Medicaid short list: Prescribing a hassle factor

States view Medicaid preferred-drug lists as money savers. Many doctors see them only as barriers to care.

By Geri Aston — Posted May 3, 2004

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A necessary evil. That's how James S. Powers, MD, an internist specializing in geriatrics, describes Tennessee's Medicaid preferred-drug list.

Dr. Powers' vantage point allows him to see the pros and cons of the effort to rein in his state's Medicaid drug spending. He chairs the board that recommends to the state which drugs should be on the list.

As a physician, he recognizes the burden the PDL can put on doctors. Physicians who want to prescribe a drug that's not included must get prior state approval.

"It's cumbersome. The hassle factor turns off physicians," said Dr. Powers, associate professor of medicine and head of senior care services at Vanderbilt University Medical Center in Tennessee.

But as head of the advisory board, he believes that the alternatives would be worse. If the state doesn't control drug costs, Medicaid rolls would have to be cut.

The task, then, was to create the best drug list possible, Dr. Powers said. Tennessee's PDL, launched last fall, isn't 100% perfect, he said. "There are always compromises."

Dr. Powers' experience lays out issues being debated across the country as states have embraced this approach as a way to cut burgeoning Medicaid budgets during a time of fiscal crisis. Florida implemented a PDL first, in July 2001, and was followed quickly by Michigan in early 2002.

After these programs withstood initial legal challenges, other states followed. Now, preferred-drug lists operate in 26 states and are pending in 10 others, according to the National Conference of State Legislatures.

In general, physicians understand that states need to clamp down on Medicaid spending. But many doctors have serious problems with PDLs.

A major concern is the way states make their selections. States say the decisions are based on drug effectiveness and cost. But some physicians say states are only paying lip service to drug efficacy.

"They don't come out and say, 'we're taking this drug off the list because it's a budget buster,' " said William Glazer, MD, associate clinical professor of psychiatry at Harvard Medical School. "They're coming up with as many excuses as they can."

States generally require drugmakers to give a rebate beyond the federal Medicaid discount to have drugs included on PDLs. This causes some physicians to question their motives.

"One of the problems with the formulary is it's totally based on getting a kickback," said Lance Sloan, MD, an endocrinologist and nephrologist from Lufkin, Texas.

Physicians also accuse states of developing PDLs with the assumption that all drugs within a class are basically interchangeable.

"States are trying to use a blunt instrument to change provider behavior," said Erica Defur Malik, program director for health care reform at the National Mental Health Assn.

The fear is that too few drugs are listed in each class to meet patients' unique needs. This worry is especially pronounced in the mental health community. Many physicians argue that patients with the same symptoms react very differently to atypical antipsychotics and SSRIs.

Strong patient advocacy has resulted in full or partial exemptions for mental health or AIDS drugs in several states. But the concerns go beyond these medicines.

Dr. Sloan criticizes the Texas list's insulin options. He pointed to the exclusion of Lantus. This means his diabetic patients don't have open access to a long-lasting insulin, he said.

Many doctors worry about patient access to new and/or expensive drugs. They fear that states will delay consideration of such drugs or never add them to the PDL because of their cost.

But not all doctors take issue with their state preferred-drug list.

"I wish there were more restrictions," said Kathryn Stewart, MD, MPH, a family physician and medical director for care management at Mount Sinai Hospital, Chicago. Illinois' Medicaid formulary is not nearly as restrictive as those of some private health plans, she said.

"We've got a lot of spoiled-rotten patients and spoiled doctors who are used to prescribing what they want to prescribe," Dr. Stewart said. Most new, expensive drugs don't live up to their promises of better effectiveness and fewer side effects, she added.

Imposing prescription drug limits is a better option than throwing people out of Medicaid, Dr. Stewart said.

Preserving benefits

That's exactly why states have created PDLs, state officials said. "We want to use tax dollars effectively, while at the same time effectively treating patients," said Kristie Zamrazil, spokeswoman for the Texas Health and Human Services Commission. "The PDL is a tool we think can help us do that. It helps free up money to preserve Medicaid benefits and services in the long run."

On average, Medicaid outpatient prescription drug spending in Texas grew more than 17% per year from fiscal year 1998 to fiscal year 2002. The state does not yet have an estimate on how much the PDL, which began its initial rollout in February, will save.

In Tennessee, the preferred-drug list and use of a pharmaceutical benefits manager is expected to save $150 million annually.

But the TennCare program is still consuming a growing share of the budget and is in danger of starving other priorities, said Marilyn Elam, spokeswoman for the TennCare Bureau. As a result, the governor has proposed further limits on Medicaid drugs.

"This is the last chance for TennCare," Elam said.

Officials with both programs insist that efficacy and safety, as well as cost, determine which drugs make their lists.

Both Elam and Zamrazil noted that PDLs don't bar patients from obtaining drugs that are excluded, but their doctors have to gain prior approval from the state.

Doctors counter that this process is a hassle and can be tantamount to denying access.

"The Medicaid formulary is a thorn in my side," said Stephen Durrenberger, MD, medical director of Prestera Center, West Virginia's largest community mental health provider.

PDLs and prior approval are "another interference," said AMA Trustee J. Edward Hill, MD.

Some physicians don't want to fill out the forms or make the phone call to get prior authorization, Dr. Glazer said. They don't like the administrative burden or are afraid of being labeled as a heavy prescriber.

"It's also an ego thing -- I'm a doctor, why should I have to fill out a form?" he said.

Doctors unfamiliar with their states' restrictions might write prescriptions for excluded drugs, said Wanda Moebius, spokeswoman for the Pharmaceutical Research and Manufacturers of America. Patients then get rejected at the pharmacy. "What winds up happening is they walk away."

Better alternatives

Many doctors and patient advocates said that there are better ways to control Medicaid drug spending. Some argue that in the rush to cut pharmaceutical spending, states are ignoring the savings gained by managing illnesses through proper use of drugs. As a result, states might be spending more on hospital and doctor visits.

"It's saving money in one place, but it might be driving up costs elsewhere," said Dr. Durrenberger.

Even some PDL critics agree that physician prescribing habits have played a role in Medicaid drug costs' rapid growth. The best cost-control methods, they said, are physician education and disease management.

"If you give physicians information in a nonthreatening way, they will save you money," Dr. Hill said.

A handful of state initiatives take this approach.

For example, a new state-supported program in North Carolina distributes a list to physicians that ranks the cost of medications in the 15 most high-use Medicaid drug classes. The goal is to encourage physicians to voluntarily use cheaper medications when appropriate, said Steve Wegner, MD, president and medical director of Access Care, who is involved in the program.

The initiative also includes an educational component that uses the same face-to-face tactics used by pharmaceutical marketers in doctors' offices, said Dr. Wegner, a pediatrician from Morrisville.

"I make it personal with [doctors]," he said. "I tell them this is not a black hole with the federal government paying for it."

The state's decision not to implement a PDL became very controversial in April when the news media reported that state officials bowed to pressure from the drug industry.

Dr. Wegner hopes that the voluntary program still will have a chance to prove itself. Although there are no hard data because the initiative just went statewide in November 2003, the pilot showed promising results. It helped reduce drug spending by 22% in February and March 2003 compared with the September and October before its launch.

"I tell doctors if we don't save this money, the state will have no choice but to do a PDL and prior approval," said Dr. Wegner.

Another example is in Missouri, where the Dept. of Mental Health about a year ago began notifying doctors when Medicaid claims data showed their prescribing patterns for psychiatric drugs veered too far from best practices. Physicians are sent letters when they prescribe a patient too many drugs in the same class, when patients are getting the same drug from different physicians and when patients stop getting antipsychotics, said Joseph Parks, MD, the department's medical director, whose signature is on the letters.

"The goal was, let's improve quality because we anticipate it would save money," Dr. Parks said.

The notices to physicians about their prescribing patterns refer to specific patients and include information on best practices. The initiative relies on doctors voluntarily improving their habits. "I've had to change my practices because of a letter from myself," Dr. Parks said.

The feedback has been mostly positive. "It's not punishing the many for the sins of the few," Dr. Parks said. Non-psychiatrists have been particularly receptive, perhaps because they didn't specialize in psychiatry and welcome the advice, he said.

The Missouri initiative, which tracks prescribing for the roughly 180,000 Medicaid fee-for-service patients taking psychiatric drugs, appears to be having an impact. Six months after receiving notices, about half of physicians have changed their prescribing patterns, Dr. Parks said.

Although the economy is beginning to show signs of improvement, state Medicaid budget troubles are expected to continue. Hope is on the horizon in the form of last year's Medicare reform law, which starting in 2006 will shift coverage for prescription drugs from Medicaid to Medicare for people eligible for both federal programs.

But in the near term, states aren't expected to let up on efforts to cut costs. Doctors are left trying to cope.

Ben Raimer, MD, a pediatrician and vice president for community outreach at the University of Texas Medical Branch, Galveston, describes himself as both cautiously optimistic and apprehensive about the PDL.

Scientific rigor is needed to prevent frivolous prescribing and save scarce resources, Dr. Raimer said. He hopes that is state officials' intent.

"If it's just to add a barrier, then shame on them."

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Big budget

$27.5 billion was spent on Medicaid outpatient prescription drugs in 2003.
27% of Medicaid recipients are elderly or disabled, and this group accounts for about 85% of Medicaid drug spending.
13.8% is the estimated average increase in Medicaid prescription costs for fiscal 2004.
12% of Medicaid spending on benefits is for prescription drugs.

Source: Kaiser Family Foundation

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Clamping down

States are taking several tacks to rein in Medicaid drug spending. Preferred drug lists were used in 42% of states in 2003, and 56% of states tracked high-prescribing physicians. Neither of these options was on the radar in 2000. In addition, more states now:

2000 2003
Don't pay for legally excludable drugs 91% 100%
Require prior authorization 82% 95%
Charge a co-payment 66% 81%
Track high-cost users 39% 70%
Require generics 36% 70%
Have a fail-first policy 27% 65%
Limit the number of prescriptions 20% 33%

Note: 43 states responded in 2003; 44 responded in 2000.

Source: Kaiser Family Foundation.

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External links

Kaiser Family Foundation reports on Medicaid prescription drugs (link)

TennCare pharmacy program information (link)

Texas Pharmaceutical and Therapeutics Committee (link)

Community Care of North Carolina, for information on the state's Prescription Advantage List (link)

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