Transcript Document

Strategies For Sustainable
Rx Savings
November 29, 2005
Scott Streator, Director of Health Care
Ohio PERS
“Few aspects of the drug industry are more
confused –or more confusing- that its pricing
structure.”
“We recommend that the Department of
Health should conduct a continuing survey of
drug costs, average prescription prices, and
drug use.”
Final Report. Task Force on Prescription Drugs.
U.S. Department of Health, Education, and Welfare: Washington, 1969
Mission: Fund and provide quality pension, disability,
survivor, health care benefits and services to Ohio state,
county, city and miscellaneous government employees
–
OPERS covers three quarters of a million Ohioans who are state,
county, city, university and township employees:
• 370,000 contributing employees
• 300,000 inactive employees with accounts
• 148,000 benefit recipients
• 3,700 contributing employers
–
Annual benefit payments $3.4 billion
–
$68 billion in assets
–
9th Largest State Pension System in U.S., 16th Largest in world
Consumer Price Index:
Prescription Drugs, Health Care & All Items
(1980-September 2005)
1980 = 100
600
500
Prescription Drugs
485
433
400
Health Care
300
229
200
All Items
100
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Sep-05
0
Source: U.S. Bureau of Labor Statistics 2005 . Consumer Price Index-All Urban Consumers. U.S. city average. Not Seasonally Adjusted.
Note: Prescription drugs includes medical supplies.
Average Cost per Outpatient Rx
U.S. (1992-2004)
$/Rx
$70.00
$59.68
$56.82
$52.41
$49.29
$50.00
$46.11
$42.29
$39.87
$37.00
$40.00
$34.03
$31.45
$29.88
$30.00 $24.95$28.04
$60.00
$20.00
$10.00
$0.00
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Estimated from NACDS, 2005.
Note: Mail order Rxs adjusted to 30 day supply.
Year
Outpatient Rx Expenditures.
U.S. (1965-2014)
$ Billions
$600
$521
$500
$400
$300
$223
$200
Private
Private
$61
$100
$0
$8
$4
1965
1970
1975
Source: CMS, 2005. 2004-2014 are projections.
Public
$22
1980
1985
1990
1995
2000
2005
2010 2014
“Get Comfortable with Complexity”
“HMG”
FORMULARY VS NON-FORMULARY
SSRI
COX II’s
PDP
DAYS SUPPLY
REFERENCE PRICING
“PPI”
Top therapeutic classes contributing drug trend
(2005-2007)
Diabetes
5%
Rheumatological
Seizure
4%
4%
Osteoporosis
5%
Other Classes
36%
Anticoagulant &
antiplatelet
5%
Ulcer & heartburn
6%
Asthma & COPD
8%
Antihypertensives
10%
Source: Medco 2005
Lipid-lowering
17%
OPERS Total Plan Cost
Beta Blockers
Anticonvulsants
ARB II
$10M
$12M
$9M
Cholesterol
SSRI
$60M
$12M
Antiplatelet
$13M
Osteoporosis
$14M
$31M
$16M
Pulmonary
$20M
Hypoglycemic
Proton Pump
Inhibitors
Obtain Best Discounts & Rebates as a Foundation
• Leverage size with Pharmacy Benefit Administrator
(PBM) or TPA
• Reduce Administrative Complexity
• Evaluate Network Access, Formulary Options
Rx Cost =
Members
X
Cost
Product =
Cost
AWP-Discount+FeesRebates
Product Selection
# Units
Unit Cost
Patented Drugs Price Comparison.
Selected Countries (2003)
US = 100
100
100
90
80
70
60
50
40
30
20
57
46
61
53
48
58
63
10
0
Italy
France
Canada
UK
Source: Canadian Patented Medicine Prices Review Board, Annual Report 2003
Sweden
Germany
Switzerl.
U.S.
OPERS vs. Canadian Pricing
1Q 2005
Drug Name
LIPITOR
LISINOPRIL
NEXIUM 40mg
CELEBREX
Total (Blended Strengths)
LIPITOR 20mg
LISINOPRIL 20mg
NEXIUM 40mg
CELEBREX 200mg
Total
Manufacturer
PFIZER
GENERIC
ASTRA
PFIZER
Ohio PERS Net Cost/ 90 Day Rx*
$190.00
$40.00
$220.00
$230.00
$680.00
PFIZER
GENERIC
ASTRA
PFIZER
Canadadrugs.com Cost/90 Day Rx
$212.34
$37.99
$282.12
$140.50
$672.95
Notes
Source: Canadadrugs.com 11-22-05
Compared with PBM 1Q 2005 of ALL strengths
Diovan not available on website in Canada
Zoloft and Norvasc available generically in Canada
11%
Less
Structure a
“Transparent” Agreement
•
•
•
•
•
•
•
Define all Revenue Streams
Leverage Auditing Rights
No Retail Markup & CAP Mail Markup on Generics
Administrative fee for specific services (fee or PMPM)
“Shared Savings” Methodology Agreement
Pricing terms of Brand, Generic, and Source
Beware of Biotech Pricing
Rebate Results
OPERS Rebate Performance
$50,000,000
$38.3M
$40,000,000
$30,000,000
$20,000,000
$23.2M
Total Earned
$14.5M
$10,000,000
$0
#Rx’s
*Through 11/05
2003
2004
2005*
5M
5.1M
5.1M
PBM Transparency
Are there risks of “too much”
transparency?
Drug
Company A
Ex. Actos WAC –10%
Payor/
Plan-Sponsor
Mail
Pharmacy
PBM
Retail
Pharmacy
Drug
Company B
Ex. Avandia WAC – 20%
Drug
Company C
Ex. Prandid – No Discount
(Traditional Model)
Identify Opportunities and Manage Aggressively
• Affix fair share member contribution/co-pays
• Don’t stop at discounts – manage utilization
and product selection
• Monitor the drug pipeline
(AWP-Discount+Fees-Rebates)
Rx Cost a
Function of:
Members
X
Cost
Product
Cost
=
Product Selection
# Units
Unit Cost
Product Selection: Generic Competition Impact
Celebrex 200mg
AWP:
$325
Discount: AWP–24%
-Rebates
$32
Net Cost
$215
• $121 Savings for 3 month Rx
•
For illustrative Purposes Only
Daypro Generic
$170
AWP –55%
No Rebate
$94
Rx’s per Person per Year:
U.S. 1970 to 2004
14.0
12.7
11.2
12.0
10.0
8.6
8.0
6.0
5.3
6.3
6.5
6.5
1975
1980
1985
6.8
4.0
2.0
0.0
1970
1990
Source: NARD-Lilly Digest, 1971 to 1995. 1995-2004 estimated from NACDS 2005.
Note: Mail order pharmacy Rxs for 1995-2004 were adjusted to 30 day supply.
1995
2000
2004
“Identify Opportunities and Manage Aggressively”
Savings Analysis
Members
Days/Member
Plan Cost/Day
2003
183,018
1,294
$1.63
2004
188,166
1,254
$1.62
2005 (ytd)
193,417
1,245
$1.65
Net PMPM
$168.79
$158.88
$154.87
Drug Trend Ohio PERS (Per Member Per Month)
$170.00
Co-pay
Change
$165.00
No Co-pay
Change
$160.00
$155.00
$150.00
$145.00
2003
Member Satisfaction
98%
2004
2005 (ytd)
98%
93% (new survey)
New Drug Applications Approved by FDA
by Therapeutic Potential (1990-2004)
Number
of NDAs
Priority Review
(22.1%)
140
Standard Review
(77.9%)
120
29
20
100
80
19
40
44
44
1990
1991
20
74
17
51
45
67
11
28
102
1994
20
19
16
25
15
1993
60
20
17
10
14
101
65
78
56
55
67
78
58
Source: FDA, 2005.
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1992
0
Drug Manufacturer Strategy
Case Study: “Digestive Disorders”
OTC
Tagamet
(H-2A)
}
Pepcid
Zantac
Axid
Prilosec
(PPI)
OTC
Prilosec
Prevacid
Protonix
Aciphex
Etc.
Nexium
Prevacid
Protonix
Aciphex
Timeline: 1980’s
1990’s
2000
Current
U.S.
Annual
Sales
$4.0B
$6.6B
$12.5B
$600M
OPERS Custom PPI Formulary
2005
Example: Retail
*OTC
Generic
From Brand
Non Form
**Cost
$20
$56
$100
$100+
Member Pays ’05
100%/ Not covered
$5
$10
$25
2006 Change
Member Pays ‘06
$5
$25
$50
$75
Example: Mail
**Cost
OTC
Generic
From Brand
Non Form
Member Pays ‘05
Member Pays ‘06
Not available @ Mail
$168
$233
$200+
$10
$20
$50
$50
$100
$150
2005 Strategy: Physician Approval required for greater than 90 days of therapy.
*OTC Requires an Rx for OPERS contribution (and applicable co-payment) in addition to retail pharmacy
participation. **Approx. net cost per 30 day supply of most commonly prescribed products
9
Communication and Consumerism
• Plan Design: 2,3,4 tiers, % on flat co-pays?
Plan Sponsor vs. Member Responsibility
•
•
•
•
•
Prevention
Quality & Safety-Physician Rx Surveillance
Managing change
Co-pay confusion
Communicate early, using multiple channels to
physician, pharmacy and member.
Are Consumers engaged?
50%
40%
30%
20%
49%
34%
24%
20%
15%
13%
10%
0%
1960 1970 1980 1990 2000 2003
Consumer Out-of-Pocket Spending as Share
of Total Health Costs
Tale of Two Members
Two Patients with Identical Diagnosis-different
costs
Member Costs/30 days
Member A: Zyrtec
Cozaar
Pravachol
$70.00 (Not Covered)
$53-$81 (Covered if ACE I failed)
$25 (Non-Formulary Co-pay)
$176
Member B:
Flonase
Lisinopril
Lipitor
$10 (Co-pay) or Claritin OTC
$5 (Generic Co-pay)
$10 (Formulary Co-pay)
$25
Savings: $151/Month!
Source: Walgreens.com April 2005 of common strengths
Are you willing to take the following
steps to help reduce health care costs?
Seminar Survey
On-line Survey
Healthy Lifestyle
91%
Healthy Lifestyle
98%
Preventative
Screenings
93%
Preventative
Screenings
98%
Generic Drugs
95%
Generic Drugs
Less Costly
Treatment
0%
Less Costly
Treatment
77%
20%
40%
60%
80%
97%
100%
75%
84%
80%
85%
90%
95%
100%
16
Communication & Consumerism
Alternatives to Traditional Rx Purchasing
• Evaluate Traditional vs. Emerging Models
Emerging PBM Alternatives
Network
Providers
In –House
Pharmacy
Plan
Sponsor
PBM
Medicare D
•Employer PDP
•Medicare Advantage
Manufacturer
Emerging PBM Alternatives
•In –House Pharmacy
•Mail Only
•Limit Retail
Plan
Sponsor
Network
Providers
PBM
Medicare D
•Employer PDP
•Medicare Advantage
•Subsidy
Manufacturer
Emerging PBM Alternatives
Plan
Sponsor
Plan
Sponsor
Carve out PBM
Functions:
Drug Manufacturer
Plan
Sponsor
Plan
Sponsor
PBM
or
Drug
Manufacturer
Non Profit –
PBM
Common RFP
Plan Design
Contract Administration
Network
Providers
Future Topics
• Managing the Biotech Beast or Inevitable
Explosion?
• Medicare D – Assimilation Results
• FDA: Overhaul or Fine Tuning?
• Pharma Marketing
• Drug Safety and Post Marketing Surveilane
• International Models
• “Bio-shield” and Drug Patent Laws