Prescription Solutions Fills 75% Of Prior Authorization Requests - Testimony

Prescription Solutions routinely approves 75% of requests for off-formulary drugs, VP-Legal & Regulatory John Jones told the Energy & Commerce/Health Subcommittee Feb. 15.

"Formularies are misunderstood," Jones told the subcommittee. "Requests for non-formulary drugs only represent 1% of total claims." Of those requests, "75% are approved."

The hearing was the kick-off to the House's consideration of Medicare prescription drug benefit proposals in 2001 (¹ (Also see "NACDS Urges Congress Not To Trust Volume Discounts In Medicare Rx" - Pink Sheet, 19 Feb, 2001.)).

Jones' testimony focused on the tools pharmacy benefit management companies employ in managing drug plans. Most pending Medicare Rx proposals would use PBMs in some capacity to administer the benefit.

The Prescription Solutions exec focused much of his testimony on the role of formularies.

"Contrary to the popular belief that formularies exist simply to control costs of an individual drug, there are many aspects to proper administration of a formulary that have more to do with quality and clinical effectiveness," Jones declared.

"By our definition, a drug formulary or preferred drug list is a compilation of drugs that have been reviewed for safety and efficacy," he explained.

Jones cited a recent intervention by Prescription Solutions' prior authorization department to deny a prescription for oral vancomycin.

"The physician had prescribed this drug for a serious knee infection," Jones said. However, "due to the way this oral medication works, it could not get into the blood stream in a high enough concentration to effectively treat the infection."

The PBM "contacted the doctor to change the medication to an intravenous form." The I.V. drug "was significantly more expensive," Jones noted, but the change may have prevented more serious complications for the patient.

Jones acknowledged that formularies do sometimes block access to popular medications.

Citing the role of direct-to-consumer advertising in driving demand for newer agents, Jones explained that "in many cases, the physicians reviewing these products for our formulary have found that they are not always better than existing treatments."

"For example, [Pharmacia/Pfizer's] Celebrex is widely promoted for arthritis at a retail price of about $75 per month versus generic ibuprofen or naproxen at about $10 per month," Jones said. "In clinical studies, these drugs have shown equivalent response in the patients tested," he declared.

"Drug formularies are valuable tools to control costs," Jones maintained.

"Pharmaceutical manufacturers are willing to discount drugs if the drug benefit design and formulary management results in a larger market share and increased sales. Deep discounts by the manufacturers are available only to those PBMs that demonstrate a value to the manufacturers in achieving those goals."

Consumer-friendly formulary management procedures could emerge as a focus of competition among PBMs if a Medicare Rx plan allows multiple firms to administer the benefit, Jones suggested during a Health Industry Group Purchasing Association meeting in Las Vegas a week before his testimony.

"There are lots of ways that PBMs could compete against one another," Jones suggested. "I would see that they would start differentiating from each other on the basis of speed with which you can access off-formulary drugs."

Jones does not anticipate that seniors will resist formularies altogether. Because of the penetration of managed care into the private market (and the Medicare+Choice program), "people are starting to get used to the fact that there must be a formulary...simply to have a pharmacy benefit at all," he said.

Consultant Peter Fox, PhD, told the HIGPA audience that he is less certain that consumer-focused competition among PBMs under Medicare would be beneficial. "Philosophically, I lean towards competition," Fox said. However, assuming PBMs will be used, "on what basis are the PBMs going to compete?"

Competition on the basis of formulary construction could lead to efforts to game the system, Fox suggested.

A PBM might decide to offer only one selective serotonin reuptake inhibitor for depression, Fox said. "That would have the effect of reducing SSRI costs by keeping patients with depression out of the program. They would go to a different PBM."

Fox prepared a report for AARP's Public Policy Institute on prescription drug benefit design issues for Medicare in August. In addition to the "ground rules" for competition, a PBM-administered drug benefit must also deal with the question of where the risk will reside, Fox said.

Merck-Medco is the only large PBM to state its willingness to be at-risk under a Medicare drug benefit program, Fox noted. "It is also the only PBM owned by a drug manufacturer, so it has the ability to sort of shift, if you will, where it is making its profits, that the other PBMs cannot do."

"At some level of pricing, somebody will take the risk," Fox continued, "but there is a risk premium that is paid." In addition, "there is a big difference between going at-risk for drugs in isolation, versus what Medicare+Choice plans do, where they're going at risk for the full set of services," Fox said.

"Congress doesn't really truly have a definition of pharmaceutical risk," Prescription Solutions' Jones declared. "When one PBM says, 'Yes, we can take risk'...they are making certain suppositions and presumptions that Congress is not privy to."

"Congress may get a big surprise" if it puts PBMs at risk under Medicare, Jones told the HIGPA audience. "This is going to take a lot of discussion....I don't think we're anywhere close to being there yet."

During his testimony before the Health Subcommittee, Jones was questioned primarily on the Medicare+ Choice program. Prescription Solutions' parent company, PacifiCare, participates in the program.

Rep. Greenwood (R-Pa.) asked Jones to comment on the reduction in benefits under the program. "As reimbursement levels were reduced, so was the richness of the benefits that were offered," Jones said. "It has been unfortunate for seniors because they did get used to companies competing for their attention and trying to get them into their programs, which included very reasonable benefits for the pharmacy."