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Appropriate Drug Use and Prescription Drug Programs

Perspectives & Strategies


Joan Henneberry, M.S., Director, Health Policy Study Division, National Governors' Association, Washington DC.

Ray Hanley, Director, Division of Medicaid Services, Arkansas Department of Human Services, Little Rock, AR.

Kevin W. Concannon, Commissioner, Maine Department of Human Services, Augusta, ME.

Victor T. Mikeska, R.Ph., Prescription Drug Program Administrator, Employees Retirement System of Texas, Austin, TX.

Raulo S. Frear, Pharm.D., Vice President, Clinical Services, Express Scripts, Bloomington, MN.

Perspectives and strategies for promoting the appropriate use of pharmaceuticals vary according to the goals and objectives of the organization setting out to do so. This session presented programs and policies put into place by individuals representing a State Medicaid program, a senior prescription drug program, a State employee benefit program, and a private sector pharmacy benefits manager.

Ray Hanley discussed Arkansas Medicaid's strategies for appropriate use of pharmaceuticals in the current environment of rising drug costs. According to national estimates for pharmaceutical expenditures, drug spending increased 139.5 percent between 1990 and 1998 and accounted for more than $23 billion dollars expended in 2000 and double-digit increases in all States. As a result, State Medicaid program managers must determine how to manage pharmaceutical demand if they are to maintain access to prescription drugs for their enrollees. Hanley points out that Medicaid has unique pressures in that it covers the sickest, most chronically ill patients, and millions of low-income elderly. In particular, Arkansas has a high percentage of citizens over age 65, of which a higher percentage have moderate to low incomes, making prescription drug coverage a critical issue in the State.

Hanley explained that Arkansas is working on multiple fronts to improve prescribing patterns, pinpoint waste, and improve patient compliance in how they live with chronic disease. Arkansas dual strategy includes both:

  • Educational outreach to prescribing physicians, medical directors, nursing home nurses, and consulting pharmacists.
  • Psychiatric consultation for selected patients.

The educational outreach strategy includes:

  • Seven Continuing Medical Education programs since September 2000 with more than 800 participating providers.
  • Tool kits that contain treatment guidelines, behavioral tips, and geriatric dosing guidelines.
  • Distribution of more than 800 kits.
  • Newsletters with a mailing list of 2,500.

The psychiatric consultation strategy served to identify inappropriate use of antipsychotic medications and waste within the system. Using the Medicaid database, the Medicaid department developed screening criteria for patients taking antipsychotic medications and successfully identified and intervened in instances of inappropriate antipsychotic drug use.

Arkansas runs a number of programs designed with components that encourage the appropriate use of prescription drugs. Hanley highlighted the Arkansas School Asthma and Allergy Partnership as one educational outreach program that is affecting quality of care for asthma as well as family and patient compliance issues. He stressed that the program improved interventions in asthma and that having data is a very important factor in affecting change.

Similarly, Hanley described the Arkansas ConnectCare Program that aims to limit waste in the system. Arkansas has also developed counter-detailing initiatives to help physicians make cost-effective prescribing decisions in light of the fact that Medicaid regulations instill little cost sensitivity in recipients and that private sector, tiered cost-sharing is not an option.

Hanley stated that there are a few difficult but necessary challenges that must be overcome in order to ensure the appropriate use of prescription drugs. Some of these include counter-detailing and mandating capped reimbursement rates on name-brand drugs if generics are available.

Kevin Concannon discussed Maine's prescription drug program for seniors. He described Maine's strategies for dealing with an increase in outpatient pharmaceutical spending of more than 20 percent. One initiative Maine implemented was a Physician-Directed Drug Initiative (PDDI) that sought to promote the most clinically appropriate cost-effective drugs by:

  • Increasing drug utilization in key areas.
  • Encouraging appropriate drug switching.
  • Decreasing medically unnecessary drug utilization.

As a result of this program, Maine experienced 0.6 percent savings in the drug budget in its first year.

The results of the PDDI were significant but less than desired and needed, so the Department sought a complementary approach through a prior authorization (PA) program. As a result of the PA program, the Department saw an annualized savings of 7.3 percent in the drug program. These savings have subsidized substantial increases in the number of eligible persons, so that now more patients who meet the health care guidelines are receiving care. Patients now have greater access to more medicines in a more cost-effective manner, and the program has seen a 10-percent reduction in the average price per prescription. Concannon concluded that it has been important for Maine to take new approaches to pharmaceutical challenges and that designing both programs to complement each other provided savings significant enough to provide more medication to more people.

Victor Mikeska discussed appropriate use from a State employees benefits perspective. He explained the strategies that the Employees Retirement System of Texas uses to manage its prescription drug benefit. Mikeska gave a brief background of the drug plan, highlighting that it was carved out to Merck Medco with a two-tiered co-pay design in fiscal year (FY) 2000. The current plan design and changes for FY2001 include a three-tiered co-pay design of $5/$20/$35 (generic/brand/non-preferred brand) and a mail-order benefit for a 90-day supply of $10/$40/$70, with several additional benefits. Additions to the FY2000 design include:

  • Elimination of 90-day supply of medication at retail (maintenance drug list).
  • Development of formulary with restrictions.
  • Disease management programs.
  • Managed prior authorization.
  • Quantity limitations.
  • High-profile alert report.
  • High-profile patient summary report.
  • Rebate evaluation.
  • Development of monthly executive meetings (functioning as "mini" Pharmacy and Therapeutics Committee).
  • Development of a pharmacy benefits management company (PBM) network.
  • Development of an executive summary.

Of these several additions, Mikeska stressed that the high-profile patient summary report has been very helpful in providing additional information for each high-utilization patient and has found the development of the PBM pharmacy network to be an effective tool in managing the program.

As a result in the shift of program design from FY2000 to FY2001, the program has seen the following results:

  • Net cost per member per month decreased by 11.5 percent, from $51 to $45.11.
  • Net cost decreased by 2.6 percent.
  • Overall lives increased by 10 percent.
  • Plan utilization decreased by 5.6 percent per enrollee.
  • Member's cost share increased to 30.8 percent (increased from approximately 22 percent).
  • Rate of generic substitution increased from 82 to 87.6 percent of all prescriptions.

Mikeska believes that the savings in the program resulted, in part, from shifting costs to the members. He also states that this program is unique from Medicaid in that it is less regulated and enables opportunities for honing benefits in ways that Medicaid is unable to do because of the Omnibus Budget Reconciliation Act of 1990 (OBRA-90). In the future, Mikeska envisions that the program will take on design options such as:

  • Smaller pharmacy network.
  • More selective formulary.
  • Tiered co-insurance of 10/20/30 percent.
  • Increased co-pays.
  • Increased tiers of co-pays.
  • An annual maximum.
  • A deductible.

Raulo Frear presented the private sector's strategies for encouraging appropriate use of pharmaceuticals. Express Scripts covers approximately 47 million people nationally, has 1,362 clients from the private sector, public sector, managed care organizations, and insurance carriers, and manages more than $10 billion in annual drug expenditures.

Frear explained that Express Scripts offers various management services consulting on benefits, information systems, and clinical issues. Of particular interests to States, Express Scripts has the capability to address all of the Medicaid requirements, including:

  • Network development/management/audit.
  • Call center/communications and education/service.
  • Point of service/eligibility/prior authorization and medical exception.
  • Rebate processing.
  • Formulary/maximum allowable cost.
  • Reporting/drug utilization review.
  • Outcomes and disease management.

Dimensions of appropriate use include both clinical and administrative dimensions:

Clinical Dimensions Administrative Dimensions
Prescribing Maximum allowable cost program
Dispensing Prior authorization
Utilization Rebates
  Benefit design

Frear also presented the following results from various programs administered to a large State-employee program:

Program Interventions Cost Savings
Prior Authorization 11,397 $3,375,631
Concurrent DUR 759,288 $15,005,150
Retrospective DUR 43,496 $5,908,169
Patient Education 19,333 $3,956,280

Frear emphasized that there are great opportunities for both encouraging appropriate use and generating savings by managing different portions of drug benefits. For example, he explained that many clients do not include a mandatory generic substitution component, even though such a requirement could have a great impact on appropriate use and cost savings.


State Initiatives to Promote Cost-Effective Use of Pharmaceutical Benefits. National Governors' Association Center for Best Practices. Issue Brief, August, 2001.

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