Programmatic Assessment of Carve-In and Carve-Out Arrangements in Medicaid Managed Care

1. Programmatic Assessment of Carve-In and Carve-Out Arrangementsin Medicaid Managed Care Media Conference CallOctober 24, 2007

2. Presenters • Margaret Murray CEO, ACAP • Pamela B. Morris CEO, CareSource Dayton, Ohio • Mark Reynolds CEO, Neighborhood Health Plan of Rhode Island Providence, Rhode Island • ACAP Board Members are also available for questions

3. Study Messages: The Bottom Line • Keeping the pharmacy benefit carved in to Medicaid managed care improves patient care and increases cost-savings • Extending the Medicaid drug rebate to health plans will reduce states’ incentives to carve pharmacy out of Medicaid managed care

4. Mission Statement • ACAP represents 35 nonprofit, community-based health plans covering over 4 million Medicaid, SCHIP and Medicare SNP enrollees in 22 states. • ACAP’s mission is to represent and strengthen not-for-profit, safety net health plans as they work in their communities to improve the health and well being of vulnerable populations.

5. 35 Current ACAP Members Affinity Health Plan Alameda Alliance for Health AlohaCare AmeriHealth Mercy Health Plan Boston Medical Center HealthNet CareOregon CareSource Children’s Mercy Family Health Plan Colorado Access Commonwealth Care Alliance Community Choice Health Plan Community Health Network of Connecticut Community Health Plan of Washington Contra Costa Health Plan Crescent Care Denver Health Medical Plan Health Plus Health Plan of San Mateo Health Right, Inc Horizon NJ Health Hudson Health Plan LA Care Health Plan Maricopa Health Plan Maryland Community Health System* MDWise Mercy Care Plan Monroe Plan for Medical Care, Inc. Neighborhood Health Plan Neighborhood Health Plan of Rhode Island Network Health Prestige Health Choice Santa Clara Family Health Plan Total Care University Family Care Virginia Premier Health Plan, Inc *Associate Member Plans in Italics are original CHC plans

6. ACAP Report Suggests PharmacyCarve-Ins Improve Patient Care & Cost Savings • New Report by ACAP & The Lewin Group: Programmatic Assessment of Carve-In and Carve-Out Arrangements for Medicaid Prescription Drugs • Interviews with key stakeholders in 7 states (carved-in and carved-out) • Health Plan Medical Directors • Health Plan Pharmacy Directors • Stakeholders with Medicaid agency, provider, and pharmacy perspectives

7. Definitions • Drug Carve-ins: drugs are provided by health plans, used in vast majority of states for Medicaid pharmacy benefits • Drug Carve-outs: drug costs are excluded from health plan contracts with Medicaid

8. Study Messages • Pharmacy carve-ins are good for … • Care coordination & treatment of “total person” • Real-time data for better monitoring (doctor prescribing, drug interactions, fraud) • Cost-savings generated by use of generics, lower (more appropriate) utilization • Alleviating operational challenges

9. 1. Pharmacy Carve-Ins Improve Care Coordination • Incentives aligned to address “total person” from clinical and cost perspective • Pharmacy, other medical benefits managed by one entity

10. 2. Pharmacy Carve-Ins Provide Real-time Data for Better Monitoring • No coordination needed for communication, data exchange between multiple entities • In-house pharmacy/medical claims data available in real time, valuable for • Tailoring health interventions (pregnancy, asthma) • Managing polypharmacy issues (drug interactions) • Monitoring prescribing patterns (quality, cost)

11. 2. Pharmacy Carve-Ins Provide Real-time Data for Better Monitoring • Pharmacy carve-ins provide opportunity to monitor prescriptions for identification of high utilizers • For marking inappropriate utilization • For identifying potential patient needs for disease and case management

12. 3. Pharmacy Carve-Ins Promote Cost-Savings, Appropriate Utilization • Higher utilization of lower-cost medications in health plans • 75% of prescriptions filled by health plans were generics • 55% to 63% of prescriptions in carved-out FFS setting for available states were generics • Prior research: health plans direct utilization towards relatively low-cost brand drugs when appropriate generic alternatives not available

13. 3. Pharmacy Carve-Ins Promote Cost-Savings, Appropriate Utilization • Special analyses of volume, prescription drug mix for children in same NY health plan under carve-in (SCHIP) and carve-out (Medicaid) • Generic fill rate about four percentage points higher for carve-in • Prescription usage rate considerably (more than 20%) higher for carve-out

14. 4. Pharmacy Carve-Ins Alleviate Operational Challenges • No need for enrollees, providers, states and health plans to sort through fragmented parts of benefit packages • Enrollees have one insurance card for all benefits, need not navigate several systems for care • Health plans better equipped than states to adjust formularies based on clinical and economic considerations, lack states’ political pressures

15. Drug Rebate Equalization:“Win-Win” Policy • Medicaid Drug Rebate Program • Ensures Medicaid gets “best price” on drugs through rebate payments from manufacturers to states • For FFS only, excludes Medicaid managed care programs • Higher rebates in FFS may encourage states to carve drugs out of Medicaid managed care

16. Drug Rebate Equalization:“Win-Win” Policy • Medicaid Drug Rebate Equalization Act (S.1589 and H.R.3041) extends rebate to health plans • Levels playing field between managed care and FFS • Could yield 20% savings in net pharmacy costs for Medicaid managed care; CBO scored Federal savings at $2.3 billion over 10 years • Does no harm to Medicaid enrollees

17. Conclusions • Pharmacy carve-ins improve care coordination by treating the “whole person” • Pharmacy Carve-Ins Provide Real-time Data for Better Monitoring • Pharmacy carve-ins promote cost-savings, appropriate utilization • Pharmacy carve-ins alleviate operational challenges • Extending Medicaid drug rebate to plans would reduce states’ incentives to carve drugs out

18. Contact Information • Meg Murray, CEO mmurray@communityplans.net 202.331.4601 Association for Community Affiliated Plans 1400 Eye Street NW, Suite 330 Washington, DC 20005 www.communityplans.net • Pamela B. Morris, CEOPamela.Morris@care-source.com 937- 531-2200 CareSource One S. Main Street Dayton, OH 45402-2016 • Mark E. Reynolds, CEO mreynolds@nhpri.org 401-459-6141 Neighborhood Health Plan of Rhode Island 299 Prominade Street Providence, RI 02908