Medication Costs – Where are we going

1. Medication Costs – Where are we going Jeanne Tuttle, R.Ph. Pharmacy Benefits Management Service, VA Central Office June 2012

2. Learning Objectives • List two methods historically used to manage medication costs • Describe how the national formulary is currently managed in the VA • Identify two factors, unrelated to cost, that should be key in formulary decision making

3. Poll Question Trivia Time: What year was the NATIONAL Formulary instituted and what year did it become the ONLY formulary (local and VISN both abolished)? Instituted in 1997, all others abolished in 2009 Instituted in 2001, all others abolished in 2003 Instituted in 2003, all others abolished in 2003 Instituted in 1990, all other abolished in 2003

4. VA Formulary Progression

5. PBM-MAP Drug Use Management Process ID areas of opportunity • Review: • RX volume • RX expenditures • New Drugs Monitor Performance Assess feasibility • Contract Participation • Utilization Management • Use of Criteria • Review: • Medical Literature • VA Prescribing • Clinical Need START Implement action(s) • One or more of: • Issue Drug Use Criteria • Conduct Solicitation • Negotiate BPA Present issue to stakeholders • Medical Advisory Panel (MAP) • VISN Formulary Leaders (VFLs) • Get input from front • line clinical staff • Chief Clinical Consultants • DoD • Pharmacoeconomic Center • P & T Committee Determine action(s) • Nothing • One or more of: • Guideline • Criteria for Use • National Contract • Incentive Agreement

6. Basic Tenets • Promote appropriate drug therapy and discourage inappropriate drug therapy • Reduce the geographic variability in utilization of pharmaceuticals across the VA system • Initiate patient safety improvements • Improve the distribution of pharmaceuticals

7. Basic Tenets • Reduce inventory carrying costs, drug acquisition costs and the overall cost of care • Promote portability and uniformity of the drug benefit • Design and carry out relevant outcomes assessment projects

8. Lost cost is NOT a deciding factors if concerns over safety or effectiveness

9. Historically • Traditional methods: • Purchasing – contracts, blanket purchase agreements • Tablet Splitting • Maximize use of generics when clinically appropriate • Criteria for use, clinical guidance • Past four years have focused on reducing variance in drug costs across the system • Focus on high cost and high variance • Have addressed area with most opportunity • Will continue, however magnitude is less and effort/resources is larger (e.g. one-on-one communication with patients and providers)

11. DRUG COST VARIANCE TREND

12. DRUG COST VARIANCE TREND

13. Loss of Patent Exclusivity • Emphasis on Prescribing Criteria • Reduction in the number of low cost OTC RXs due to increase in co-payment from $2 to $7

14. The Data: More Initiatives with Less Cost Avoidance • FY ‘07 • 21 National initiatives • $264 million cost avoidance (8% of total outpatient expenditures) • Drug cost per patient ↓ 1.56% compared to FY 06 • FY ‘08 • 15 National initiatives • $354 million cost avoidance (11.5% of outpatient expenditures) • Drug cost per patient ↓ 8.11% compared to FY 07 • FY ’09 • 12 National initiatives • $192 million cost avoidance (6.1% of outpatient expenditures) • Drug cost per patient ­ 0.61% compared to FY 08 • FY ’10 • 26 National initiatives • $120 million cost avoidance (3.6% of outpatient expenditures) • Drug cost per patient ­ 1.08% compared to FY 09 • FY ’11 • 36 National initiatives • Target $128 million cost avoidance (~3-4% of projected outpatient expenditures) • Savings through Q1: $60 million (annualized)

15. Pharmacy Game Changers? • Expansion of costly chemotherapy regimens with modest/ limited clinical benefit • Ex: Provenge ® : $71,000 per course • New, expensive MS drugs • Ex: Gilyena ® (fingolimod): $35,000/year • Anticoagulation • Ex: Pradaxa ® (dabigatran): $1843/year (but lots of pts!)

16. Pharmacy Game Changers? • “New” old drugs • Ex: Colcrys ® (colchicine): $0.07/tab to $3.40 (lots of pts) • New Hepatitis C treatments (lots of pts) • Ex: Victrelis ® (boceprevir): $24,000-$43,500/pt/year • Ex: Incivek ® (telaprevir): $41,000-$46,000/pt/year

17. New Drug Approvals- Cost Increases(Selected Drugs)

18. Why is this important? • We have addressed traditional methods of cost avoidance and have done well! • <1% Decrease in VA Average 30 day equivalent RX ingredient cost over 10 years ($12.79 in October 1998 versus $12.76 in Sept 2009 • Going forward, the magnitude of cost avoidance using traditional methods has diminished versus the effort and resources • High cost, novel new therapies are entering the market at an unprecedented rate • Drug shortages have forced us to purchase higher cost alternatives and are expected to continue

19. Colchicine: Something Old, Something New(Old Drug, New Price!)

20. New Drug Impact Example: Dabigatran • Anticoagulant - Direct thrombin inhibitor indicated to reduce the risk of stroke and systemic embolism in patients with non-valvular atrial fibrillation • $117.25costlier than warfarin per patient per month • Average cost 30 day warfarin (5mg qd) = $0.88 • Average cost 30 day Dabigatran (150mg bid) = $118.25 • 2667 Veterans currently with active prescriptions • Budget Impact for this one drug: • Approximately $3,750,000/year more in drug costs to treat current patients • Number of Veterans receiving this drug expected to grow

21. New Drug Impact Example: Hepatitis C, Boceprevir and Telaprevir • Historic annual treatment rate: 2% of eligible patients • Increase to 27% in FY 2000 when standard therapy introduced • Assume deferral of treatment pending availability of new drugs • Number of treatment-eligible patients per VISN: National HCV Clinical Case Registry • Conservative estimate: 5% of eligible patients in FY 12 • High-end estimate: 17.5% of eligible patients in FY 12 • Cost Impact • Public Health SHG projected $117 - $324 M in first year of use • Purchases for June – December, 2011 = $16,191,883

22. Example: MS Drugs • 25,000 VA patients with MS, ~30% have relapsing- remitting disease • Fingolimod – first oral disease modifying MS drug. • ~$35,000/ year compared to $10-17,000 for other MS therapies • At least as effective as other agents • If all eligible change, $150 M/year above current drug therapies • Dalfampridine- drug to help with symptoms (does not change disease progression) • $9700/ year

23. Example: Provenge® for Prostate CA(Castrate Resistant) • The Facts • Mortality: Live longer (4 months) • Disease free progression: No • Tumor response: No • Cost: $71,000 per patient • Few would consider this cost-effective • VA: FY 2009- 146,214 veterans Prostate Ca • If 600 patients/ year = ~$43 million (conservative estimate) • New patients?

24. Is This Good Value? • Example: Request for erlotinib and gemcitabine for 72 yo veteran with pancreatic cancer, widely metastatic. • Erlotinib (Tarceva) FDA approved in combination with gemcitabine, based on study:J Clin Oncol 2007: 25: 1960-66. • Recommended by NCCN National Clinical Practice Guidelines in Oncology • Cost for 6 cycles, erlotinib alone: $10,920 • Benefit: 10 days increased overall survival. “Statistically significant” • More side effects with combined treatment • ? Quality of life? ? Good Value?

25. High Value, Cost-Conscious Health Care • Trajectory of pharmacy costs is likely to become unsustainable • Owens, Shakelle, et al (VA physicians) have presented for the American College of Physicians concept of “High-Value, Cost-Conscious Health Care” (Ann Intern Med 2011) • Important distinction between cost and value • Inappropriate to focus only on cost, or benefit • Value considers both benefits relevant to cost, and benefits relevant to other interventions • Many current pharmacy treatments do not present high value- for both high cost, and low cost drugs

26. High Value, Cost-Conscious Health Care • Recommendations by authors • Decrease or discontinue interventions of no benefit • Ensure provision of interventions that are effective and decrease costs • For interventions that provide additional benefit at additional cost: Assess value (CEA or otherwise)

28. What Can We Do? • Pharmacy costs likely to dramatically increase if we rely on old methods to manage cost • Opportunities to reduce cost through contracting and prescribing criteria have been maximized (or very nearly so) for many years • VA PBM is committed to exploring all conceivable solutions to manage pharmaceutical costs • Academic Detailing Pilot • Continue to develop high quality prescribing criteria to optimize best outcomes for expensive drugs

29. Field Implementation

30. And then what happens? • Wide variation with field implementation • Field Implementation Factors • Staffing • IT Resources • Facility Philosophy • Competing performance measures

31. Field Implementation • CPRS Decision guided drug specific template with pharmacist review • CPRS Decision guided drug specific templates - NO pharmacist review • Review centralized to VISN level pharmacist • Generic non-formulary drug request with pharmacist review • Generic non-formulary drug request – NO pharmacist review

32. Field Implementation • Criteria disseminated to clinicians • Message field populated • Restrictions field populated • Links within CPRS • How does the message get delivered? • What are the expectations for practice? • How is ongoing use monitored and medication discontinued appropriately?

33. Poll Question We use templates to assess the need for ongoing therapy AND they are effective: For NO drugs For < 5 drugs For 5-10 drugs For >10 drugs We use templates to assess the need for ongoing therapy but have never determined if they work

34. National Template Survey • National Templates developed and posted • Dabigatran • Boceprevir • Reminder Dialogue • Consult • Field Survey through VPEs – 76 responses

35. Survey Results • Would your facility be more willing to use a national tool if it was released at the same time as the CFU? • Yes = 91% No = 9% • Would your facility be willing to change current processes for implementing CFUs to accommodate use of nationally developed electronic tools? • Yes = 53% No = 7% • Unknown = 40%

36. Survey Results: Dabigatran • Implemented (36%) • 14% with no changes • 15% with slight wording changes • 7% with changes that modified the CFU slightly • Not Implemented • 28% had developed locally • 9% do not use drug specific consults • 3% could not get IT support • Free text responses

37. Survey Results Boceprevir • Implemented (22%) • 15% as consult • 7% as reminder dialogue • Not implemented • 24% had developed locally • 4% used template from another medical center or VISN • 1% could not get IT support • 49% did not implement any type of template

40. Clopidogrel • Overall use is driven by those patients who are on for more than 2 years • Tremendous variation across system • % of Clopidogrel Patients receiving longer than 2 years range: 4%- 57% • % of Patients receiving Clopidogral longer than 2 years range: 0.02% - 2.02% • Should “going generic” matter?

41. Where do we go from here? • Risk Share Agreements • Coverage with Evidence Development (CED) • Provider Level Feedback • Prior Authorization: • National • VISN

42. Risk Share Agreements • “Pay for Performance”: • VA reimburses drug costs only for those patients who achieve agreed upon clinically relevant outcomes. • both VA and industry share in the cost-risk • Caps for coverage of specific drugs: • VA negotiates limits to spending for drug in return for coverage benefits to the manufacturer • Identify a pre-specified cost threshold for coverage of a specific drug- over which the manufacturer would cover costs, or • Provide a cap on costs for specific drug for specific patient

43. Coverage with Evidence Development (CED) • Costly drug therapies where safety, efficacy, and cost-effectiveness are in question. Controversial • Drugs would only be available to patients and providers if the patient agrees to participate in a study to assess outcomes. • May involve randomization to different treatment arms. • No randomization - all patients agree to participation in the collection of outcome data- including (as appropriate), risks, benefits, and quality of life.

44. Provider Level Feedback • Historically PBM has provided facility and VISN level feedback on drug utilization • No national effort to provide meaningful, provider level feedback • Kaiser: Physician to physician model • Identification of extreme outliers- both patients and physicians

45. Prior Authorization • Despite criteria, wide variation exists • Availability of Subject Matter Experts at local level, at VISN level? • Application of CFU versus overall assessment of patient/disease • Determination made by MAP/VPE • Formulary with national prior authorization • Formulary with VISN prior authorization

46. Prior Authorization Considerations • Cost • Volume • Marginal clinical benefit • Narrow spectrum of safety • Special significance to the mission of the VA (to ensure access to all veterans) • Subject matter experts

47. Field Implementation

48. New drug – MAP/VPE Discuss Evidence and Vote Formulary – Risk Share Agreement Formulary – CED • Non-Formulary • Formulary Formulary – Academic Detailing Required • Formulary With Criteria • Non-Formulary with Criteria Formulary – National Prior Auth Formulary – VISN Prior Auth Formulary – Template Required

49. Your insights and Thoughts?