Countervailing forces

At the same time that MCOs and self-funded employers attempt to control increasing drug costs through use of internal pharmacy benefits management activities and PBMs, they must contend with a range of countervailing forces. Some of the most important of these forces are negative reactions to positive lists on the part of the public or elected officials; concerns about patient confidentiality; and increased use of direct-to-consumer (DTC) drug advertising by pharmaceutical manufacturers.

4.1. Public reaction to positive lists

As MCOs increase their efforts to control the rising costs of drug therapies, there is growing public awareness of and sometimes criticism of these efforts, which are sometimes regarded as an example of putting cost concerns ahead of health care quality. Even as elected officials at the national level grapple with concerns about managed care by putting forth competing visions of a comprehensive “Patients’

Bill of Rights”, state lawmakers are enacting laws in response to more specific concerns about managed care cost containment efforts. These new state laws cover such topics as requiring health plans to al-low women specified minimum hospital stays after childbirth or mastectomy, or requiring physicians to inform certain male patients of specified diagnostic procedures for prostate cancer detection.

In this political environment, it should not be surprising that California, a large state considered to be at the forefront of managed care health system changes, enacted laws pertaining to positive lists and, more generally, pharmacy benefits management. One of these laws requires that MCOs maintain an

‘expeditious process’ by which prescribing providers may obtain authorization for a drug outside the list. The MCO must notify the patient of its reasons for any disapprovals [17]. Another California law prevents an MCO from limiting or disapproving payment for a patient’s drug if that patient had previously been taking that drug, had been covered for it by the MCO, and if the patient’s physician continues to prescribe it. This law also requires all MCOs to disclose publicly “in language that is easily understood and in a format that is easy to understand” whether they use a positive list, what a positive list is, how that MCO determines which prescription drugs are included or excluded, and how often the MCO reviews the content of the positive list [1].

These laws illustrate the lack of understanding and support among part of the public for many of the pharmacy benefit management strategies now taking place. Such restrictions and disclosure requirements can be expected to continue and to become more widespread if the public perceives PBM and payer activities as being motivated more by cost containment than by health care quality considerations.

4.2. Patient privacy concerns

Analysts have raised issues about ethical and legal conflicts created by disease management programs sponsored by PBMs. PBMs have access to drug use and sometimes diagnostic data about enrollees and these data are used to target patients in attempts to enroll them in disease management programs. Iden-tifying employees for voluntary participation in PBM-sponsored disease management programs through medical and/or pharmacy claims data is permissible under current law. Some analysts have however questioned whether such efforts might not constitute an invasion of patient privacy [14]. The Joint Com-mission on Accreditation of Healthcare Organizations and the National Committee of Quality Assurance, two powerful groups that inspect and accredit hospitals and MCOs, have announced that although they already have standards to safeguard medical privacy, they are considering several additional requirements to protect patient confidentiality while still allowing quality improvement, care management, and other important oversight activities to go forward. More generally, health officials, private sector accredita-tion bodies, and consumer advocates have been holding patient confidentiality conferences to discuss the need to enact general privacy safeguards before the US federal government establishes a national health care database. Mandated under the 1996 Health Insurance Portability and Accountability Act, commonly known as the Kassebaum-Kennedy Act, the federal government will require the health care system – including physicians, pharmacists, and MCOs – to maintain a uniform computerized record-keeping system. In view of this imminent centralization of information (the US Secretary of Health and Human Services was required to issue privacy regulations by February 2000 if Congress fails to act), public figures are concerned that there are no federal rules to protect the confidentiality of medical records, and want to respond to reports of damaging consequences such as employees being fired when their employers learned they were taking medication for depression or had other potentially stigmatizing health problems. It remains to be seen whether medical privacy concerns will present new obstacles to improved pharmacy benefits management interventions, including the movement toward more compre-hensive disease management programs.

4.3. Direct-to-consumer advertising

Although direct-to-consumer prescription drug advertising (DTC) first appeared in the US in the early 1980’s, these activities have increased sharply. DTC advertising expenditures for pharmaceuticals in the first half of 1998 were $631 million, a 16% increase over this spending in the same period the previous year [6] and it has continued to rise since. There may be several reasons for the widespread and growing use of DTC. Perhaps one motivation underlying this development is manufacturers’ attempts to circum-vent PBMs cost containment efforts by trying to inform patients about specific drug products and by encouraging them to ask their physicians to prescribe them. There is some evidence that physicians fear that consumers will obtain misinformation from DTC advertisements [9]. Specific physician criticisms were that these advertisements raise unrealistic expectations among consumers, minimize potential side effects [9] and fail to identify equally efficacious and less expensive alternatives [20].

There is some evidence that prospective drug consumers believe differently, suggesting DTC is effec-tive in reaching the consumers’ mind. One survey reports that 59% of consumers think DTC advertise-ments help them “make their own decisions” about different drugs [15], and another survey indicates that 28% of consumers would change physicians in order to obtain an advertised medication that they desired [19]. Some large MCOs report that these new channels of drug manufacturers’ product promotion are driving up drug costs by creating unprecedented patient pressures to increase pharmaceutical use and to use the advertised and perhaps more expensive drugs [10].

5. Conclusion

Pharmacy benefit management strategies are evolving and are characterized by experimentation and innovation. Insurors feel ongoing pressure from public and private health care purchasers to contain drug costs, and can be expected to continue using pharmacy benefit management activities as an important part of their cost control efforts. However, insurors and the PBMs which they employ must move care-fully to avoid appearing too restrictive to lawmakers, patients, and potential drug consumers. The US public generally supports the effort to keep health care costs down, but the public is also becoming more informed and less tolerant of some of the specific restrictions and economic incentives currently in use to control drug expenditure. Disease management may be a key part of future efforts by PBMs to address both cost and health care quality concerns, but there are significant practical, legal, and economic issues to address before these programs can be effectively implemented on a large scale.

References

[1] AB 974, Chapter 68, Statutes of 1998.

[2] G. Borzo, Drug firms expand into patient care,American Medical News39(24) (1996), 1,7,8.

[3] General Accounting Office, Pharmacy Benefit Managers: FEHBP plans satisfied with savings and services, but retail pharmacies have concerns, GAO/HEHS-97-47, Washington, D.C., 1997.

[4] M. Gibaldi, Vertical integration: the drug industry and prescription benefits managers,Pharmacotherapy15(1995), 265–

271.

[5] H.G. Grabowski and C.D. Mullins, Pharmacy benefit management, cost-effectiveness analysis and drug formulary deci-sions,Social Science & Medicine45(1997), 535–544.

[6] IMS Health and Competitive Media Reporting release, 11/11/98.

[7] L. Johannes, Some HMOs now put doctors on a budget for prescription drugs,Wall Street Journal(12 May 1997), A1.

[8] D.H. Kreling, H.L. Lipton, T.C. Collins and K.C. Hertz,Assessment of the impact of pharmacy benefit managers, Final Report to the Health Care Financing Administration, National Technical Information Service, Springfield, VA, 1996, Pub.

No. PB97-103683.

[9] M. Lipsky, The opinions and experiences of family physicians regarding direct-to-consumer advertising,Journal of Family Practice45(6) (1997), 495–499.

[10] H.L. Lipton, L.H. Syed and M.R. Stebbins, Description and potential impact of pharmaceutical benefit management strategies in Medicare-risk HMOs: an exploratory study. Presented at Annual Meeting of the Gerontological Society of America, November 22, 1998, Philadelphia, Pennsylvania, USA.

[11] R. Navarro, ed., Novartis Pharmacy Benefit Report: 1997 Trends and Forecasts, Totowa, New Jersey: Emron, Inc., 1997.

[12] R. Navarro, ed., Novartis Pharmacy Benefit Report: 1998 Trends and Forecasts, Totowa, New Jersey: Emron, Inc., 1997.

[13] Newark Star-Ledger, 1998, reported in 11/11 California Healthline.

[14] R. O’Harrow Jr., Plans’ access to pharmacy data raises privacy issue,Washington Post. (27 Sept. 1998), A1.

[15] Prevention Magazine, reported in 11/11/98 California Healthline.

[16] R.L. Rundle, CalPERS to pay 2.7% boost in HMO rates,Wall Street Journal(16 April 1997), A3.

[17] SB 625, Chapter 69, Statutes of 1998.

[18] K.A. Schulman, E. Rubenstein, D.R. Abernethy, D.M. Seils and D.P. Sulmasy, The effect of pharmaceutical benefits managers: is it being evaluated?,Annals of Internal Medicine124(1996), 906–913.

[19] Time Magazine, reported in 11/11/98 California Healthline.

[20] R.D. Waltermire, Direct-to-consumer advertising of Rx drugs can be harmful to your health,Drug Benefit Trends10(10) (1998), 60–61.

[21] J.B. White and R.L. Rundle, Big companies fight health-plan rates: employers demand HMOs and hospitals cut costs, Wall Street Journal(19 May 1998), A2.

[22] R. Winslow, Health-care inflation revives in Minneapolis despite cost cutting,Wall Street Journal(19 May 1998), A1.

Suggested reading

D. Saikami, Financial risk management of pharmacy benefits,American Journal of Health-Systems Pharmacy54(1 Oct.

1997), 2207–2212.

IOS Press

Chapter 13