Status Report on the Virginia Medicaid Pharmacy Programs

1. Status Report on the Virginia Medicaid Pharmacy Programs Presentation to: PDL/PA Implementation Advisory Group Cheryl J. Roberts Deputy Director Programs and Operations Department of Medical Assistance Services June 22, 2004 Richmond, Virginia

2. Presentation Outline Phases II and III of the PDL Cox-2 Clinical Edit Annual Review Process MAC Program

3. Phase II – April 2004 Therapeutic classes for the April 2004, PDL Phase II implementation: • Oral Hypoglycemics(diabetes) • Second Generation Sulfonylureas • Alpha Glucosidase Inhibitors • Biguanide Combinations • Hypoglycemic, Biguanide Type • Meglitinides • Thiazolidinediones (TZDs) • Leukotriene Modifiers (asthma) • Analgesic- NSAIDS (pain and inflammation) • Serotonin Receptor Agonists (migraine headaches) • Onychomycosis Antifungals (fungal infections) • Bisphosphonates for osteoporosis (osteoporosis)

4. Phase II – April 2004 Phase-In Schedule for April Implementation - Soft edits started April 1 for all classes • Hard edits on May 3, 2004 • Oral Hypoglycemics • Second Generation Sulfonylureas • Alpha-Glucosidase Inhibitors • Biguanides • Biguanide Combination Products • Meglitinides • Thiazolidinediones (TZDs) • Leukotriene Modifiers • Hard edits on May 10, 2004 • NSAIDs • Serotonin Receptor Agonists (Triptans) • Oral Antifungals for Onychomycosis • Bisphosphonates for Osteoporosis

5. Phase III – July 2004 Therapeutic classes for the July 2004, PDL Phase III implementation: • Carbonic Anhydrase Inhibitors – Opthalmic (glaucoma) • Alpha 2 Adrenergics – Opthalmic (glaucoma) • Beta-blockers – Opthalmic (glaucoma) • Prostaglandin Inhibitors – Opthalmic (glaucoma) • Antihyperkinesis/CNS Stimulants (ADD/ADHD) • Macrolides - Adult (antibiotics) • Macrolides - Pediatrics (antibiotics) • 2nd Generation Quinolones - Systemic (antibiotics) • 3rd Generation Quinolones - Systemic (antibiotics) • 2nd Generation Cephalosporins (antibiotics) • 3rd Generation Cephalosporins (antibiotics) Long Acting Narcotics will not be included in the July 2004 implementation. The Department is examining the 72 hour provision on Schedule II drugs and the impact on this drug class.

6. Phase III – July 2004 Phase-In Schedule for July Implementation - Soft edits start July 1 for all classes • Hard edits on August 2, 2004 • 2nd generation Cephalosporins • 3rd generation Cephalosporins • Macrolides - Adult and Pediatric • 2nd generation Quinolones – Systemic • 3rd generation Quinolones – Systemic • Antihyperkinesis/CNS Stimulants • Hard edits on August 9, 2004 • Alpha-2 Adrenergic - Opthalmic • Beta-blockers -Opthalmic • Carbonic Anhydrase Inhibitors - Opthalmic • Prostaglandin Inhibitors - Opthalmic

7. Presentation Outline Phases II and III of the PDL Cox-2 Clinical Edit Annual Review Process MAC Program

8. COX-2 Inhibitors • The Pharmacy and Therapeutics Committee (P&T) previously reviewed the COX-2 Inhibitor therapeutic drug class during Phase I of the PDL implementation. At that time, it was determined that one drug was preferred and the remaining drugs in that class would be available through PA. • In addition, the P&T Committee has decided to implement clinical edits for the COX-2 Inhibitor therapeutic drug class. The purpose of this edit is to prevent inappropriate use of COX-2 inhibitors in patients without indications for use and to contain drug costs. Additionally, the edits are expected to reduce the potential for adverse events associated with chronic, high-dose COX-2 use. • Effective July 1, 2004, those patients under 60 years of age with a new prescription for COX-2 therapy will require a PA. A hard edit message indicating that the drug requires a PA will be displayed at POS.

9. COX-2 Inhibitors • The clinical edit will only affect those patients under age 60 who have a new prescription for any of the COX-2 drugs. Those patients who are under 60 and have been on COX-2 therapy between January and June 30, 2004, will fall under a grandfathering provision and will be able to continue without disruption of service until their current prior authorization expires, or until June 30, 2005, which ever comes first. • In March 2005, those recipients who were grandfathered under the clinical edit will receive a letter indicating that continued use of a COX-2 Inhibitor after June 30, 2005 will require a prior authorization. • Providers also will be sent letters in March 2005 notifying them of their patients utilizing COX-2 Inhibitors and that future use will require a prior authorization or change in therapy to an NSAID.

10. Presentation Outline Phases II and III of the PDL Cox-2 Clinical Edit Annual Review Process MAC Program

11. Annual Review Process • The Virginia Medicaid program will continue utilizing Virginia specific contracts for pricing and supplemental rebates directly with manufacturers. • Manufacturers are encouraged to provide supplemental rebate offers for consideration by the Commonwealth of Virginia. • DMAS has set the anticipated schedule for the review of drug classes implemented in January 2004 (Phase I). • This includes the drug classes that were reviewed in the fall of 2003 and whose contracts terminate December 31, 2004.

12. Annual Review Process The following therapeutic classes of drugs from Phase I will be reviewed for continued PDL inclusion: Proton Pump Inhibitors Nasal Steroids Non-Sedating Antihistamines and combination products Histamine-2 Receptor Antagonists Inhaled Beta Adrenergics COX-2 Inhibitors Inhaled Steroids HMG-CoA Reductase Inhibitors (statins) Sedative Hypnotics Angiotensin Converting Enzyme Inhibitors and combination products Angiotensin Receptor Antagonists and combination products Beta-blockers Dihydropyridine Calcium Channel Blockers Non-Dihydropyridine Calcium Channel Blockers

13. Annual Review Process In order to meet the January 2005 implementation date, DMAS has set the following deadlines: Friday, August 6, 2004: Manufacturers’ final supplemental rebate offers must be submitted to First Health Services by close of business. The Department expects to receive best and final offers by this date. Monday, August 23, 2004: Meeting of the P&T Committee to review clinical information, pricing information, and to select which drugs will not require prior authorization. NOTE: both the clinical and financial information will be considered at this meeting.   Manufacturers who wish to present clinical information to the P&T Committee at this meeting must notify the Department by August 13, 2004 via the pdlinput@dmas.virginia.gov email. Friday, October 15, 2004: First Health Services must receive all manufacturer-executed supplemental rebate contracts by close of business. Should the final contract not be received at this time, previous offers will be considered rescinded. Monday, January 3, 2005: Implement prior authorization requirement for drugs that were not selected to be on the PDL.

14. Annual Review Process • Contracts for Phases II will be extended from March 31, 2005 to June 30, 2005 • Contracts for Phase III will end on June 30, 2005 • In order to meet the July 2005 implementation date, DMAS has set the following schedule: December 2004: A comprehensive bidding package with instructions will be sent electronically to manufacturers by First Health Services Corporation. February 2005: Manufacturers’ final supplemental rebate offers must be submitted to First Health Services by close of business. The Department expects to receive best and final offers by this date. March 2005: Meeting of the P&T Committee to review clinical information, pricing information, and to select which drugs will not require prior authorization. NOTE: both the clinical and financial information will be considered at this meeting. Manufacturers who wish to present clinical information to the P&T Committee at this meeting must notify the Department by mid February via the pdlinput@dmas.virginia.gov email. April 2005: First Health Services must receive all manufacturer-executed supplemental rebate contracts by close of business. Should the final contract not be received at this time, previous offers will be considered rescinded. July 1, 2005: Implement prior authorization requirement for drugs that were not selected to be on the PDL.

15. Presentation Outline Phases II and III of the PDL Cox-2 Clinical Edit Annual Review Process MAC Program

16. MAC Program • Maximum allowable cost (MAC) reimbursement is a method used by Medicaid programs in approximately 41 states and by private insurers throughout the commercial insurance market to control the cost of generic drugs. • Currently, the Virginia Medicaid program reimburses pharmacies the Average Wholesale Price (AWP) of the drug minus 10.25% for both brand name and generic drugs. • Virginia Medicaid reimbursement is AWP-10.25% regardless of how much the pharmacy actually pays for the drug. With multiple source generic drugs, pharmacies often can purchase them for far less than this amount (on average 40-60% below brand costs). Thus, Medicaid is paying a higher level of reimbursement than is necessary for these drugs. • By instituting a MAC reimbursement methodology for generics, DMAS will reimburse pharmacies an amount that more accurately reflects their acquisition costs plus an appropriate profit margin.

17. MAC Program • The PDL (preferred drug list) program focused on brand name drugs and negotiating with the drug manufacturers for supplemental rebates. • The next round of activity will be to manage generics drugs. We plan to manage generic drugs through both a MAC project and the implementation of several IT changes in our drug file. • The DMAS Pharmacy & Therapeutics Committee has strongly recommended that a MAC reimbursement methodology be instituted for generic drugs. The General Assembly budget language authorized the Department to move forward on the initiative. In the first year we estimate that we will save $10 million dollars. • As part of this process, the Department released an RFP on May 28th to seek a vendor to handle the generic drug pricing utilizing a maximum allowable cost (MAC) methodology. • Responses from vendors are due June 25th for a planned implementation date of November 1, 2004.

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