Fiscal fitness: How states copeNew training, technical assistance, and grants help six states manage pharmacy strategies

"The Medicaid program in Washington implemented a three-part program designed to promote appropriate and cost-effective use of prescription drugs and improve quality of care. An initial review of the Therapeutic Consultation Service, a program run by Affiliated Computer Services that targets high-volume utilizers and prescribers, has demonstrated savings of $5.13 million in the first five months following implementation."

Statements such as this, taken from a report prepared by the Lawrenceville, NJ-based Center for Health Care Strategies (CHCS) on the impact of clinical pharmacy management programs, are encouraging state officials to take a close look at such programs as they attempt to restrain pharmacy costs in Medicaid and other state programs. State efforts in this area will be helped by an initiative to support new training, technical assistance, and grant-making for up to six states interested in developing quality-focused pharmacy management strategies. The goal of the initiative, which will start this fall, is to find feasible solutions that improve quality, reduce costs, and are amendable to all stakeholders. Primary focus areas for technical assistance include pharmacy case management and physician and patient profiling and education activities.

Controlling pharmacy costs has been a major effort in many states in recent years, given the increasing fiscal pressure on state officials. Prescription drug spending is the most rapidly growing component of the total Medicaid budget, and has become a specific target for states’ cost-containment strategies. (See graph.) In fiscal year 2001, Medicaid fee-for-service prescription drug costs were $24.7 billion (combined federal and state). The Centers for Medicare & Medicaid Services has projected costs to grow by approximately 24% in 2003, to $32.5 billion. Most state officials attribute this growth to a combination of factors, including increased utilization and price of prescription drugs, an increased number of products on the market, and the mix of drugs taken by beneficiaries.

The CHCS report says drug spending is a separately appropriated item in most states, which fuels an environment in which drugs are seen as separate from overall medical costs. While increased use of drugs may improve quality of care or even reduce costs, states are focused on increases in drug spending.

CHCS state purchasing programs director Anna Fallieras says many states hope to manage rising prescription drug costs through preferred drug lists and limitations on the quantity of drugs beneficiaries may receive each month.

But, Ms. Fallieras says, restricting benefits without a plan to ensure quality is not compromised may increase hospitalizations, emergency room visits, and ultimately costs over the long term, especially when the benefits in question relate to prescription drugs.

"Unfortunately," she says in the report, "the effects of these programs on quality are generally not being studied. Key stakeholders groups are thus concerned about the potential effect of state programs on quality."

The report says state Medicaid programs can mitigate prescription drug costs by exerting influence on price, utilization, and drug mix.

"Clinical pharmacy management initiatives focus on influencing utilization and mix to enhance the quality of care provided to beneficiaries and reduce prescription drug and other program costs," Ms. Fallieras says. "Through education, nurse-patient case management, provider detailing, and other activities, clinical pharmacy management programs generally seek to eliminate inappropriate drugs from patients’ regimens, reduce the risk of harmful and expensive drug interactions, and boost compliance. These initiatives also attempt to influence the mix of drugs taken by beneficiaries by promoting best practice guidelines that providers recognize, and by monitoring patients with a history of taking expensive medications. Often making small changes first to improve the drug regimens of the sickest, most expensive beneficiaries can lead to meaningful cost savings. Early data from some programs [such as the one in the state of Washington, quoted at the beginning of this article] support the claim that states’ immediate focus on quality can promote cost reduction in the short and long term."

Ms. Fallieras says the potential for cost savings isn’t the only reason why states should consider alternatives that promote clinical quality. Such programs are more politically palatable, she says, which gives states an opportunity to save money without denying access to services or limiting eligibility. Also, such initiatives typically focus on some of the most vulnerable beneficiaries in the Medicaid program to ensure their complex clinical care needs are met.

In general, according to the report, clinical pharmacy management programs establish systems or processes to monitor and intervene in the treatment of patients taking prescriptions. The monitoring and intervention may be episodic, occurring at various points in time, or may be an ongoing activity that affects patients over a period of months or years.

A CHCS framework suggests that the structure of existing clinical pharmacy management programs includes identification/stratification of patients or providers for interventions; establishment of clinical goals to guide development of interventions; outreach/interventions to enroll and maintain patients in a program that produces change in their care plans; and monitoring/ evaluation to measure effectiveness of a program and continually improve it. (See graph.)

Structure of Existing Clinical 
Pharmacy Management Programs

Source: Center for Health Care
Strategies, Lawrenceville, NJ.

Clinical pharmacy management activities often are divided into two broad categories: pharmacy case management and physician profiling. Pharmacy case management is seen as a system or program in which Medicaid or private insurers identify and manage beneficiaries meeting one or more criteria such as generating high prescription drug costs, taking a high number of prescription drugs, or having a specific disease. Case management typically is triggered when a patient reaches a set drug limit, generates claims above an established level, or is diagnosed with a particular disease.

Physician profiling is a technique used to identify providers who prescribe outside of accepted guidelines. Such programs typically are triggered through drug utilization reviews, which generate data on physician prescribing histories and compare these data to expected prescribing patterns within drug categories. Depending on the degree of variation, interventions might rely on general educational materials on prescribing protocols or a pharmacist consultation to review specific patient medication issues.

Many more states have undertaken pharmacy case management than have entered into physician profiling, although many private insurers make good use of the latter technique.

The CHCS report contains case studies from Maryland, North Carolina, Texas, and Washington, representing a variety of plan types and approaches to incorporating pharmacy case management or physician profiling programs into a pharmacy benefit.

For instance, in 2000, Maryland Physicians Care implemented a disease-driven case management program for diabetes patients enrolled in the Maryland Medicaid managed care plan. The program gives physicians comprehensive information, tools, and counseling to support treatment of beneficiaries with diabetes through an integrated approach. Ms. Fallieras says implementation of this program has resulted in improved beneficiary health, reduced medical service utilization, and a net decrease in direct medical costs.

Schaller Anderson consultant Neil West, who worked with Maryland officials on the project, tells State Heath Watch the state is collecting lab values and pharmacy information and matching those data to physician groups so they can get a perspective on all the patients involved.

The program uses the hemoglobin A1c test, which measures blood sugar, to gauge success of the efforts. When they first started giving information to plan medical directors, 36% of patients had A1c readings higher than 9.5. After a few months in the program, only 20% of the same patients had readings higher than 9.5.

Mr. West says the results led to physicians getting an A1c testing machine for their clinic to better track the patients. They also are doing diabetic retinopathy screenings. Another project has opened in western Maryland with 150 patients with paired data, and they’re hoping to be able to apply it to a larger geographic area so they can evaluate the impact of people moving among health plans.

Mr. West and Schaller Anderson also have been working in Missouri with a university-owned health plan and an asthma program. In studying hospital, emergency room, and pharmacy costs for this project, they have seen an increase of about $1 per person per month in pharmacy costs because of an increase in the use of controller medications. But that has been accompanied by a 50% reduction in hospitalizations.

"The net effect has been a significant savings," Mr. West tells State Health Watch. "It’s probably worth $200,000 a year to the health plan’s bottom line."

The program works by monitoring patient drug records for instances when patients have prescriptions for rescue medications but not for controller medications. "It’s only a small percentage of patients," Mr. West says, "but they are the ones who get into trouble. We can flag the charts and talk to people to find out what’s going on."

[Contact Ms. Fallieras or obtain copies of the full report at (609) 895-8101. Contact Mr. West at (602) 659-2060 or by e-mail at]