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April 7, 2000
"Private Sector Management of Prescription Drug Benefits"
AIM and the Progressive Policy Institute (PPI)
co-sponsored an April 7 briefing for Congressional staff on private sector management of prescription drug benefits and application to a future Medicare prescription drug benefit.
Speakers included Mr. Terry S. Latanich, Vice President for Government Affairs, Merck-Medco; Dr. Carolyn L. Yancey, Senior Medical Director, CIGNA HealthCare Mid-Atlantic; and Dr. Roland D. McDevitt, Director, Research and Information Center, Watson Wyatt Worldwide.
Mr. Latanich discussed using pharmacy benefit management
(PBMs) companies to manage drug costs and improve the quality of health care coverage. Mr. Latanich described the core capabilities of PBMS as developing and administering formularies; negotiating drug
manufacturer rebates; developing programs to accelerate adoption of generic drugs; negotiating pharmacy network contracts; and development and management of prior authorization, best practices and health management
programs.
Mr. Latanich also discussed drug utilization review (DUR)
practices but stated that DURs are not designed to save money but to encourage the use of specific drugs as a possible way to improve quality. In the long run, Mr. Latanich stated, DURs may result in higher
overall drug expenditures but may save money by avoiding hospitalizations.
Dr. Yancey discussed prescription drug benefits from a
managed care perspective.
She explained the advantages of integrating drugs as part of a comprehensive health benefit plan. She provided an overview of CIGNA's Therapeutics Committee which compares newly approved drugs, together with supporting data and literature, with similar drugs already on the market to determine coverage policies under CIGNA formularies. Dr. Yancey stated that cost is not the Committee's initial consideration and that the Committee has sometimes chosen brand name drugs over generics for coverage. Dr. Yancey stated that if a new drug demonstrates no significant advantage over existing drugs, CIGNA will wait 12 months before initiating a review for addition to the formulary.
Dr. Yancey also discussed management strategies
utilized by CIGNA to maintain quality including a three-tiered co-payment structure for drug coverage, prior authorization when concern exists that specific drugs are being inappropriately prescribed, and technology
review.
Dr. McDevitt described some key considerations for development of a
Medicare prescription drug benefit. First, Dr. McDevitt provided an overview of the size and current drug coverage of Medicare-eligible beneficiary population. Specifically, he cited a $100 billion total
market for outpatient prescription drug costs in 1999 with one-third of this market attributed to Medicare enrollees. Dr. McDevitt predicted this market will grow substantially in the near future but cited
possible disruptions as price controls, restricted R&D spending by the pharmaceuticals industry, the ability to negotiate discounts and rebates, and the role of employer-sponsored benefit packages.
Second, Dr. McDevitt discussed the balance of enrollee cost sharing versus benefit management. He cited the original Medicare benefit and the $50 deductible charged the first year of the Medicare program as an example of the impacts of poor benefit management. He cited PBMs as effective cost sharing, benefit management tools.
Third, Dr. McDevitt discussed single PBMs versus multiple
PBMs. He stated that single PBMs serve more as a payor of benefit costs than as a manager of benefits. Single PBMs are less likely to be successful in negotiating rebates or contracts with pharmaceutical
companies or networks.
Finally, Dr. McDevitt discussed the impact of stand-alone
versus integrated PBMs.
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