Drug switching: Are there real villains?
Business as usual’ seems to be the response
It’s been three years since Eli Lilly & Co. bought PCS Health Systems and SmithKline Beecham acquired Diversified Pharmaceutical Services, and five years have passed since Merck & Co. added Merck-Medco Containment Systems to its list of subsidiaries.
In all, the acquisitions meant that drug companies would now control two-thirds of the nation’s pharmacy benefit management (PBM) business. During the same time period, managed care has mushroomed, and its growing pains have included some restrictive policies that have consumers up in arms.
Over the past few months, drug company-owned PBMs have been getting the lion’s share of criticism amid accusations they force their parent-company’s drugs into formularies, primarily by pressuring prescribers, offering kickbacks or rebates, and controlling mail service substitution.
National groups like Citizen Action and the Consumer Federation of America have lambasted those PBMs for their restrictive practices. "The drug companies now have more control over drugs used by Americans than does the medical profession," claims former U.S. Sen. Howard Metzenbaum, current chair of Consumer Federation of America.
New York City Public Advocate Mark Green has furnished surveys attacking therapeutic drug substitutions by citing figures that 83% of 248 New York state doctors surveyed said they had been contacted by health plans asking them to change drug prescriptions. More than 70% said therapeutic drug substitutions diminish quality of care, and they feel "uncomfortable" making those decisions.
These groups and others like them are calling for bans on drug company-owned PBMs and investigations by Congress and the U.S. Food and Drug Administration. But what the public may see as a conspiracy, the industry has come to accept as business as usual.
"I think we’re seeing a backlash against managed care in general, not particularly directed at pharmaceutical-owned PBMs. The fact is, almost all insurance carriers and HMO programs are involved in switching programs," says Barbara Hawes, RPh, MBA, a consultant with Towers Perrin in Atlanta. Her company matches employers and health systems with PBMs.
"It’s the Coke vs. Pepsi mentality with prescription drugs that people are having a problem with," she says, "and the likely first place to scrutinize is the drug company-owned PBM. In some cases, autonomous PBMs have alliances with drug companies that influence the formulary. My clients are curious about these relationships, and we investigate them with due diligence, but I can’t think of a time in the last 18 months a client said, I won’t work with a manufacturer-owned PBM,’" Hawes says.
Michael Deskin, president of the Pharmacy Benefit Management Institute in Scottsdale, AZ, agrees. "The criticism parallels what’s going on in managed care in general," he says. "For example, in California, several HMOs are allowing patients to self-refer to specialists. It’s part of the backing off on restrictions trend, and here therapeutic substitution programs are the primary concern on whether patients are prevented from getting a certain drug."
Part of that backlash is taking shape as state disclosure or anti-rebate laws. California has pending legislation that would allow generic drug alternatives but requires physician consent for therapeutic substituting. It also requires health plans to disclose any financial incentives for using a formulary drug. Also, any incentive or bonus plans given to pharmacists, physicians, or contracting PBMs including parts of a therapeutic switching plan must be filed with the state’s Department of Corporations. The California Pharmacists Association is backing the bill, and similar disclosure laws are being applauded throughout the industry.
"I don’t know that, generally speaking, ownership of PBMs by drug makers is the biggest problem that exists. What they represent is financial incentives, and those relationships can exist whether there’s ownership or a partnership. A lot of it is perception, but the big three haven’t done anything to allay those concerns," Deskin says.
Eli Lilly & Co. bought PCS Health Systems in 1994, and with the purchase, signed a federal consent decree by the Federal Trade Commis-sion swearing that proprietary information would not pass between them. PCS now covers 56 million people through 54,000 pharmacies while contracting with 98% of all retail pharmacies, according to the company. That translates to 300 million prescriptions a year worth about $10 billion, explains PCS spokeswoman Bettylou Smith.
She says the company uses open, closed, or custom-restricted formularies based on the type of health system contract. Although the majority of patients are on open formularies, about 20 million are on a custom-restricted formulary. That means a defined set of therapeutic drug classes are set, but patients do not pay a financial penalty for going off the preferred drug list, though they are "encouraged" not to. Smith says about two million people are on closed formularies, which means they do pay out of pocket for going off the list.
Eighteen drug manufacturers are represented on the PCS preferred drug list, Smith says. Some offer rebate programs, while others do not. Of the 89 drugs on the preferred list, three are made by Lilly.
"In terms of our therapeutic interchange program, the patient and the pharmacist chooses whether to participate, and the doctor is the final authority. All of our formulary programs are reviewed by outside clinical experts, not by employees of PCS or Lilly. Decisions are made based on scientific literature they bring to the table. . . . The competition among PBMs is too stiff to push only our drugs or switch only to our drugs. There is an incredible amount of misconception."
Also in 1994, SmithKline Beecham bought Diversified Pharmaceutical Services, including 52,000 pharmacists and 33 million people as of 1996, according to the company. While company officials declined to be interviewed, in a detailed statement prepared for Drug Utilization Review, Diversified officials describe their formulary this way: "Diversified’s policy is that an independent formulary committee must determine all drugs listed on every formulary administered by Diversified (including the Diversified National Formulary) . . . . The majority of Diversified’s clients develop their own formularies through their own independent committees of physicians."
As for drug switching, the company states that pharmacists must get doctor approval before "dispensing a drug with a different active ingredient than was originally prescribed." The statement adds that when a physician approves a change, the substituted drug is expected to result in "identical clinical effectiveness" as the drug that was eliminated.
Few in the industry believe that rebates, formulary restrictions, and therapeutic substitutions are going away, though regulation likely will continue. In the meantime, consultants are sharing the reservations they stress to employers and health systems shopping for a PBM.
"I don’t presume that the PBM owned by a pharmaceutical is good or bad on its face, and I certainly don’t assume a PBM not owned by a drug maker is pure," says Patricia Wilson of Associates & Wilson in Rosemont, PA.
"I do not think that just because a PBM is owned by a drug maker it means they push their own drugs. You could not make up a formulary just with one drug company’s drugs alone," she explains. "I don’t necessarily object to a preferred position of their product because patients aren’t being switched to a poor product. Having said all that, the problem is whether any given drug is right for a patient. Is it competitively priced for that patient, and are they on a drug where no alternatives are being tried?" Wilson says.
Due diligence required
"In whose interest does the PBM act? That’s what you have to look at. Health providers must make sure they are the clients when contracting with a PBM, and that requires a fair amount of due diligence. Check their formulary and ask why, for example, everyone is on the most expensive channel blocker. Why are all those 80 year olds on those cholesterol agents?" Wilson suggests.
Leslie Epstein, PD, president of the consulting firm Think Zebras LLC in Owings Mills, MD, used to work for a PBM, Advance Paradigm in Maryland, before becoming a consultant. "In some drug categories, there are hundreds of me-too products, but a successful formulary is one that does not exclude whole therapeutic categories. A full range of therapeutic categories is key," she says.
Both Wilson and Epstein agree that mail service functions are a tip off on whether any one pharmaceutical’s drugs are being pushed. "Look into mail service to see how many times a drug is being switched, see who’s switching and whether a rebate is involved, and see how much deviation from a standard formulary does a PBM encourage. That’s what request for proposals and interviews can do when an HMO or employer is choosing a PBM, or when a pharmacist needs to know who he’s getting into bed with," Epstein says.
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