status report: medicaid preferred drug list program and maximum allowable cost mac pricing

1. Status Report: Medicaid Preferred Drug List Program and Maximum Allowable Cost (MAC) Pricing Presentation to: Senate Finance Committee Health & Human Resources Subcommittee

2. 2

3. 3

4. 4

5. 5

6. 6

7. 7 What is a PreferredDrug List (PDL) Program? PDL is a prior authorization program that divides Medicaid covered prescription drugs into two categories: (1) Those that are available with no prior authorization, known as �preferred� drugs. (2) Those that are available with prior authorization, known as �nonpreferred� drugs. A �preferred� drug is selected based on safety and clinical efficacy first, then on cost effectiveness. Many classes of drugs are not subject to the PDL program. All clinical decisions regarding the PDL and prior authorization process are made by DMAS� Pharmacy and Therapeutics (P&T) Committee.

8. 8 2003 Appropriations Act: Preferred Drug List (PDL) Program Item 325(ZZ.1) of the 2003 Appropriations Act directs DMAS to: Implement PDL program no later than Jan. 1, 2004 Seek input from physicians, pharmacists, pharmaceutical manufacturers, patient advocates, and others Form a Pharmacy & Therapeutics (P&T) Committee Ensure drugs on the PDL are safe and clinically effective before considering cost effectiveness Include several key provisions: 72-hour emergency supply; 24-hour prior authorization process; expedited review of denials; and consumer/provider training and education Report to General Assembly on main design components Generate net savings of $9 million GF in FY 2003 and $18 million GF in future fiscal years

9. 9 Role of P&T Committee The P&T Committee shall recommend to the Department: therapeutic classes of drugs to be subject to the PDL and prior authorization requirements specific drugs within each class to be included on the PDL appropriate exclusions for medications, including atypical anti-psychotics, used for the treatment of serious mental illnesses such as bi-polar disorders, schizophrenia, and depression appropriate exclusions for medications used for the treatment of brain disorders, cancer, and HIV-related conditions other appropriate exclusions and �grandfather� clauses

10. 10 Members of P&T Committee Member Background Randy Axelrod (MD) (Chairman) Anthem Chief Medical Officer Roy Beveridge (MD) Oncologist Avtar Dhillon (MD) Psychiatrist (CSB) James Reinhard (MD) Psychiatrist (DMHMRSAS) Arthur Garson, Jr (MD) Dean, UVA Med. School Mariann Johnson (MD) Family Practice Eleanor (Sue) Cantrell (MD) Local Health District Director Christine Tully (MD) Geriatrician, VCU/MCV Mark Szalwinski (Pharmacist) Sentara Health Care (Vice Chairman) Gill Abernathy (Pharmacist) INOVA Health System Mark Oley (Pharmacist) Westwood Pharmacy Renita Warren (Pharmacist) Edloe�s Pharmacies

11. 11 PDL Development Process

12. 12

13. 13 Critical Steps Taken in Development Process Met with more than 30 interested parties (manufacturers, providers, pharmacists, advocates, state agencies, etc.) to solicit input into design of PDL program Formed PDL Implementation Advisory Group Developed a �Virginia-specific� program Provided broad access to all PDL information through dedicated website and e-mail (pdlinput@dmas.state.va.us) ALL decisions regarding �preferred� and �non-preferred� drugs were made by the P&T Committee

14. 14 Critical Steps Taken in Development Process Developed extensive education program Memorandum and reminder postcard sent to all providers Information (English & Spanish) sent to all recipients Regional and targeted training programs for pharmacists, health systems, and provider associations Extensive beta-site testing with community and long-term care pharmacists Individual, personal contact made with high volume Medicaid prescribers and pharmacists Implementation of initial drug classes has gone smoothly

15. 15

16. 16

17. 17

18. 18 Drug Classes To Be Added to PDL Program in April 2004 Therapeutic Class Description Oral Hypoglycemics Leukotrine Modifiers Bisphosphonates Traditional NSAIDs Serotonin Receptor Agonists Oral Anitfungals Used in The Treatment of: Diabetes Allergic Conditions/Asthma Osteoporosis Inflammatory Conditions Migraine Headache Nail Fungal Infections

19. 19 Review Of Additional Drug Classes Ophthalmologic drugs will be added in July P&T Committee will review antibiotics and long-acting narcotics at its February 9th meeting for possible inclusion in PDL in July, 2004 By April, 2004, the P&T Committee will have reviewed the top 50 therapeutic classes based on overall expenditures except those that have been excluded from the program and the antidepressants

20. 20 Antidepressants (SSRIs) Medicaid spent approximately $29.5 million in total funds (net of rebates) on SSRIs ($15.8), anti-anxiety drugs ($6.9), and new generation antidepressants ($6.8) in FY 2003 The SSRI drug class is the third highest in expenditures Generic forms of the SSRIs are coming onto the market �Grandfathering� patients currently on a SSRI eliminates concern regarding changing a patient�s drug regimen Excluding the SSRIs, anti-anxiety drugs and new generation antidepressants from the PDL would cost approximately $5 million (total funds) annually; a �grandfather� provision would cost roughly half of this amount

21. 21 Evaluation of PDL Program DMAS will be conducting a thorough evaluation of the PDL Program to address the following key issues: Has the PDL program been implemented in a way to ensure a high rate of compliance without adversely affecting patient access/care? What impact has the PDL program had on Medicaid pharmaceutical spending? Has the PDL program impacted patient health outcomes for Medicaid clients?

22. 22

23. 23 Maximum Allowable Cost (MAC) Pricing for Generic Drugs Currently, Virginia Medicaid reimburses pharmacies the Average Wholesale Price (AWP) of the drug minus 10.25% for brand and generic drugs With multiple source generic drugs, pharmacies often can purchase them for far less than this amount (sometimes 40-60% or greater below brand costs) Under a MAC pricing program, DMAS would reimburse pharmacies a �maximum� amount based on the cost that the drug can be purchased by pharmacies in the marketplace Provides an incentive for pharmacies to be prudent purchasers of generics MAC price would be set at a level that reflects pharmacies� acquisition costs plus an appropriate profit

24. 24 MAC Pricing for Generics At least 35 other state Medicaid programs utilize MAC pricing for generics MAC pricing is used throughout the commercial insurance market State Medicaid programs and private insurers vary in how aggressive they are in setting their MAC pricing The DMAS P&T Committee has recommended strongly that Virginia Medicaid implement a MAC Program The MAC that is set for each drug must be reviewed and updated periodically to ensure appropriate pricing DMAS estimates the net savings for its proposed MAC program to be $5.15 million (GF) in each year of the 2004-2006 biennium