Evaluation of Virginia’s Preferred Drug List: Interim Report

1. Evaluation of Virginia’s Preferred Drug List: Interim Report Policy and Research Division Department of Medical Assistance Services March 16, 2004

2. Presentation Outline  • Components of DMAS’ PDL Evaluation • PDL Process: Movement of Prescriptions • PDL Process: Inside Prior Authorization • Budget Savings: Analysis Plan and Next Steps • Health Impacts: Analysis Plan and Next Steps • Conclusions

3. DMAS’ Review of the PDL Has Several Major Components • The framework for this review is broadly designed to address the following three issues: • the vendor’s implementation of the program including a focus on the process for prior authorizing non-preferred drugs • the impact of the PDL program on the agency’s budget and whether the mandated savings targets are realized • the impact of the PDL program on Medicaid patient health outcomes

4. Three Important Research Questions Provide The Focus For The Study • Within the context of this issue framework, the following specific research questions will be addressed in the agency’s full review of the PDL: • Has the PDL program been implemented in a way to ensure a high rate of compliance by physicians without adversely affecting patient access? • Has the PDL program produced the $27 million in general fund savings for FY 04 and 05 as required by the General Assembly? • Is there evidence to suggest that the PDL program has adversely impacted patient health outcomes for those Medicaid recipients who are switched from non-preferred to preferred drugs?

5. Study Report Schedule Scheduled Report Dates and Frequency of Reporting

6. Presentation Outline • Components of PDL Evaluation  • PDL Process: Movement of Prescriptions • PDL Process: Inside Prior Authorization • Budget Savings: Analysis Plan and Next Steps • Health Impacts: Analysis Plan and Next Steps • Conclusions

7. Dataset To Track The Movement of Prescriptions Must Account For Numerous Outcomes Bolded Boxes Represent PDL Compliance

8. NDC File National Drug Code Hard Edit Date Drug Class Drug Name Preferred Indicator The First Health National Drug Code File With PDL Indicator and DMAS Claims Data Used To Create PDL Analysis File DMAS File First Health File Drug Name Drug Name Hard Edit Date Drug Class National Drug Code Preferred Indicator PRE-PDL Claims File Paid Claims 90 days prior to Hard Edit Date PDL Claims Analysis File Service Date Hard Edit Date Paid/Denied Status Drug Class Drug Name Preferred Indicator Recipient Information National Drug Code POST-PDL Claims File Paid or Denied Claims 1 to 6 Weeks After the Hard Edit Date DMAS Claims File National Drug Code Paid/Denied Status Service Dates Recipient Information

9. Drug Claims For This Report Were Selected From Files Containing Over Six Million Records and 1.4 Million PDL-Eligible Claims Claims Database (Oct 03 to Feb 04) 6,212,505 PDL Eligible Claims 1,486,105 Pre-PDL Claims 90 Days Prior to Hard Edit Date (multiple claims per recipient and drug) 592,609 Post-PDL Claims 1 to 6 Weeks After Hard Edit Date (multiple claims per recipient and drug) 220,424 Pre-PDL By Prescription Single Claim Per Recipient Per Drug 289,487 Post-PDL By Prescription Single Claim Per Recipient Per Drug 156,163

10. DMAS Policy and Research Staff Tracked The Movement of Nearly 300,000 Drug Claims In The PDL System Post-PDL Pre-PDL Change to Preferred Rx* 51,459 Claim Not Yet Submitted ???? Approved as Non-Preferred 3,417 Recent Pre-PDL Rx 19,308 Non-Preferred Rx 102,806 Walkaway ???? Later Refill ???? No New Claim 47,930 Not Found 28,620 Total Claims 289,487 No Refill ???? Remained on Preferred Rx 64,269 Denied 2 Walk aways ???? Headed to PA ???? Recent Pre-PDL Rx 48,538 Preferred Rx 186,681 Later Refill ???? No New Claim 73,874 No Refill ???? * This count excludes 792 possibly duplicate claims

11. PDL Compliance Rate Is High But Future Status Of Unpaid Claims Must Be Monitored Pre-PDL Period (Oct 03 to Dec 03) Post-PDL Period (Jan 04 to Feb 04) Post-PDL Period (Jan 04 to Feb 04) PDL Status Not on PDL 36% 31% PDL Drug 64% 97% 69% Total Claims 289,487 119,145* 167,075** * Includes only paid claims. ** Includes adjudicated claims and claims not found for drugs that were categorized as non-preferred in the pre-PDL period.

12. It Is Too Soon To Draw Conclusions Regarding Unpaid Claims In The Post-PDL Period For Drugs That Were Non-Preferred Prior To PDL Implementation Key Facts About Pre-PDL Non-Preferred Claims With No Matching Post-PDL Claim Jan 1st Jan 15th Jan 19th Feb 1st Feb 29th Was Last Pre-PDL Prescription Paid After Jan 15th? Did Hard Edits For Drug Class Occur After Feb 1st? Gastrointestinal 20% No No Yes 41% 59% 23% Analgesics 60% 40% Yes 19% Cardiac (Beta Blockers) Total Claims = 47,930

13. Compliance Rates Do Not Vary Significantly By Drug Class Gastrointestinal Medications Cardiac Medications Asthma Medications Central Nervous System Medications Total 97% 96% 94% 93% 85% 83% Compliance Rate Needed to Achieve Budget Savings Total Claims 55,562 5,508 35,433 12,517 2,104

14. Presentation Outline • Components of PDL Evaluation • PDL Process: Movement of Prescriptions  • PDL Process: Inside Prior Authorization • Budget Savings: Analysis Plan and Next Steps • Health Impacts: Analysis Plan and Next Steps • Conclusions

15. Four Out Of Every 10 Requests To The Call Center Result In A Change To A Preferred Drug. There Have Been No Denials. Prior Authorization Approved 60% 62% 75% 59% 56% 52% 59% 64% 67% Physician Agreed to Change to a Preferred Drug 40% 38% 25% 41% 44% 48% 41% 36% 33% Total Since January 5 Jan. 5 n=173 Jan 12 n=398 Jan 19 n=787 Jan 26 n=1,482 Feb 2 n=1,572 Feb 9 n=1,351 Feb 16 n=1,404 Feb 23 n=1,498 Week Start Date

16. Calls To The Center Are Increasing Weekly 2800 Total Issues Addressed 2600 2,640 2400 2200 2000 1800 Total Calls 1,822 1600 1,643 1400 1200 1000 1,137 800 600 Calls on Peak Day 400 200 349 241 0 Average Jan 5 Jan 12 Jan 19 Jan 26 Feb 2 Feb 9 Feb 16 Feb 23 Week Start Date

17. Physicians Raise Most of The Calls To The Center Physician 60% 67% 62% 73% 75% 74% 73% 72% 71% Pharmacist 26% 26% 32% 23% 21% 21% 24% 22% 24% Recipient 15% 7% 6% 5% 6% Average Jan. 5 n=455 Jan 12 n=821 Jan 19 n=1,421 Jan 26 n=1,944 Feb 2 n=2,463 Feb 9 n=2,314 Feb 16 n=2,516 Feb 23 n=2,640 Week Start Date

18. Most Inquirers Concern Requests For Prior Authorization Inquiry Type Other Caller Type Guidelines 4% 9% DUR Codes 4% Physician 89% Reject 6% PA Requests 68% PDL/PPL 9% Pharmacist 11%

19. First Health Call Center Staff Are Answering Calls In Less Than 30 Seconds 3:50 3:21 Average Length of Call 2:54 2:42 2:52 2:24 1:55 1:26 0:57 Average Speed to Answer 0:24 0:23 0:28 0:00 Average Jan 5 Jan 12 Jan 19 Jan 26 Feb 2 Feb 9 Feb 16 Feb 23 Week Start Date

20. Presentation Outline • Components of PDL Evaluation • PDL Process: Movement of Prescriptions • PDL Process: Inside Prior Authorization  • Budget Savings: Analysis Plan and Next Steps • Health Impacts: Analysis Plan and Next Steps • Conclusions

21. Budget Impact Will Be Assessed By Comparing Predicted Costs To Actual Costs PDL Implementation Projected Medicaid Spending Projected Savings Due to PDL $ Millions Actual Medicaid Spending Actual Medicaid Spending Month 4 Month 3 Month 2 Month 1 Month 1 Month 2 Month 3 Month 4 Pre-Implementation Months Post-Implementation Months

22. Other Components of Budget Impact Study • Market share analysis. Model predictions will need to be validated. Market share analysis will allow DMAS to accomplish this. Specifically: • If large savings are estimated using the prediction models and the PDL is comprised of drugs that controlled only a small share of the market, a large shift in market share should be observed • Analysis of Savings Among Eligibility Groups. The DMAS study team will also determine which eligibility groups witnessed the largest reduction in drug costs. Calculations will be made on a per-member, per-month basis to dampen the effect of enrollment changes.

23. Presentation Outline • Components of PDL Evaluation • PDL Process: Movement of Prescriptions • PDL Process: Inside Prior Authorization • Budget Savings: Analysis Plan and Next Steps  • Health Impacts: Analysis Plan and Next Steps • Conclusions

24. Evaluation of PDL Health Effects Poses Methodological Challenges Pre-PDL Period Post-PDL Period Atypical High Level Severity of Condition Movement Towards Typical Level Time Time

25. Research Design Strategies

26. Sample Size For PDL and Control Group Will Be Driven By Program Compliance Rate Change to Preferred Rx* 51,459 PDL Group Control Group Approved as Non-Preferred 3,417 Recent Pre-PDL Rx 19,308 Non-Preferred Rx 102,806 Later Refill ???? No Refill ???? No New Claim 47,930 Not Found 28,620 Total Claims 289,487 Walk away ???? Remained on Preferred Rx 64,269 Denied 2 Headed to PA ???? Recent Pre-PDL Rx 48,538 Preferred Rx 186,681 Later Refill ???? No New Claim 73,874 No Refill ???? * This count excludes 792 possibly duplicate claims

27. Quasi-Experimental Option Selected By DMAS Study Team • Construct two study groups from the universe of persons who were on non-preferred drugs prior to participating in the program: • The first group would consist of persons who were switched to a preferred drug by their physician to comply with the PDL program • The second group would consist of persons who were approved for the non-preferred drugs by First Health or DMAS • These groups could then be tracked over time and compared across the following measures post-PDL: • Total Medicaid expenditures • Rate of hospitalizations • Total inpatient and outpatient Medicaid costs • Statistical modeling will be used to account for non-equivalency between the two groups.

28. Presentation Outline • Components of PDL Evaluation • PDL Process: Movement of Prescriptions • PDL Process: Inside Prior Authorization • Budget Savings: Analysis Plan and Next Steps • Health Impacts: Analysis Plan and Next Steps  • Conclusions

29. Conclusions • Study results of the early implementation of PDL in Virginia are favorable: • PDL compliance rate is high and most changes are being made voluntarily • Patients are not being denied drugs • The Call Center is working well • More conclusive findings must be held in abeyance until the program matures and DMAS has had the opportunity to examine the health effects of the new program. • Interim results on the health effects of the program will likely be presented in the early part of 2005.