HMO coverage of Rx-to-OTC switch products slipped to 27% in 1997 -- Novartis report.

ANTIHISTAMINES, H2 ANTAGONISTS REIMBURSED BY OVER A THIRD OF HMOs in 1997, according to survey data reported in the recently- released "Novartis Pharmacy Benefits Report: 1998 Trends & Forecasts." With the exception of diabetic supplies and insulin, which topped all OTCs covered by health maintenance organizations last year, antihistamines and H2 blockers were listed by survey respondents as the OTC products covered by the most HMO plans. In 1997, antihistamines were reimbursed by 41% of HMOs, while H2 antagonists were covered by 36.4%, the report states.

Reimbursement of OTC acid blockers doubled in 1997, representing the largest jump among OTC products. The 18 percentage point increase over the 1996 level likely reflects the maturation and acceptance of the products -- J&J/Merck's Pepcid AC, SmithKline Beecham's Tagamet HB, Warner-Lambert's Zantac 75 and Whitehall-Robins' Axid AR -- within the over-the-counter stomach remedies category. The report estimates 41% of HMOs will cover H2 blockers by 1999.

HMO coverage of antihistamines jumped nine percentage points in 1997 and is expected to reach 50% in 1998/1999, the report says. Cough/cold remedies, reimbursed by 31.8% of HMOs in 1997, are expected to be covered by 41% in both 1998 and 1999. Antifungals and niacin were both covered by 32% of HMOs in 1997, and NSAIDs by 23%.

Despite the increasing popularity of dietary supplements among U.S. consumers, the survey data indicate reimbursement of vitamins fell from 23% in 1996 to 18% in 1997. However, the report predicts the level will return to 23% in 1998 and 1999.

The data on HMO trends were obtained from two surveys conducted by Totawa, N.J.-based Emron, a managed healthcare research and communications firm, for the "1998 Trends & Forecasts." A "lead survey" involved 50 pharmacy directors representing a sample of over 19 mil. enrollees; a second survey involved a sample of 27 HMO medical directors. The HMO studies were among six surveys conducted and analyzed by Emron for the report. A consumer survey used to measure the "attitudes, opinions and behaviors" relating to consumers' healthcare coverage was designed by Emron and A.C. Nielsen. Novartis sponsors the report, now in its sixth year, "as an educational service to the healthcare industry."

"A significant minority of HMOs reported coverage of OTC products other than diabetic supplies," the report states. OTCs were reimbursed by 45% of HMOs in 1997, a percentage point decrease from 1996.

Switch products, which clearly have been at the forefront of the OTC market in recent years, were covered by fewer HMOs in 1997 than in the previous year, according to the report. Twenty-seven percent of HMOs reported reimbursement of switch products in 1997, compared to 30% in 1996. The "considerable number of important Rx-to-OTC switch products certainly increases the HMO's cost exposure, perhaps to unacceptable levels in the cases of the most advertised products," the report suggests.

Promotion of OTCs in "step-care protocols" is slightly more prevalent than HMO reimbursement of the products. "In 1997, 46% of HMOs reported encouraging use of OTCs in step-care protocols, and they expect that use will increase to 52% by 1999," the surveys suggest. Various plans also have been "testing the OTC waters" by offering members OTC treatment kits priced at the cost of a copay. Distributed through group practice clinics or HMO clinics, the kits often include antihistamines, NSAIDs, cough/cold remedies and acid blockers.

"Outside of such controlled situations, it has been difficult to set systems in place by which plans can track actual utilization and appropriately reimburse OTCs and Rx-to-OTC switch products," the report points out.

Step-care protocols also seem popular among pharmacy benefit management companies. Approximately half of PBMs "reported managing benefits that covered some OTC products," although 67% of these involved reimbursement for insulin and diabetic supplies. Around 25% covered OTC antifungals, about a third covered cough/cold products and "a few" listed H2 antagonists and antihistamines. "Through qualitative interviews, PBM managers agree that, as the quantitative data showed, coverage of OTCs is not likely to increase, except through the increased number of Medicaid recipients entering managed care plans," the report states.

The "1998 Trends & Forecasts" report predicts a drop in OTC coverage under the "pharmacy benefit" and an increase under the "medical benefit" over the next two years. In 1997, the report states, 15% of OTCs were covered under the pharmacy benefit, compared to 85% under the medical benefit. By 1999, it is estimated that only 10% of OTC products will fall under the pharmacy benefit.

"These shifts are occurring because of the changing care delivery venues and the increased number of medications now taken orally and/or able to be self-administered," the report explains.

As would be expected, the majority of consumers (57%) turn to their pharmacists for information on OTC drugs. Tied for second, both physician consultation and advice from a friend or family member were reported by 27% of consumers. Twenty-five percent of survey respondents do not seek advice on OTC products. Over half of the respondents reported spending $10 or less on OTCs per month, while 27% said they spend between $11 and $20 monthly, 9% between $21 and $30, and, "despite the inclusion...of the elderly and those on Medicare," only 7.3% over $30 a month.

Consumer perception on the effectiveness of direct-to-consumer advertising appears to be split. According to the report, 36% of survey respondents said DTC advertising "offers new information about Rx" products, while 36% "do not find Rx drug advertisements informative." Thirty-five percent of the consumers surveyed said DTC ads are educational and 15% said they do not read Rx drug ads. Pharmacy directors, however, found DTC ads to be "highly influential."