 average
prescription in 2000).
Faced with increased economic pressure, patients must
now begin to educate themselves about making prescription
drug choices that compare cost and efficacy. Information
sources include one's physician, health plan, and employer.
Another type of resource is web-based health information.
As one example, the Oregon Health Resources Commission
offers a Prescription Drug Guide, with information on
the effectiveness and safety of selected classes of
prescription drugs; the Guide was developed with the
Evidence-Based Practice Center of the Oregon Health
& Science University.
The goal for all parties is high quality, cost-effective
pharmaceutical care. As insurers and employers develop
new and revised approaches to benefits and care management,
and physicians consider the most appropriate prescription
alternatives, patients and consumers must stay informed
and be engaged in decisions around their care.
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