Status Report on Development of a Medicaid Preferred Drug List Program

1. Status Report on Development of a Medicaid Preferred Drug List Program Presentation to: The Medicaid Pharmacy & Therapeutics Committee Cynthia B. Jones Department of Medical Assistance Services June 18, 2003 Richmond, Virginia

2. Presentation Outline Background Actions Taken Thus Far Next Steps

3. Medicaid Coverageof Prescription Drugs • Prescription drug coverage is an optional benefit that all state Medicaid programs provide. • In Virginia, this coverage is provided through fee-for-service and managed care programs. • The focus of this PDL program is on the 220,000 clients that are in the fee-for-service program. These clients live in areas of the State that currently do not have a managed care organization available or who are excluded from managed care (such as persons in nursing facilities, community based waiver programs, and foster care). • The 300,000 Medicaid recipients in one of the five managed care programs are already subject to a preferred drug list or similar program.

4. Fee-For-Service (FFS) Pharmacy Costs Have Increased 89% Since 1997 Annual FFS Pharmacy Costs (Millions) Net of drug rebates Source: Statistical Record of the Virginia Medicaid Program

5. FFS Pharmacy Costs As A Percentage of Total Medical Costs Is Increasing FFS Pharmacy Costs As A Percentage of Total Medical Costs Source: Statistical Record of the Virginia Medicaid Program

6. 2003 Appropriations Act: Preferred Drug List (PDL) Program • Item 325(ZZ.1) of the 2003 Appropriations Act directs DMAS to: • Implement PDL program no later than Jan. 1, 2004 • Seek input from physicians, pharmacists, pharmaceutical manufacturers, patient advocates, and others • Form a Pharmacy & Therapeutics (P&T) Committee • Ensure drugs on the PDL are safe and clinically effective before considering cost effectiveness • Include several key provisions: 72-hour emergency supply; 24-hour prior authorization process; expedited review of denials; and consumer/provider training and education • Report to General Assembly on main design components • Program must generate savings of $9 million GF in FY 2004, and $18 million GF in subsequent fiscal years.

7. Other States’ Medicaid PDL Programs • There is no uniform definition of a PDL program. • At least 22 states have implemented or have legislation to implement a PDL program. • The Centers for Medicare and Medicaid Services support PDL programs, including those that require supplemental rebates. • Florida was one of the first states to establish a PDL. It utilizes supplemental rebates or “value added” services to generate program savings. • Michigan focuses on reference pricing and rebates only. • Oregon’s PDL program started out as voluntary for physicians.

8. Other States’ Medicaid PDL Programs • Both the Michigan and the Florida PDL programs have been the subject of external reviews. • A recent Kaiser Commission report on the Michigan Program found that the program was implemented too rapidly, excluded the views of key stakeholders, failed to educate physicians, pharmacists, and beneficiaries adequately, had a cumbersome prior authorization and appeals process, and appears to be restrictive in certain categories of drugs, such as mental health drugs. • A recent legislative review of Florida’s program found that an additional $64.2 million in 2003-2004 could be saved by restricting supplemental rebates to only cash rebates rather than services.

9. Presentation Outline Background Actions Taken Thus Far Next Steps

10. Actions Taken Thus Far • Met with 30+ different interested parties on PDL issues • pharmaceutical manufacturers, physicians, pharmacists, hospitals, nursing homes, advocacy groups and others • Submitted status report to General Assembly on April 1 • Solicited nominations from provider associations for physicians and pharmacists to serve on the P&T Committee

11. Actions Taken Thus Far • Solicited public comments on a draft Request for Proposals (RFP) to select a PDL contract administrator; RFP issued on May 1 • proposals were received on June 5th • Established a pharmacy web page at DMAS’ internet site (www.dmas.state.va.us) and e-mail address for PDL comments/input • pdlinput@dmas.state.va.us • Submitted a PDL program status memorandum to General Assembly on June 17th

12. Therapeutic Class Description Insulins Cholinesterase Inhibitors Platelet Aggregation Inhibitors Antivirals for HIV Cancer Chemo. Agents Anti-convulsants Immunosupressants Antiemetics Anti-psychotics, Atypical and Typicals Used in the Treatment of Diabetes Alzheimers Clotting Disorders HIV/AIDS Cancer Seizure Disorders, Mental Health Transplant rejections, Arthritis Nausea in cancer patients, Aging Serious Mental Illness An Initial List of Key Classes of Drugs to be Excluded from the PDL Program Has Been Developed

13. Presentation Outline Background Actions Taken Thus Far Next Steps

14. Next Steps • Procure PDL contractor services • contract award is expected by early July • Schedule additional P&T Committee meetings • Develop emergency regulations and submit State Plan amendment to Centers for Medicare & Medicaid Services • Provide status reports to the General Assembly at key points in development process • Establish a PDL Implementation Advisory Group • Continue to receive input from interested parties

15. Next Steps(continued) • Incorporate other pharmacy-related prior authorization requirements • prior authorization for more than 9 unique prescriptions in 180 days (non-institutionalized patients) or 30 days (institutionalized patients) • Modify Medicaid Management Information System (MMIS) to process PDL and prior authorization-related transactions • Develop provider/consumer education and training program • PDL contractor will have major responsibilities • PDL Implementation Advisory Group will play key role