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Incentives, education, and flexibility combine to create mandatory substitution programs that work. Edward J. Keating With today's health care market under intense pressure to reduce costs, independent practice associations (IPAs) are looking to cut expenses associated with reimbursement for prescription drugs. Priority Health is a National Council on Quality Assurance (NCQA)-accredited multiproduct managed care organization (MCO) serving more than 180,000 members in 13 counties in western Michigan. It has contractual relationships with more than 700 primary care providers, 700 specialists, 16 hospitals, and more than 800 pharmacies in Michigan. More than 2,800 employer groups have selected Priority Health as their plan of choice. After reviewing prescribing patterns of participating physicians and the dispensing records of pharmacists in the catchment area, Priority Health discovered that many of the prescriptions written could have been filled with less costly generics. It then implemented an incentive program to maximize use of generic drugs. The potential for savings in a program like this is significant. The average wholesale price (AWP) per prescription for brand name drugs is estimated to be $53, but only $10 for generic drugs. For every 1% increase in generic substitution, Priority Health could save $332,000 annually. This article describes this midsized MCO's successful efforts to improve generic substitution rates using a comprehensive program.
Benchmarking: The BeginningIn many areas of pharmacy practice, pharmacy benefits managers (PBMs) find that comparing MCOs nationally is useful. Reviewing generic substitution rates across the country gives overall direction to the cost reduction program. When this program was considered, the national generic substitution rate was around 39%; it now hovers around 42%.In reviewing national statistics, the benefits manager should look not only at the overall rate of generic substitution, but also at the specific drugs involved. Regional and local comparisons can make their analysis meaningful. By reviewing regional and local differences in generic substitution rates, the benefits manager can identify the most significant obstacles to success in the IPA catchment area. Regardless of the national trend, different localities will require different strategies based on the attitudes and beliefs of prescribers, pharmacists, and members. In some areas of the country, physicians are more receptive to using generic drugs than in others. In others, pharmacists may have experienced resistance from both prescribers and members, and consequently may be reluctant to substitute generics. Members may be hesitant to use generic drugs initially, or resist switching after using a brand-name product. State and local law also can affect generic substitution rates. Before establishing a program, review existing laws carefully. Some states restrict substitution of certain drugs. For example, many states prohibit generic substitution for drugs with narrow therapeutic indexes, including digoxin, theophylline, and phenytoin. Some prescribers also are very reluctant to allow generic substitution of these drugs.
Building The FrameworkTarget audiences for a generic substitution campaign are easy to identify; physicians, pharmacists, and members all must be included. Initial acceptance by the physician is crucial to success. Education and information that addresses the physician should include discussion of the purpose of the program and safeguards that will ensure high-quality clinical outcomes. Priority Health determined that several areas were of utmost concern to physicians - particular generic brands and their equivalence to the brand-name product, communication with members, and community-specific concerns - and discussed its specific policies on these issues with prescribers in advance.Physician education focused on the program's plan to use only those generic drugs rated "A" by the Food and Drug Administration (FDA). Explanation of the rating system for equivalence helped alleviate concerns about inferior products and bioequivalence. Physicians were particularly concerned about those patients who, for one reason or another, could not use a generic drug. They also were interested in ensuring that members would be educated about generic substitution and have appropriate information available to them from a variety of sources. Three approaches were used to convey information to physicians. First, prescribers received direct mailings, including a copy of the formulary. Another mailing was directed at their office managers (whose support is important to the success of the MCO in many matters, not just generic substitution). Finally, pamphlets addressing member concerns were made available to members at physicians' offices and participating pharmacies. Newsletter articles were published in the member health journal as well. Once Primary Health addressed physician acceptance, it directed its efforts at pharmacists, whose influence is substantial. Without the incentive of fair reimbursement for an investment of time, however, pharmacists are less likely to suggest substitution to physicians or members. As the liaison between the program, the physician, and the member, pharmacists must be prepared to advocate for a substitution program. Pharmacists with good communication skills, augmented by a solid understanding of the program's benefits, can help generic substitution programs succeed. Involving the pharmacist from the program's inception helped both with policy design and consistent communication. Like physicians and pharmacists, members have concerns about generic substitution and must be included in the process early. Often, their concerns are less technical and more emotional that those of health care providers. Communication with the patient must be clear, direct, professional, and unambiguous. It should be presented in a manner that is somewhat redundant, using both oral instructions and written materials, but not condescending. Priority Health designed its member pamphlets and newsletter articles with the average member in mind. The questions they addressed ranged from bioequivalence - presented in layman's terms - to cost.
PolicyEstablishing a firm but flexible policy helps everyone understand the criteria and process for substitution. Therapeutic failures and the potential for misadventure are always the greatest concerns. Any policy must address medical necessity exceptions. Physicians and members want to know in advance that there are mechanisms to obtain brand-name products if generics fail; they need clear, measurable guidelines describing the exception policy. At a minimum, these guidelines should include a description of the length of the trial, the measures that will be used to determine success or failure, and the documentation required to request a return to a brand-name product. Such requests must rely on demonstrable clinical outcomes, rather than the subjective findings of the physician or member. Recognizing that paperwork is the bane of the health care provider's existence is important; forms should be simple and concise. Justification forms, called "Dispense as Written" forms by Priority Health, were kept to one page and limited to essential information.In some cases, demonstrable clinical outcomes are difficult to define. When members experience sleep disturbances, anxiety, or pain, it can be difficult to describe and document problems. In these cases, a firm but consistent policy is important, but can be difficult to develop.
Mandatory SubstitutionMandatory substitution programs rely on drug lists so that the prescriber and the pharmacist have drug selection guidelines. An acceptable drug list is the foundation for the program. Initially, this is a tremendous task because of the sheer number of generic products on the market. Many organizations begin by reviewing the Health Care Financing Administration's (HCFA's) generic drug list. This is a comprehensive list of some 800 drugs whose study requires close attention and an investment of time. But regardless of the source used, the initial list must describe each drug and its maximum allowable cost (MAC).Once a drug list is developed, it requires constant maintenance to reflect changes in the marketplace. Changes at the FDA have complicated that market. The 1984 Waxman-Hatch Act, which allowed generic versions of drugs approved after 1964 to be processed under an abbreviated new drug request, as well as internal FDA initiatives to expedite the drug approval process have helped to fuel exponential growth in the number of new generics. These new generics represent a potential savings that can be achieved only if the PBM revises its drug list frequently. During the first few months after a generic becomes available, the potential savings ranges from 10%-11%. In years past, that savings was 30%-50%, but the potential savings have diminished as the approval process has accelerated. Once a drug is available from more manufacturers, the potential for savings increase. Drug list changes should be made quickly, and the MAC should be adjusted to reflect changes as more generic equivalents for the same product enter the marketplace. Though daunting, this task is a critical one for PBMs. Revising the drug list creates potential for conflict. When new generics are added to the drug list very quickly, some pharmacists have difficulty obtaining them at the low price reflected on the list. However, if changes are not made quickly enough, potential savings are lost. MCOs must balance their need for savings with the pharmacist�s ability to comply with the drug list.
Designing Reimbursement TiersA tiered reimbursement program provides incentives to participating pharmacists. The pharmacists who will be involved are included in setting goals, which are established using data obtained from reviews of national, regional, and local trends. There are three criteria:
Before a plan establishes payment tiers, local pharmacists should be included in the negotiations to ensure that their concerns and problems are addressed. They may provide information about prescriber acceptance, member concerns, or state law that will significantly change proposed tier structures. Additionally, PBMs must consider seasonal changes in reimbursement rates. Generic substitution rates do vary with seasons, particularly in the case of antibiotics. Figure 1 shows actual generic substitution rates achieved by pharmacies associated with Priority Health; the seasonal variation is apparent.
Reimbursement issues appear simple on the surface, but can be quite complex. Clearly, the PBM should change reimbursement rates very quickly to reflect changes in generic reimbursement rates at each pharmacy. Failure to change the reimbursement rate quickly causes dissatisfaction among pharmacists who do not receive immediate financial rewards for successful interventions. It also adversely affects the IPA when a pharmacy's substitution rate declines but the reimbursement rate remains high. Because there usually are multiple steps involved in the payment process, a procedure must be established to ensure that changes are communicated and acted upon expeditiously. Priority Health uses a report-card format to document information for each pharmacy (see Figure 2). The report card provides enough information for pharmacists to examine their own performance in comparison to the IPA's average. The historical information included can be used to track progress over the previous three years. Several areas of the report card offer help to the pharmacist who is looking for ways to improve. For example:
The report card provides an element of peer review, and directs the pharmacist's attention to areas of accomplishment as well as areas where improvement is possible.
ResultsConcerted efforts to maximize generic substitution were successful at Priority Health. Figure 3 shows prescription costs for single-source, multisource, and generic drugs for fiscal years 1994-1997. Nationally, the average cost per prescription has grown at a rate significantly higher than expected. The success of this program is demonstrated clearly; as the generic substitution rate has increased, the average cost per prescription at Priority Health has decreased. Figure 4 describes overall generic substitution rates compared to the national average. For the last five years, pharmacies affiliated with Priority Health have consistently exceeded the national average for generic substitution. In 1997, this represented savings of almost $1.8 million to the plan.Table 3. Priority Health Prescription Cost Differential: 1994-1997 
ConclusionPrograms designed to encourage generic substitution offer an opportunity for savings. Management mechanisms are quite simple, and incentives help pharmacists become true partners in the program.Table 4. Generic Substitution Rate: 1994-1997 
In the future, MCOs and PBMs will develop such programs to address therapeutic substitution and take advantage of opportunities to cut costs while maintaining quality care. We are laying the framework for new programs now. To succeed, we will need strong trust relationships with prescribers, participating pharmacists, and members. These relationships must be built on a history of excellent clinical judgement, fulfilled promises, and accurate communication.
EDWARD J. KEATING, R.PH., is Director of Pharmaceutical and DME Services, Priority Health, Grand Rapids, MI. Copyright© 1998, Academy of Managed Care Pharmacy, Inc. All rights reserved. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prescription volume baselines for participation must be established. Priority Health established a baseline of 100 prescriptions per quarter per pharmacy, based more on intuition and negotiation than on a formula. Only pharmacies that met or exceeded this number were included.