The Realities of Managed Health Care and Pharmacy Practice Pharmacists and health care purchasers can become partners) but pharmacists must take the lead to avoid being treated as vendors. by Lee R. Strandberg, PhD, Robert J. Pallari, and Dwight S. Fullerton, PhD
imbedded in a claims processing system facilitate drug moniealth care partner or vendor-which will be the toring? (See American Pharmacy, November 1992, p. 39.) role of the community phannacists in the next genOr will managed care adopt a model in between, or someeration of managed health care? This article focuses thing altogether different? Who will ultimately control and on two topics: how phannacists in ambulatory-care settings pay for the scope of pharmacists' cognitive services? How can assert their roles as partners in bargaining with health can managed health plans provide incentives for phannacists care purchasers, and an assessment of current health care to become partners in reducing overall health care costs? programs to identify potential partnering opportunities In addition, managed health care is rapidly expanding, and evolving in today's marketplace. predictions are that major medical health insurance will be The question of partner or vendor is an important issue as nearly eliminated during the next few years. 1 According to a the U.S. health care system lurches toward universal covernew set of estimates by the Health Forecasting Group (Santa age, and pharmacy continues to seek expanded practice Clarita, Calif.), more than half roles. Pharmacists have the the population will have training and expertise to projoined a managed care plan vide pharmaceutical care , Many purchasers view pharmacy as by 1995. 1 Traditional indemand this can and will nity plans will continue to strengthen the -health care a commodity to be bargainedfor, not decline in availability, with system. indemnity membership slipHowever, several additionas a service that can help manage ping by 50%, to 4 million al issues will help shape pharhealth care costs. people. Additional data on macists' roles. For example, marketplace trends are do all ambulatory patients described in Table 1. need the same level of pharHealth care "rationing " maceutical care, or do some proposals also will pose conneed less than others? What siderable challenges. Will is the best way to determine pharmacy services be which patients need more intensive levels? Patient consultation will soon be routinely "rationed" into a routine vendor/dispenser function? Or will required in phannacy practice, but will comprehensive drug purchasers, both federal and private, involve phannacists in establishing the level of services to be provided to optimize monitoring be carried out by all community phannacists or health care? As noted by Strandberg, "A health care budget, assigned to specialized phannacists serving as case managers? like any other budget, is ultimately fInite and an explicit deciTo what degree will advances in software programs
H
AMERICAN PHARMACY
December 1992/ 982
Vol. NS32, No. 12
sion to allocate money for one set of services means that an implicit decision also has been made not to spend money on other services."2 The much discussed Oregon Health Care Plan, 2 based on a rationing model, is an excellent example of trade-offs among health care options. The plan, still under review by the federal government, would more than triple the number of citizens covered under health insurance provided by the state or small businesses, either through managed health care plans contracted by Oregon Medicaid, or through mandated managed care coverage for small businesses. However, the proposal would probably not cover heroic medical procedures (e.g., for terminal HIV disease with less than 10% survival rate at five years) and medicines with little chance for significantly enhancing or extending patients' quality of life.
Becoming Partners
what these services are, and how they will benefit them and their beneficiaries."3 Moffa adds: "May I suggest that [health care purchasers] sit down regularly with a panel of pharmacists. We can show you dozens of ways to keep down costs and improve patient care .... You say you have to use mail order because it saves money. You do not have to use mail order. [Pharmacists] can show you ways to save money, and at the same time have your members receive their medications from a pharmacist and not from a mailman.,,4
Local Pharmacists Committees Allowing pharmacists to become full economic partners in today's health care system will take a concerted effort by the profession, community pharmacists, and third party plans. Third party plans should form pharmacist advisory committees at the local (state) level and seek their input regarding cost and quality tnanagement issues. Because health care is a local issue as well as a national issue, multiple strategies should be developed to address cost and quality management problems around the country. Pharmacist practititioners, via pharmacy networks, should become partners with third party plans to connect and work effectively with local third party clients. Pharmacists can work with third party plans to improve purchaser understanding of how pharmacists can manage pharmacy and total
Purchasers of health care have generally not included pharmacists at the managed care bargaining table, other than to ask, How inexpensively can you provide drugs to our patients? This behavior is common because many health care purchasers view pharmacy as a commodity to be bargained for, not as a service that can help manage total health care costs. Pharmacists have been especially fnlstrated that reimbursement rates have been set with little apparent regard for their professional skills, training, services, or the overall cost and health benefits of drug therapy. A lack of coordinaTable 1 tion among health care purNational Forecast of Managed Care Grovvth (by 1995) chasers and a willingness of some pharmacists to provide Percent of Population MiUioosEnroned their services to the lowest bidder have added to the 1990 1995 Type -of Coverage 1990 1995 pharmacists' feeling of helpHealth maitltenanca 5'5 15.4 21.3 38 organi4;6tion lessness. "And now," pharmacists note, "patient consulPr$ferred provider 15.4 38 48 18.6 GrgapJzatlon tation is required, but no one 3.2 6.2 Rolnt of - sal~ 16 8 is willing to pay me for it!" · :(7.8 How can pharmacists 26~7 :46 66 M:aQ~~ep indeqlllity become equal partners? The 3.2 6.2 4 8 4"rclCtitional lnd~A:ttnit't answer is simple, but the 13,0 29 11.3 32 Medica're (fl'On""Hn(lO) solution is complex: Pur'1.9 0.4 5 Medicare HMO 1 chasers and payers must be 8.9 R9 22 23 Medicaid persuaded that pharmacy ser4.7 13MB 12 34 MedkaHy UQ'insUred vices will save money, either - 20 7.7 Nationaf health (HMO} 0 0 immediately or through 100.0 258 100.0 Total ,~47 decreased total health care costs. As noted recently by SOUfces; Estimates by the He'8lth, Forecasting Group based on source data from the InterStudy Edge, January 1, 1991; the Health Insurance Association ofAmerica Empfoyer Survey 1989:-1990; the Health Care Financing Administration; the U.S. Departmen~ of Commerce; and the Rupp, "For the most part, Americf;tn Association of Preferred Provider Organizations, Health Care Competition Week, 1992. payers do not understand 'iii
Vol. NS32, No. 12 December 1992/983
AMERICAN PHARMACY
Chaos and health care costs while simulCentral Control taneously improving quality. For example, pharmacists could help develop alternaPharmacists who can document cost From the community phartive pharmacy compensation macist's perspective, chaos packages based on patient savings should be reimbursed more seems to be the prevailing outcomes, not prescription managed care rule of the volume. In short, pharmathan those who simply practice day. A typical community cists who provide and can pharmacy today serves as a document cost-saving pharas drug vendors. maceutical care via a pharmaprovider for multiple managed care and insurance cy network should be reimbursed more than those plans, each with its own who simply practice as dnlg reimbursement rates, restricvendors. tions, prior-approval requireThese principles for pharments, and regulations. Only macist partnership also apply to state and federal health covin rare cases have pharmacists had any meaningful input into plan design; they have had to accept whatever reimburseerage. Some states include pharmacist advisory committees ment rate is offered in the marketplace. "If we don't take as part of their Medicaid and other state-managed health insurance programs. These advisory committees are in addithose patients, someone else will" is a common remark. Through OBRA '90, Congress now has recognized the tion to dnlg use review boards mandated by the Omnibus Budget Reconciliation Act of 1990 COBRA '90). As one examimportance of local individual practitioners' services. This is ple, physicians and pharmacists working through the Oregon reflected in the recent emergence of mandated drug use review and patient counseling for Medicaid patients and State Pharmacists Association, have helped design the Oregon Medicaid on-line claims system plus retroactive and nmding for cognitive services pilot studies tmder OBRA '90. prospective systems for drug use review. Nevertheless, Medicaid dispensing fees continue to be woeTen Steps Toward Becoming a Health Care Partner Purchasers of health care want solutions for meeting their employees' health care needs. Executives of managed care plans are seeking control over escalating drug costs. The time is right for pharmacists to step f01Ward as partners. We propose 10 steps community pharmacists could take, as part OfR pharmacy network to develop a partnership relationship with local managed health care plans. 7
1 Conauct a needs assessment 0/ the potential client's organization. Different organizations will have different needs. The phannacy managed care plan must identify these needs and design a system to fit each situation, while not overtaxing the total managed care plan. Xhe number and location ofpharmacy outlet~, demographics of patient population, amount of money to fund the pharmaey 1?lan, and management reportitig needs! an should be reviewea with the prospective client.
2
Provide assurances that your managed care pharmacy plan will offer a true discount. Purchasers are starting to recognize that provider discounts off AWP do not necessarily mean that total pharmacy costs will be controlled. In some situations, savings created by discounts are more than offset by increased provision of services.
AMERICAN PHARMACY
A prospective client for phannacy services will need documented assurances that your dnlg distribution system can control costs and that incentives are in place to do so. If a managed care system offers an "AWP minus" plan as its mechanism of pharmacy payment, what.effect will this have on the pharmacist'S propensity to purchase drug products in large quantities, but file claims on the highest cost per unit package of the product dispensed? The enlight-'" ened purchaser will understand this relationship and possiblyask how your system will control and manage phannacist behaVior. A properly structured pharmacy compensation package, such as'wel1:managed marketplace poe. . ing i could circumvent this and other payment incentive problems that artitlcially'drive up costs.
3 Define a management reporting system. J{.ey to the success of any pharmacy managed care system is its ability to provide essential costinfotmation sunnnarized ina manner the client can understand. These data should be made·available to the client on a specified periodic basis timed to the client's accounting and patient ca,re reporting needs. Development of a systematic plan to document pharmacists' interventions also will be an indispensable part of the overall program.8 December 1992/ 984
Vol. NS32, No. 12
fully unreflective of phannacist's education, service, and economic investment. Central control, exemplified by Medicare and Medicaid programs, also has traditionally treated pharmacists as vendors, not partners. Medicaid lists pharmacy as an optional service and Medicare fails to cover outpatient medications.
Clinical Autonomy, Fiscal Accountability The health care system in general would benefit if phannacist providers acted as partners with purchasers, sharing clinical autonomy and fiscal accountability. Changing phannacists' compensation from a volume-based system to one encompassing outcomes plus dispensing costs would be an excellent step toward a more equal partnership in the next generation of managed health care systems. The technology afforded by modern on-line pharmacy claims systems is a key component in phannacy's quest to become a full health care partner. Cost-containment activities should be incorporated into the paid-claims system database and used as part of a continuous quality improvement approach to manage the process of pharmaceutical care.
4 Describe bow the o1$-l/ne network wt11 be fUnded. Prospective clients may want an explanation of how the phannacy on-line computer network is (or Will be) maintamed and supported,
Phannacists could then document their drug therapy interventions, monitor phannaceutical care and patient compliance, and provide reports for health care purchasers. For example, empowering the community phannacist to manage the process of pharmaceutical care for targeted patients is an extension of a managed care system that refers high-risk patients to more intensive case management. Such strategies focus on the cause of health care cost increases, not today's traditional focus on the symptoms that result in "AWP minus" reimbursement plans (average wholesale cost minus a specified percentage plus a flXed fee). Economic incentives to control costs and optimize health care outcomes will be important to phannacists, just as they have been to physicians. 5 Pharmacist incentives could include: • Differential reimbursement rates. Focusing on patient consultation, the recent Schering Report clearly demonstrates that not all phannacists are providing the same level of phannaceutical care. 6 Phannacists who are merely serving as vendors could be reimbursed less under managed care incentive plans than those who can document cost-savings with phannaceutical care. • Sharing cost savings with pharmacists or their preferred provider organizations for pharmaceutical interventions such as avoiding drug-dnlg interactions, substituting lowerpriced equivalent medications, and avoiding drug overdoses.
ceroing patient confidentiality. Also, clients will want to JroQw if the tlrug use review system will be likely to save any money, or (;o;nverselYl if it is sintplya sales promotion.
8 Address antitrustf,sstJ,es. Some purchasers may be sengi.., tive to ttijsissl:lc.Does your pharmacy compensationsystent bav hidden legalproplems? You may want to provide. W '00 "a ddtessing·this issue to prospective clients.
7 Delineate a wetl-tlevel:()ped tirug'J;ls6;"review me~bu P,rospectiye cli,ents will want to exanfine various aspects of the.review ~~tem an(t unde-r6ta.ndhow it WOrES and how patient confidentiality wlllbe handled. There,may be union or corporate tOles, ;in addition to state laWs cQnnis:iil~
Vol. NS32, No. 12 December 1992/ 985
AMERICANPHARMACY
• Paying pharmacists for more intensive drug case management for targeted ambulatory patient populations, e.g., those with high-risk/high-cost illnesses.
advice on difficult issues, such as determining when use of particular drugs already has become the standard of care in saving lives and reducing overall costs (often Significantly in advance of fmal FDA approval).
Emerging Partnering Opportunities
Legal Standards
Practice Standards Some significant changes taking place in the health care marketplace will provide pharmacists with the opportunity to gain additional negotiating strength. Perhaps most important, the value of pharmacists' services in providing costeffective health care is being recognized by national leaders including Food and Drug Administration (FDA) Commissioner David A. Kessler.9 National and state pharmacy organizations are becoming increasingly vocal and assertive in demanding opportunities for pharmacists to serve as health care partners. Legislative proposals by Sen. David Pryor (principal sponsor for OBRA '90) underscore the importance of pharmacists in modern health care and have provided a national basis to focus discussion on the importance of pharmacists'services. Concern about drug costs has driven much of the market's focus on pharmaceuticals. This is a major issue with managed health plan executives and offers partnering opportunities for community pharmacists. Although drugs accotmt for less than 10% of health care expenditures in the United States, total drug retail costs exceed $40 billion annually. Third-party insurers' increasing concentration on pharmaceutical purchases has made the cost issue more visible and subject to more vendor-type controls. Nationwide, third-party insurers now pay more than 40% of prescription drugs; in some areas of the country, they pay more than 90%. Central to managing cost are dnlg use review programs in which physicians and pharmacists work together as partners. Prospective and retrospective DUR programs will soon be required under OBRA '90 for Medicaid patients, and already are starting to appear as part of more innovative managed health plans. DUR programs have established a foothold in the nationwide market, and much expansion is possible, especially as major medical programs evolve into open-panel health maintenance organization (HMO) models. Another factor changing pharmacy practice has been the introduction of bioengineered drugs such as colony stimulating factors and monoclonal antibodies. These dnlgs offer lifesaving modalities but at a cost and therapeutic complexity that many benefit plans are ill equipped to manage. Similarly, using prescription medicines for indications that have not yet been fully reviewed and approved by FDA and broadening the use of orphan drugs present new opportunities for pharmacists. Benefit managers need pharmacists' insights and AMERICAN PHARMACY
The level and depth of pharmaceutical care in ambulatory settings will be Significantly strengthened in the near future because of OBRA '90 and related changes in state pharmacy practice acts. Patient consultation will be required for all Medicaid patients tmder OBRA '90. Some states are already requiring consultation for all patients. The National Association of Boards of Pharmacy recently completed the fmal draft of a revised Model State Pharmacy Practice Act,IO which emphasizes pharmacists' expanded responsibilities in providing pharmaceutical care. Supporting these changes is the American Pharmaceutical Association's white paper, "The Role of the Pharmacist in Comprehensive Medication Use Management." It underscores the partnering roles of pharmacists in our changing system. 1 1 Additionally, distribution of the newly drafted Pharmacy Patient's Bill of Rights I2 by H.T. Hatoum will increase patients' awareness of what level of care to expect from their pharmacists. The pharmacist'S duty to warn also will be affected by these changes. We suggest that a new and higher standard will emerge in the next generation of managed health care because of these new pharmacy practice acts. In short, purchasers of prescription benefit plans will soon be seeing pharmacists practicing more and more as partners, and less and less simply as dnlg vendors, in part because of these changes.
Structural Changes The next generation of managed health care also will encompass major stnlctural changes. One example already mentioned is the Oregon Health Care Plan, which is based on the concept of health care rationing. Slated for implementation July 1, 1995, for employed citizens, the plan proposes to cover 587 of a possible 709 medical conditions. Oregon's plan will cover private citizens as well as Medicaid eligibles. This means that most Oregonians will receive their health care services through managed health care systems, possibly eliminating the need for many major medical insurance policies. Both Medicaid and private employer portions of the plan are subject to approval by the federal government. The new state plan represents a major change for Oregon pharmacists in their health care market. Patients would have the right to choose a health care plan and pharmacies that are part of that plan, not necessarily the pharmacies of their choice. Oregon, like Hawaii and Minnesota, will have universal coverage for all but a small percentage of its residents who are self-employed with a low income. The Oregon plan December 1992/ 986
Vol. NS32, No. 12
also offers pharmacists an excellent opportunity to work with and develop managed care systems because pharmaceuticals are part of both the private and public portions of the program. The Oregon Health Care Plan is based on five pieces of legislation that are designed to complement one another and restructure the market: • Senate Bill (SB) 27 extended Medicaid eligibility to all people below the federal poverty level and created the Health Services Commission. The commission rank-ordered all medical treatments into 17 categories and 709 treatment-pair conditions. • SB 935 , the Health Insurance Partnership Act, mandated that Medicaid's basic benefit package serve as the minimum standard for 300,000 Oregonians who have jobs but no health insurance. • SB 534 established the State Health Risk Pool for medically uninsurables, or persons who do not qualify for Medicaid and cannot obtain private health insurance because of a preexisting medical condition. • SB 1076 enacted significant reforms in the small-group insurance market. It included guaranteed issue, guaranteed reissue, prohibition of preexisting conditions exclusions, and price controls on small-group insurance premium. • SB 1077 created the Health Resources Commission, which is charged with developing clinically based methods to evaluate the cost-benefit of new procedures and services. Mandated outcomes research will create new, integrated databases and opportunities to study the impact of pharmacist services on total health care costs.
Implications for Pharmacy The trends in health care are unmistakable. Costs must be brought under control and the needs of the elderly and uninsured must be addressed. Will pharmacy be a partner or a vendor in this process? Opportunities now exist to become an equal clinical and economic partner with payers and other providers. The burden is on pharmacy to make its case. Without outcomes data showing how pharmacy services impact total health care costs, purchasers will treat pharmacy in the next generation of managed care just as they do now. Now is the time for the pharmacy profession to take substantive action to show how it can improve health care quality while lowering costs. Lee R. Strandberg, PhD, is associate professor, College of Pharmacy, Oregon State University, Portland, Oreg.; RobertJ Pallari is senior vice president, Marketing and Health Plans, Legacy Health Systems, Portland, Oreg.; and Dwight S. Fullerton, PhD, is dean, College of Pharmacy, University of Utah, Salt Lake City.
Vol. NS32, No. 12 December 1992/ 987
Based on a presentation at the APhA Annual Meeting in San Diego, Calif, March 16, 1992, sponsored by ICI Pharmaceuticals.
References 1. Coile RC. Health Care Competition Week. January 10,1992. 2. Strandberg LR. The Oregon Health Care Plan: an attempt to restructure a broken system. Pharm Business. October 1991;2:10-6. 3. Rupp MT. Strategies 1992;NS32:359-65.
for
reimbursement.
Am
Pharm.
4. Moffa K. Cited in: Pharmacists open the eyes of some business managers. Drug Top. June 8, 1992;63-4. 5. Hillman AL. Managing the physician: rules versus incentives. Health Affairs. Winter 1991;10:138-46. 6. Robbins JA. Improving Patient Compliance: Is There a Pharmacist in the House? Schering Report XIV. Schering Plough Corporation, April 1992. 7. Sharp WT, Strandberg LR. Contracting by managed care systems for pharmaceutical products and services. Top Hasp Pharm Manage. 1990;10(3):8-17. 8. Henderson ML. How to document the value of pharmacists' interventions. WeI/come Trends Pharm. March 1992;14(2):4-5. 9. FDA chief answers 10 questions on RPh's expanding health care. WeI/come Trends Pharm. May 1992;14(3):3-7. 10. Model State Pharmacy Practice Act. National Association of Boards of Pharmacy, April 20, 1992.
11. The Role of the Pharmacist in Comprehensive Medication Use Management. Washington, DC: American Pharmaceutical Association, 1991. 12. Pharmacy patient's bill of rights. US Pharm. May 1992:68.
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SELF·EXAMINATION
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AMERICAN PHARMACY
imbedded in a claims processing system facilitate drug moniealth care partner or vendor-which will be the toring? (See American Pharmacy, November 1992, p. 39.) role of the community phannacists in the next genOr will managed care adopt a model in between, or someeration of managed health care? This article focuses thing altogether different? Who will ultimately control and on two topics: how phannacists in ambulatory-care settings pay for the scope of pharmacists' cognitive services? How can assert their roles as partners in bargaining with health can managed health plans provide incentives for phannacists care purchasers, and an assessment of current health care to become partners in reducing overall health care costs? programs to identify potential partnering opportunities In addition, managed health care is rapidly expanding, and evolving in today's marketplace. predictions are that major medical health insurance will be The question of partner or vendor is an important issue as nearly eliminated during the next few years. 1 According to a the U.S. health care system lurches toward universal covernew set of estimates by the Health Forecasting Group (Santa age, and pharmacy continues to seek expanded practice Clarita, Calif.), more than half roles. Pharmacists have the the population will have training and expertise to projoined a managed care plan vide pharmaceutical care , Many purchasers view pharmacy as by 1995. 1 Traditional indemand this can and will nity plans will continue to strengthen the -health care a commodity to be bargainedfor, not decline in availability, with system. indemnity membership slipHowever, several additionas a service that can help manage ping by 50%, to 4 million al issues will help shape pharhealth care costs. people. Additional data on macists' roles. For example, marketplace trends are do all ambulatory patients described in Table 1. need the same level of pharHealth care "rationing " maceutical care, or do some proposals also will pose conneed less than others? What siderable challenges. Will is the best way to determine pharmacy services be which patients need more intensive levels? Patient consultation will soon be routinely "rationed" into a routine vendor/dispenser function? Or will required in phannacy practice, but will comprehensive drug purchasers, both federal and private, involve phannacists in establishing the level of services to be provided to optimize monitoring be carried out by all community phannacists or health care? As noted by Strandberg, "A health care budget, assigned to specialized phannacists serving as case managers? like any other budget, is ultimately fInite and an explicit deciTo what degree will advances in software programs
H
AMERICAN PHARMACY
December 1992/ 982
Vol. NS32, No. 12
sion to allocate money for one set of services means that an implicit decision also has been made not to spend money on other services."2 The much discussed Oregon Health Care Plan, 2 based on a rationing model, is an excellent example of trade-offs among health care options. The plan, still under review by the federal government, would more than triple the number of citizens covered under health insurance provided by the state or small businesses, either through managed health care plans contracted by Oregon Medicaid, or through mandated managed care coverage for small businesses. However, the proposal would probably not cover heroic medical procedures (e.g., for terminal HIV disease with less than 10% survival rate at five years) and medicines with little chance for significantly enhancing or extending patients' quality of life.
Becoming Partners
what these services are, and how they will benefit them and their beneficiaries."3 Moffa adds: "May I suggest that [health care purchasers] sit down regularly with a panel of pharmacists. We can show you dozens of ways to keep down costs and improve patient care .... You say you have to use mail order because it saves money. You do not have to use mail order. [Pharmacists] can show you ways to save money, and at the same time have your members receive their medications from a pharmacist and not from a mailman.,,4
Local Pharmacists Committees Allowing pharmacists to become full economic partners in today's health care system will take a concerted effort by the profession, community pharmacists, and third party plans. Third party plans should form pharmacist advisory committees at the local (state) level and seek their input regarding cost and quality tnanagement issues. Because health care is a local issue as well as a national issue, multiple strategies should be developed to address cost and quality management problems around the country. Pharmacist practititioners, via pharmacy networks, should become partners with third party plans to connect and work effectively with local third party clients. Pharmacists can work with third party plans to improve purchaser understanding of how pharmacists can manage pharmacy and total
Purchasers of health care have generally not included pharmacists at the managed care bargaining table, other than to ask, How inexpensively can you provide drugs to our patients? This behavior is common because many health care purchasers view pharmacy as a commodity to be bargained for, not as a service that can help manage total health care costs. Pharmacists have been especially fnlstrated that reimbursement rates have been set with little apparent regard for their professional skills, training, services, or the overall cost and health benefits of drug therapy. A lack of coordinaTable 1 tion among health care purNational Forecast of Managed Care Grovvth (by 1995) chasers and a willingness of some pharmacists to provide Percent of Population MiUioosEnroned their services to the lowest bidder have added to the 1990 1995 Type -of Coverage 1990 1995 pharmacists' feeling of helpHealth maitltenanca 5'5 15.4 21.3 38 organi4;6tion lessness. "And now," pharmacists note, "patient consulPr$ferred provider 15.4 38 48 18.6 GrgapJzatlon tation is required, but no one 3.2 6.2 Rolnt of - sal~ 16 8 is willing to pay me for it!" · :(7.8 How can pharmacists 26~7 :46 66 M:aQ~~ep indeqlllity become equal partners? The 3.2 6.2 4 8 4"rclCtitional lnd~A:ttnit't answer is simple, but the 13,0 29 11.3 32 Medica're (fl'On""Hn(lO) solution is complex: Pur'1.9 0.4 5 Medicare HMO 1 chasers and payers must be 8.9 R9 22 23 Medicaid persuaded that pharmacy ser4.7 13MB 12 34 MedkaHy UQ'insUred vices will save money, either - 20 7.7 Nationaf health (HMO} 0 0 immediately or through 100.0 258 100.0 Total ,~47 decreased total health care costs. As noted recently by SOUfces; Estimates by the He'8lth, Forecasting Group based on source data from the InterStudy Edge, January 1, 1991; the Health Insurance Association ofAmerica Empfoyer Survey 1989:-1990; the Health Care Financing Administration; the U.S. Departmen~ of Commerce; and the Rupp, "For the most part, Americf;tn Association of Preferred Provider Organizations, Health Care Competition Week, 1992. payers do not understand 'iii
Vol. NS32, No. 12 December 1992/983
AMERICAN PHARMACY
Chaos and health care costs while simulCentral Control taneously improving quality. For example, pharmacists could help develop alternaPharmacists who can document cost From the community phartive pharmacy compensation macist's perspective, chaos packages based on patient savings should be reimbursed more seems to be the prevailing outcomes, not prescription managed care rule of the volume. In short, pharmathan those who simply practice day. A typical community cists who provide and can pharmacy today serves as a document cost-saving pharas drug vendors. maceutical care via a pharmaprovider for multiple managed care and insurance cy network should be reimbursed more than those plans, each with its own who simply practice as dnlg reimbursement rates, restricvendors. tions, prior-approval requireThese principles for pharments, and regulations. Only macist partnership also apply to state and federal health covin rare cases have pharmacists had any meaningful input into plan design; they have had to accept whatever reimburseerage. Some states include pharmacist advisory committees ment rate is offered in the marketplace. "If we don't take as part of their Medicaid and other state-managed health insurance programs. These advisory committees are in addithose patients, someone else will" is a common remark. Through OBRA '90, Congress now has recognized the tion to dnlg use review boards mandated by the Omnibus Budget Reconciliation Act of 1990 COBRA '90). As one examimportance of local individual practitioners' services. This is ple, physicians and pharmacists working through the Oregon reflected in the recent emergence of mandated drug use review and patient counseling for Medicaid patients and State Pharmacists Association, have helped design the Oregon Medicaid on-line claims system plus retroactive and nmding for cognitive services pilot studies tmder OBRA '90. prospective systems for drug use review. Nevertheless, Medicaid dispensing fees continue to be woeTen Steps Toward Becoming a Health Care Partner Purchasers of health care want solutions for meeting their employees' health care needs. Executives of managed care plans are seeking control over escalating drug costs. The time is right for pharmacists to step f01Ward as partners. We propose 10 steps community pharmacists could take, as part OfR pharmacy network to develop a partnership relationship with local managed health care plans. 7
1 Conauct a needs assessment 0/ the potential client's organization. Different organizations will have different needs. The phannacy managed care plan must identify these needs and design a system to fit each situation, while not overtaxing the total managed care plan. Xhe number and location ofpharmacy outlet~, demographics of patient population, amount of money to fund the pharmaey 1?lan, and management reportitig needs! an should be reviewea with the prospective client.
2
Provide assurances that your managed care pharmacy plan will offer a true discount. Purchasers are starting to recognize that provider discounts off AWP do not necessarily mean that total pharmacy costs will be controlled. In some situations, savings created by discounts are more than offset by increased provision of services.
AMERICAN PHARMACY
A prospective client for phannacy services will need documented assurances that your dnlg distribution system can control costs and that incentives are in place to do so. If a managed care system offers an "AWP minus" plan as its mechanism of pharmacy payment, what.effect will this have on the pharmacist'S propensity to purchase drug products in large quantities, but file claims on the highest cost per unit package of the product dispensed? The enlight-'" ened purchaser will understand this relationship and possiblyask how your system will control and manage phannacist behaVior. A properly structured pharmacy compensation package, such as'wel1:managed marketplace poe. . ing i could circumvent this and other payment incentive problems that artitlcially'drive up costs.
3 Define a management reporting system. J{.ey to the success of any pharmacy managed care system is its ability to provide essential costinfotmation sunnnarized ina manner the client can understand. These data should be made·available to the client on a specified periodic basis timed to the client's accounting and patient ca,re reporting needs. Development of a systematic plan to document pharmacists' interventions also will be an indispensable part of the overall program.8 December 1992/ 984
Vol. NS32, No. 12
fully unreflective of phannacist's education, service, and economic investment. Central control, exemplified by Medicare and Medicaid programs, also has traditionally treated pharmacists as vendors, not partners. Medicaid lists pharmacy as an optional service and Medicare fails to cover outpatient medications.
Clinical Autonomy, Fiscal Accountability The health care system in general would benefit if phannacist providers acted as partners with purchasers, sharing clinical autonomy and fiscal accountability. Changing phannacists' compensation from a volume-based system to one encompassing outcomes plus dispensing costs would be an excellent step toward a more equal partnership in the next generation of managed health care systems. The technology afforded by modern on-line pharmacy claims systems is a key component in phannacy's quest to become a full health care partner. Cost-containment activities should be incorporated into the paid-claims system database and used as part of a continuous quality improvement approach to manage the process of pharmaceutical care.
4 Describe bow the o1$-l/ne network wt11 be fUnded. Prospective clients may want an explanation of how the phannacy on-line computer network is (or Will be) maintamed and supported,
Phannacists could then document their drug therapy interventions, monitor phannaceutical care and patient compliance, and provide reports for health care purchasers. For example, empowering the community phannacist to manage the process of pharmaceutical care for targeted patients is an extension of a managed care system that refers high-risk patients to more intensive case management. Such strategies focus on the cause of health care cost increases, not today's traditional focus on the symptoms that result in "AWP minus" reimbursement plans (average wholesale cost minus a specified percentage plus a flXed fee). Economic incentives to control costs and optimize health care outcomes will be important to phannacists, just as they have been to physicians. 5 Pharmacist incentives could include: • Differential reimbursement rates. Focusing on patient consultation, the recent Schering Report clearly demonstrates that not all phannacists are providing the same level of phannaceutical care. 6 Phannacists who are merely serving as vendors could be reimbursed less under managed care incentive plans than those who can document cost-savings with phannaceutical care. • Sharing cost savings with pharmacists or their preferred provider organizations for pharmaceutical interventions such as avoiding drug-dnlg interactions, substituting lowerpriced equivalent medications, and avoiding drug overdoses.
ceroing patient confidentiality. Also, clients will want to JroQw if the tlrug use review system will be likely to save any money, or (;o;nverselYl if it is sintplya sales promotion.
8 Address antitrustf,sstJ,es. Some purchasers may be sengi.., tive to ttijsissl:lc.Does your pharmacy compensationsystent bav hidden legalproplems? You may want to provide. W '00 "a ddtessing·this issue to prospective clients.
7 Delineate a wetl-tlevel:()ped tirug'J;ls6;"review me~bu P,rospectiye cli,ents will want to exanfine various aspects of the.review ~~tem an(t unde-r6ta.ndhow it WOrES and how patient confidentiality wlllbe handled. There,may be union or corporate tOles, ;in addition to state laWs cQnnis:iil~
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• Paying pharmacists for more intensive drug case management for targeted ambulatory patient populations, e.g., those with high-risk/high-cost illnesses.
advice on difficult issues, such as determining when use of particular drugs already has become the standard of care in saving lives and reducing overall costs (often Significantly in advance of fmal FDA approval).
Emerging Partnering Opportunities
Legal Standards
Practice Standards Some significant changes taking place in the health care marketplace will provide pharmacists with the opportunity to gain additional negotiating strength. Perhaps most important, the value of pharmacists' services in providing costeffective health care is being recognized by national leaders including Food and Drug Administration (FDA) Commissioner David A. Kessler.9 National and state pharmacy organizations are becoming increasingly vocal and assertive in demanding opportunities for pharmacists to serve as health care partners. Legislative proposals by Sen. David Pryor (principal sponsor for OBRA '90) underscore the importance of pharmacists in modern health care and have provided a national basis to focus discussion on the importance of pharmacists'services. Concern about drug costs has driven much of the market's focus on pharmaceuticals. This is a major issue with managed health plan executives and offers partnering opportunities for community pharmacists. Although drugs accotmt for less than 10% of health care expenditures in the United States, total drug retail costs exceed $40 billion annually. Third-party insurers' increasing concentration on pharmaceutical purchases has made the cost issue more visible and subject to more vendor-type controls. Nationwide, third-party insurers now pay more than 40% of prescription drugs; in some areas of the country, they pay more than 90%. Central to managing cost are dnlg use review programs in which physicians and pharmacists work together as partners. Prospective and retrospective DUR programs will soon be required under OBRA '90 for Medicaid patients, and already are starting to appear as part of more innovative managed health plans. DUR programs have established a foothold in the nationwide market, and much expansion is possible, especially as major medical programs evolve into open-panel health maintenance organization (HMO) models. Another factor changing pharmacy practice has been the introduction of bioengineered drugs such as colony stimulating factors and monoclonal antibodies. These dnlgs offer lifesaving modalities but at a cost and therapeutic complexity that many benefit plans are ill equipped to manage. Similarly, using prescription medicines for indications that have not yet been fully reviewed and approved by FDA and broadening the use of orphan drugs present new opportunities for pharmacists. Benefit managers need pharmacists' insights and AMERICAN PHARMACY
The level and depth of pharmaceutical care in ambulatory settings will be Significantly strengthened in the near future because of OBRA '90 and related changes in state pharmacy practice acts. Patient consultation will be required for all Medicaid patients tmder OBRA '90. Some states are already requiring consultation for all patients. The National Association of Boards of Pharmacy recently completed the fmal draft of a revised Model State Pharmacy Practice Act,IO which emphasizes pharmacists' expanded responsibilities in providing pharmaceutical care. Supporting these changes is the American Pharmaceutical Association's white paper, "The Role of the Pharmacist in Comprehensive Medication Use Management." It underscores the partnering roles of pharmacists in our changing system. 1 1 Additionally, distribution of the newly drafted Pharmacy Patient's Bill of Rights I2 by H.T. Hatoum will increase patients' awareness of what level of care to expect from their pharmacists. The pharmacist'S duty to warn also will be affected by these changes. We suggest that a new and higher standard will emerge in the next generation of managed health care because of these new pharmacy practice acts. In short, purchasers of prescription benefit plans will soon be seeing pharmacists practicing more and more as partners, and less and less simply as dnlg vendors, in part because of these changes.
Structural Changes The next generation of managed health care also will encompass major stnlctural changes. One example already mentioned is the Oregon Health Care Plan, which is based on the concept of health care rationing. Slated for implementation July 1, 1995, for employed citizens, the plan proposes to cover 587 of a possible 709 medical conditions. Oregon's plan will cover private citizens as well as Medicaid eligibles. This means that most Oregonians will receive their health care services through managed health care systems, possibly eliminating the need for many major medical insurance policies. Both Medicaid and private employer portions of the plan are subject to approval by the federal government. The new state plan represents a major change for Oregon pharmacists in their health care market. Patients would have the right to choose a health care plan and pharmacies that are part of that plan, not necessarily the pharmacies of their choice. Oregon, like Hawaii and Minnesota, will have universal coverage for all but a small percentage of its residents who are self-employed with a low income. The Oregon plan December 1992/ 986
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also offers pharmacists an excellent opportunity to work with and develop managed care systems because pharmaceuticals are part of both the private and public portions of the program. The Oregon Health Care Plan is based on five pieces of legislation that are designed to complement one another and restructure the market: • Senate Bill (SB) 27 extended Medicaid eligibility to all people below the federal poverty level and created the Health Services Commission. The commission rank-ordered all medical treatments into 17 categories and 709 treatment-pair conditions. • SB 935 , the Health Insurance Partnership Act, mandated that Medicaid's basic benefit package serve as the minimum standard for 300,000 Oregonians who have jobs but no health insurance. • SB 534 established the State Health Risk Pool for medically uninsurables, or persons who do not qualify for Medicaid and cannot obtain private health insurance because of a preexisting medical condition. • SB 1076 enacted significant reforms in the small-group insurance market. It included guaranteed issue, guaranteed reissue, prohibition of preexisting conditions exclusions, and price controls on small-group insurance premium. • SB 1077 created the Health Resources Commission, which is charged with developing clinically based methods to evaluate the cost-benefit of new procedures and services. Mandated outcomes research will create new, integrated databases and opportunities to study the impact of pharmacist services on total health care costs.
Implications for Pharmacy The trends in health care are unmistakable. Costs must be brought under control and the needs of the elderly and uninsured must be addressed. Will pharmacy be a partner or a vendor in this process? Opportunities now exist to become an equal clinical and economic partner with payers and other providers. The burden is on pharmacy to make its case. Without outcomes data showing how pharmacy services impact total health care costs, purchasers will treat pharmacy in the next generation of managed care just as they do now. Now is the time for the pharmacy profession to take substantive action to show how it can improve health care quality while lowering costs. Lee R. Strandberg, PhD, is associate professor, College of Pharmacy, Oregon State University, Portland, Oreg.; RobertJ Pallari is senior vice president, Marketing and Health Plans, Legacy Health Systems, Portland, Oreg.; and Dwight S. Fullerton, PhD, is dean, College of Pharmacy, University of Utah, Salt Lake City.
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Based on a presentation at the APhA Annual Meeting in San Diego, Calif, March 16, 1992, sponsored by ICI Pharmaceuticals.
References 1. Coile RC. Health Care Competition Week. January 10,1992. 2. Strandberg LR. The Oregon Health Care Plan: an attempt to restructure a broken system. Pharm Business. October 1991;2:10-6. 3. Rupp MT. Strategies 1992;NS32:359-65.
for
reimbursement.
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4. Moffa K. Cited in: Pharmacists open the eyes of some business managers. Drug Top. June 8, 1992;63-4. 5. Hillman AL. Managing the physician: rules versus incentives. Health Affairs. Winter 1991;10:138-46. 6. Robbins JA. Improving Patient Compliance: Is There a Pharmacist in the House? Schering Report XIV. Schering Plough Corporation, April 1992. 7. Sharp WT, Strandberg LR. Contracting by managed care systems for pharmaceutical products and services. Top Hasp Pharm Manage. 1990;10(3):8-17. 8. Henderson ML. How to document the value of pharmacists' interventions. WeI/come Trends Pharm. March 1992;14(2):4-5. 9. FDA chief answers 10 questions on RPh's expanding health care. WeI/come Trends Pharm. May 1992;14(3):3-7. 10. Model State Pharmacy Practice Act. National Association of Boards of Pharmacy, April 20, 1992.
11. The Role of the Pharmacist in Comprehensive Medication Use Management. Washington, DC: American Pharmaceutical Association, 1991. 12. Pharmacy patient's bill of rights. US Pharm. May 1992:68.
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SELF·EXAMINATION
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AMERICAN PHARMACY
