Statement of Heath Schiesser, President, Prescription Drug Plan, WellCare Health Plans, Inc., Tampa, Florida

Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means

May 03, 2006

I.          INTRODUCTION

Good afternoon, Madam Chairwoman and members of the subcommittee.  I am Heath Schiesser, President of Prescription Drug Plans for WellCare Health Plans.  For over 10 years, WellCare has been serving Medicare beneficiaries through health plans that offer high quality, comprehensive, affordable coverage.  More recently, as participants in the new Medicare Part D prescription drug program, we have launched three new stand-alone Medicare prescription drug plans providing coverage that became effective on January 1, 2006.  We consider it a great privilege to be able to serve Medicare beneficiaries throughout the nation.             

We appreciate this opportunity to testify about implementation of the Medicare Part D program.  According to the most recent data released by the Centers for Medicare & Medicaid Services (CMS), approximately 850,000 Medicare beneficiaries have enrolled in Part D prescription drug plans offered by WellCare in all 50 states.  Another 70,000 beneficiaries receive prescription drug coverage through WellCare’s Medicare Advantage health plans. 

WellCare is strongly committed to meeting the health care needs of Medicare beneficiaries and we are excited about our participation in the new Part D program.  This program, along with other provisions of the Medicare Modernization Act of 2003 (MMA), is providing important benefits and peace of mind to millions of Medicare beneficiaries.  We applaud Congress for enacting this landmark legislation, and we thank CMS for its tremendous work in achieving a largely successful implementation of the Part D program within a relatively short period of time.     

In our testimony today, we will focus on:  (1) the savings and value the Part D program is delivering to both beneficiaries and taxpayers; (2) the critically important role that competition based on benefit design has played in the program’s success; (3) the experiences of beneficiaries who have enrolled in WellCare’s Part D plans; and (4) specific steps WellCare and other plan sponsors are taking, in collaboration with CMS and other partners, to strengthen the program. 

II.        PART D IS PROVIDING VALUE TO BENEFICIARIES AND TAXPAYERS

WellCare and other Part D sponsors are delivering more comprehensive benefits at a lower cost than the experts had predicted before plans developed their benefit packages for 2006.  This outcome is largely a result of the fact that plans have developed a number of tools and techniques that have proven to be highly effective in making prescription drugs more affordable for consumers.  This positive outcome is also a result of the success of the MMA legislation in creating strong and vibrant competition among health plans which has led to lower costs and better benefits for Medicare beneficiaries.

WellCare is giving beneficiaries the option of choosing prescription drug coverage that goes well beyond the minimum requirements established by the MMA.  WellCare offers three PDP alternatives across the nation.  All three plans offer $0 generic drugs without any co-pay, no deductible, and low premiums starting as low as $17.13 in New York and averaging $22 across all our members.  (Of course, our full-dual and low income subsidy members have their premiums paid entirely by Medicare.)   

WellCare also offers Medicare Advantage plans with Part D drug coverage in 53 counties that are home to more than 5.2 million Medicare beneficiaries.  In all of these counties, WellCare offers plans that provide Part D coverage, plus lower physician and hospital co-pays, for no monthly plan premium – including no Part D plan premium.  Furthermore, in 40 of those counties, 4.4 million beneficiaries have access to a WellCare plan with no monthly plan premium and $0 generics in the coverage gap. 

Much like WellCare, a wide range of plans across the nation are offering coverage that exceeds expectations.  Many plans – including WellCare’s Medicare Advantage plans – are providing additional benefits in the MMA-established “coverage gap” that begins after a beneficiary’s annual drug expenditures exceed $2,250.  Under the MMA, the standard benefit includes a coverage gap in which beneficiaries would pay 100 percent of their total drug costs exceeding $2,250 until their out-of-pocket expenditures reach $3,600.  However, in all 50 states, beneficiaries have the option of choosing a Part D plan that covers a portion of the costs in this coverage gap.  

The value offered by Part D plans also can be seen in the lower-than-expected premiums that beneficiaries are paying.  Before plans submitted their benefit packages for 2006, beneficiary premiums were projected to average $37 a month.  However, according to CMS, the average premium for all prescription drug plans nationwide is actually $30 a month – almost 20 percent lower than originally expected – with a number of plans offering premiums that are far lower. 

In addition, many plans have deductibles below the $250 maximum standard, including 58 percent of all stand-alone prescription drug plans that offer zero deductibles^[1].  According to CMS[2], 69 percent of beneficiaries in stand-alone prescription drug plans and 89 percent of beneficiaries in MA-PD plans have selected options offering zero deductibles. 

Savings Generated by Competition  

Overall, HHS has reported[3] that beneficiaries who previously did not have drug coverage are now saving an average of $1,100 on their annual prescription drug costs by enrolling in the Part D program.  Moreover, a recent CMS analysis[4] found that beneficiaries who select the lowest-cost plan in their area can save up to 71 percent relative to the amount they would pay without prescription drug coverage.

While all types of beneficiaries can save money by choosing Part D plans, financially vulnerable beneficiaries can expect to receive exceptionally large savings because of the low-income subsidies the MMA provides.  On average, Medicare will pay more than 95 percent of prescription drug costs for these low-income beneficiaries. 

The savings available to low-income beneficiaries are measured by an August 2005 study, performed by PricewaterhouseCoopers[5], which concluded that beneficiaries with incomes at or below 150 percent of the federal poverty level and who are not on Medicaid can expect to see their annual out-of-pocket prescription costs drop from an average of $1,657 to $180 by participating in the new drug program.  Another more recent study, conducted by the Lewin Group[6], found that beneficiaries without previous drug coverage who have one or more of five chronic conditions – arthritis, diabetes, hypertension, osteoporosis, or respiratory illness – can save 58 percent on their drug costs by enrolling in a Part D plan. 

According to CMS data, the number of beneficiaries who are choosing this new benefit and receiving these savings is increasing by more than 400,000 with each passing week.  The agency recently announced that, as of April 18, almost 20 million Medicare beneficiaries were receiving prescription drug coverage through either stand-alone Part D prescription drug plans or Medicare Advantage health plans.  Another 6.8 million beneficiaries are benefiting from Part D subsidies that are partially supporting their retiree health benefits.  Overall, the total number of Medicare beneficiaries with prescription drug coverage now exceeds 30 million.  

Taxpayers also are benefiting from plans’ success in delivering quality prescription drug coverage at an affordable price.  HHS has announced[7] that the savings generated by competition in the Part D program are greater than expected and are reducing costs for Medicare.  Since July 2005, the projected cost of the Part D program for 2006 has declined by $7.6 billion.  Similarly, projected program costs for the next five years have declined by $30 billion according to HHS’ most recent estimates.  These lower-than-expected costs mean that taxpayers are receiving high value for the dollars they invest in the Part D program. 

Sustaining These Benefits

Our experience at WellCare suggests that benefit design matters.  We have seen strong enrollment in our plans precisely because we have developed plans that are meeting beneficiary needs.  While some suggest that standardization of benefits would simplify the program, proponents of this approach are overlooking the reality that innovation will continue to flourish as long as plans are competing based on their ability to design benefits that are appealing to beneficiaries.  This element of competition is critically important in sustaining the high quality, comprehensive, affordable options that beneficiaries are seeing in this first year of the Part D program. 

A review of the program indicates that plans are offering different benefit packages, allowing beneficiaries to choose options that better meet their needs with coverage that goes far beyond the minimum requirements.  It would be a serious mistake for Congress to undermine these choices by requiring plans to adhere to rigid standardization requirements.  Allowing the market to produce high quality choices through healthy competition is a much more effective way to meet beneficiaries’ needs than mandating one-size-fits-all benefits packages. 

The vast majority of beneficiaries have responded to these choices by selecting benefit packages that differ from the minimum requirements set by the MMA.  CMS data[8] show that the standard defined benefit has been selected by only 16 percent of beneficiaries in stand-alone prescription drug plans and by only 5 percent of beneficiaries in Medicare Advantage plans with prescription drug benefits (MA-PD plans).  All other beneficiaries are choosing plans that offer enhanced benefits or alternatives to the standard benefit.  

The value of choice has been demonstrated by WellCare for years in our Medicare Advantage business.  For example, in Broward County, Florida (the Fort Lauderdale area), we offer three plans:  Choice, Value and Dividend, each of which have attracted a large number of members.  All three plans offer Part D coverage with $0 generics and no deductible.  They also offer reliable co-pays rather than co-insurance, and lower physician and hospital costs for Medicare beneficiaries. 

• The Choice product offers co-pays of $0, $10 and $50 for primary care physician (PCP) office visits, specialist office visits, and per-day hospital charges for the first five days in the hospital.  Choice also offers $0 generics in the coverage gap. 
• By comparison, our Value product offers $0 co-pays for PCP office visits, specialists and hospital stays, but does not provide coverage in the coverage gap. 
• Finally, the Dividend product has higher co-pays of $0, $15 and $50 with no coverage in the coverage gap, but refunds $87.70 per month towards the member’s Medicare Part B premium. 

To summarize, these three products offer beneficiaries the choice of coverage in the gap, $0 co-pays, or over $1,000 a year toward Part B premiums.  These are meaningful differences that recognize the fact that beneficiaries want a range of options to meet their particular needs and circumstances.  

There is another advantage to having plans compete based on benefit designs.  This approach creates incentives for innovation and makes the marketplace competitive.  Just look at WellCare’s success in signing up people into its PDP programs.  We did not do it with a big, nationally recognized brand name like AARP or Blue Cross.  Despite being well known and respected in many of our markets, WellCare is virtually unknown in most of the country.  Nor can our success be attributed to an expensive advertising campaign.  Rather, I believe WellCare attracted members by providing a distinctive benefit package with $0 generics and no deductible.  And as long as there is flexibility in creating different benefit packages, there will continue to be vibrant efforts to better understand and meet the needs of Medicare beneficiaries.

Tools and Techniques for Increasing Value

WellCare is able to offer high quality, affordable coverage through the Part D program because we have developed tools and techniques to reduce out-of-pocket costs for beneficiaries and, at the same time, improve quality by reducing medication errors and promoting clinically sound drug use. 

Drug Interactions:  Before Part D, if a Medicare beneficiary purchased drugs at more than one retail location, or perhaps via the mail, no one entity had a complete picture of all the drugs that he or she was taking.  Now, through their pharmacy benefit manager, plans are able to review all the drugs that an individual is taking and identify potentially dangerous interactions before the drug is dispensed to the member.  Likewise, plans are also able to monitor dosages and frequently abused drugs, like narcotics, and assure that they are treated appropriately.

Screening for Excessive or Sub-Therapeutic Dosages:  In some instances, we have received requests for up to 900 tablets of a drug whose normal 30-day supply is only 30 or 60 tablets.  Recognizing the potential for abuse, we typically will contact the prescribing physician to determine if the prescription is appropriate.  Another circumstance in which we may take similar action is when we receive requests for low dosages of a schizophrenia drug that is sometimes used off label as a sleeping aid – a usage that could have a detrimental effect on a patient’s health.   

Encouraging Generic Drug Use:  One of the most important steps Medicare beneficiaries can take to minimize their drug costs, and in many cases avoid the coverage gap, is to utilize generic drugs, which cost on average less than 20 percent of their brand counterparts.  We encourage this by designing products with $0 generic drug co-pays and by adopting system edits that substitute generic drugs for more expensive brand name drugs.  In addition to helping WellCare keep plan premiums low, this approach minimizes the cost to the beneficiary and makes the most of the coverage that Medicare Part D provides.  Interestingly, over 80 percent of the most prescribed brand drugs have a generic therapeutic alternative available.  Of course, if the member’s physician has particular concerns that make the generic an unacceptable alternative, then the member can continue to take the more expensive brand name drug.

Discounts:  Another way WellCare helps beneficiaries avoid the coverage gap, or help them minimize costs if they do reach the coverage gap, is by negotiating attractive discounts with retail pharmacies.  For example, WellCare has negotiated prices that are more than 15 percent below typical cash prices.  This clearly helps beneficiaries make the most of the Part D benefit.

I recognize that there has been some concern about the effect of Part D on independent pharmacies.  A few facts to clear the air.  First, of the 52,000 pharmacies in our network, approximately 16,000 are independent and are valuable partners in serving our members.  They are an important part of our nation’s system for delivering drugs to members.  Second, our payments to independent pharmacies are, on average, about 1-3% higher than our payments to chain pharmacies.  Third, our payments to independent pharmacies are timely; we receive bundled claims from our pharmacy benefit manager twice a month and we typically pay these claims, by electronic wire transfer, within 3 to 5 days after receiving them.    

Formularies:  Formularies, which also play an important role in controlling costs, must comply with stringent standards which ensure that they include drugs necessary to treat all major diseases.  Medical professionals play a central role in developing formularies.  To ensure that formulary decisions are clinically appropriate,health plan Pharmacy & Therapeutics Committees – comprised principally of physicians and pharmacists – identify drugs for inclusion on health plan formularies based on documented safety, efficacy, and therapeutic benefit.  

A number of studies demonstrate that these strategies are highly effective in making prescription drugs more affordable for consumers.  For example: 

• The Congressional Budget Office (CBO) has estimated[9] that private sector management techniques employed by Medicare Part D plans would save individuals 20-25 percent off retail prices for prescription drugs.
• A 2003 study[10], conducted by Associates and Wilson on behalf of America’s Health Insurance Plans (AHIP), found that the PACE program in Pennsylvania – the largest state pharmacy assistance program in the nation – could save up to 40 percent by adopting the full range of private sector pharmacy benefit management techniques.
• In addition, the Government Accountability Office (GAO) has reported[11] that pharmacy benefit management techniques used by health plans in the Federal Employees Health Benefits Program (FEHBP) resulted in savings of 18 percent for brand-name drugs and 47 percent for generic drugs, compared to the average cash price customers would pay at retail pharmacies.

These findings clearly demonstrate that the private sector has a strong track record of using its experience and capabilities to deliver affordable prescription drug benefits.  At a time when federal resources are severely strained, it is important for policymakers to recognize the ability of health insurance plans to implement strategies that are enabling Medicare beneficiaries to receive the greatest possible value for the dollars the Medicare program is spending on their prescription drug coverage. 

III.       Beneficiary Experiences And Attitudes

To more clearly illustrate the value the Part D program is delivering to Medicare beneficiaries, I would like to review the personal experiences of two seniors who are enrolled in WellCare’s prescription drug plans.  These real world examples demonstrate that beneficiaries are achieving significant savings on their prescription drugs by choosing Part D plans.    

“Mike” is a Medicare beneficiary in California who will probably save about $2,400 this year as a member of a WellCare plan.  He is taking six prescriptions that would cost about $520 per month at retail.  By comparison, with WellCare’s pharmacy discounts and the coverage provided by Medicare Part D, he will save about 38 percent this year.

“Ann” is a Medicare beneficiary in New Hampshire who will probably save about $700 this year and avoid the coverage gap as a member of WellCare’s Signature plan.  She is taking Nexium and Clarinex, which average about $240 per month combined at retail prices, or about $2,500 over the course of the year with our discounts.  At that rate, she would reach the coverage gap in about November and spend about $250 in the coverage gap.  By switching to generic alternatives, her monthly total drug cost will drop to about $70 per month, which will allow her to avoid the coverage gap entirely.  Even better, since the WellCare Signature plan has $0 generic co-pays, her monthly co-pays for those two drugs will be zero.  As a result, Ann’s monthly premium for her Part D plan will be her only expense on prescription drugs for the entire year.  

While these examples provide just a brief glimpse at the success of the Part D program, the experiences of these Medicare beneficiaries are not uncommon.  Numerous surveys show that a large percentage of the overall Medicare population is pleased with the new program and the benefits it is delivering. 

In early March, Ayres, McHenry & Associates conducted two surveys to evaluate the attitudes of beneficiaries who already were covered by Part D plans.  One survey[12] focused on beneficiaries who chose plans on their own and the other focused on dual eligibles who were automatically enrolled in the program.  Among seniors who voluntarily signed up for the program, 59 percent said they already were saving money and more than 80 percent reported that they had no problems related to enrollment or usage of their new benefits.  Additionally, 65 percent of enrolled seniors said they would recommend that other seniors sign up for the program, versus 8 percent who said they would not.

The other survey[13] found that among seniors who are dually eligible for both Medicare and Medicaid, 90 percent said they had experienced no problems using the new Medicare drug benefit.  Another 4 percent said they had a problem that was resolved, while 4 percent said they had a problem that was not yet resolved. 

In recent weeks, these findings have been reinforced by numerous other surveys indicating that beneficiaries are well-served by the Part D program.  These survey findings clearly indicate that a large majority of Part D enrollees already are saving money, have not had problems signing up for or using their new benefits, and would recommend the program to others. 

IV.       PLANS ARE WORKING TO FURTHER STRENGTHEN THE PROGRAM

WellCare has been preparing for implementation of the Part D program for more than two years. 

We are proud to be a partner with CMS in working to ensure that the program is meeting beneficiary needs and continues to be strengthened on an ongoing basis. 

At every step of the implementation process, WellCare has provided leadership and offered input to CMS on measures needed to promote a smooth transition for beneficiaries.  We have significantly expanded our customer service systems, we have reached out to pharmacists, and we have adopted transition policies to ensure that enrollees in our plans – including dual eligibles and low-income seniors – receive their medications on a timely basis. 

Improvements to Customer Call Centers

In January, WellCare’s call centers – like other PDPs across the nation – experienced extremely high call volumes.  These call volumes were related to problems with eligibility data and operational difficulties in the pharmacies.  Since our staffing models did not anticipate these problems and the calls they would create, we were not adequately staffed to absorb these additional calls.  As a result, the performance of our call centers initially did not meet the high standards we set for ourselves.  Most other plans had similar experiences.  Therefore, we moved quickly in early January to adopt corrective measures, dramatically increasing our staff, working overtime, and refining our processes.  Between January and April, we increased our staffing by approximately 75 percent. 

Call volumes have moderated significantly as most of the eligibility and operational challenges have been resolved in the intervening months.  Now, WellCare is consistently delivering service levels in excess of CMS requirements.  In the month of April, WellCare answered 90 percent of our member calls and 87 percent of our pharmacist calls within 30 seconds.  In March, those figures were 91 percent and 93 percent, respectively.  Our average time to answer has been under 20 seconds over the last two months.

CMS has attempted to measure the performance of WellCare and other companies’ call centers through an outside contractor.  Unfortunately, this contractor’s methodology appears to be flawed and is yielding results that are dramatically inconsistent with our data.  We are working closely with CMS to urge improvements in the contractor’s methodology.  In the meantime, I am confident that the contractor’s results, based on fewer than 80 calls per week, are less reliable than our data which is based on the thousands of calls we receive every week.

Transition to Formularies    

To ensure continuity of care during the initial implementation of the program, WellCare and other plan sponsors adopted transition plans in January to ensure that beneficiaries continued to receive an initial prescription for covered Part D drugs they had been taking that otherwise would have been subject to formulary rules.  CMS subsequently required all plans to extend these transition policies through a 90-day period that ended on March 31. 

As we approached the end of this transition period, WellCare took a number of steps to ensure a smooth shift into the normal application of our formulary.  First, we pro-actively communicated with members, pharmacists, and in some cases physicians to alert them to the fact that the transition would be ending soon and, additionally, to encourage a switch to formulary drugs.  Second, we are phasing out the transition over several months to moderate the effect on members, providers and our own call centers.  We have further increased our staff to be prepared to handle the requests for exceptions to our formularies in a timely manner.  So far, we have succeeded in saving millions of dollars for members and taxpayers through the phasing in of our formularies, while at the same time maintaining call center times above CMS standards and continuing to respond to requests for exceptions to our formulary within 24 hours (versus the 72 hours required by CMS). 

Simplifying the Exceptions Process

On April 11, AHIP and the American Medical Association (AMA) announced a standard form to simplify the process by which physicians can request prior authorization and coverage of non-formulary drugs under the Part D program.  This standard form was developed through the collaborative efforts of plan sponsors, an AMA work group, and several beneficiary advocates.  CMS is expecting Part D plans to implement the standard form as a “best practice” as soon as possible and will require its adoption in the near future.  Meanwhile, AHIP members are continuing to work with the AMA and other partners on auxiliary forms that can be used for specialized drugs that require more information. 

In addition to AHIP members and the AMA, other organizations involved in this collaboration include the American Psychiatric Association, the American Academy of Family Physicians, the American College of Physicians, the Medical Group Management Association, the National Council on the Aging, the Center for Medicare Advocacy, the Alzheimer’s Association, the American Pharmacists Association, and the American Society of Consultant Pharmacists.

The agreement on this standard form is an important step toward ensuring that physicians know how to help beneficiaries obtain their medications on a timely basis.  It also clearly demonstrates our industry’s strong commitment to simplifying administrative procedures and improving uniformity wherever possible. 

Standardizing Messages for Pharmacists

On April 18, AHIP joined the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists’ Association (NCPA) in announcing a joint agreement on standardized electronic messaging that will promote the consistent use of key terms by Part D plans to assist pharmacists in better serving beneficiaries.  The standardized electronic messages were developed to help pharmacists quickly determine the appropriate course of action for filling beneficiaries’ prescriptions under four different circumstances: (1) when a particular drug is not covered; (2) when prior authorization is required; (3) when plan quantity or other coverage limitations have been exceeded; and (4) when the pharmacy is not part of the Part D plan’s network. 

AHIP, the NACDS, and the NCPA have asked the National Council for Prescription Drug Programs (NCPDP) to endorse these messages at its upcoming meeting in May.  The NCPDP previously adopted our recommendation to develop new codes for notifying pharmacists in clear, understandable terms when drugs are statutorily excluded from Part D basic benefits or are covered under Part B.

This agreement on standardized messaging is strengthening the program by helping to eliminate a possible source of confusion for pharmacists, thus allowing them to provide more prompt and effective service to beneficiaries. 

Ensuring Continuity of Care

WellCare and other plan sponsors also have taken steps to balance the goals of: (1) ensuring continuity of prescription drug coverage for beneficiaries; and (2) using formulary management techniques to maximize the quality and cost-effectiveness of the Part D drug benefit.  On April 27, AHIP’s Board of Directors issued a statement (see Appendix A) indicating support for the principle of providing continuity of care for beneficiaries enrolled in the Medicare Part D prescription drug program.  This statement supports recent efforts by CMS – announced by the agency in an April 26 guidance document – to ensure that Medicare beneficiaries who have been prescribed a medication on a Part D formulary will not be required to change their medication or pay increased copays or coinsurance throughout a contract year. 

In addition to supporting continuity of care when formulary changes are made, the AHIP Board statement discusses the importance of providing Medicare beneficiaries with a prescription drug benefit that reflects the latest scientific evidence regarding the efficacy of various medication therapies, side effects and adverse reactions, interactions among medications, and disease-specific concerns.  The statement identifies two circumstances under which formulary changes for existing enrollees are justified to protect the health of beneficiaries or enable them to receive greater value:  (1) when safety or efficacy concerns have been identified by the Food and Drug Administration and/or the plan’s Pharmacy and Therapeutics Committee based upon scientific evidence; or (2) when an FDA-approved generic alternative to a brand name drug becomes available.

AHIP’s Board statement gives beneficiaries the peace of mind of knowing that they will be able to continue to receive their Part D formulary drugs throughout the year.  At the same time, it preserves flexibility for plan formularies to maximize the value of the drug benefit when safety concerns are raised or generic equivalents come to market.   

V.        CONCLUSION

Thank you again for this opportunity to testify about our perspectives on these important issues.  Please be assured that WellCare remains deeply committed to the long-term success of the Medicare Part D prescription drug program.  We appreciate the support many members of the subcommittee have demonstrated for this valuable program and for a strong public-private partnership in Medicare.  We look forward to continuing to work with you to meet future challenges in Medicare and throughout the U.S. health care system. 

Appendix A

Statement by the

Board of Directors

America’s Health Insurance Plans on

Maximizing Quality and Affordability of Prescription Drug Coverage for Medicare Beneficiaries

April 27, 2006

INTRODUCTION

Formularies and other pharmacy benefit management strategies allow Part D plans to control costs while ensuring the quality and safety of prescribed drugs for Medicare beneficiaries.  These tools have kept Part D premiums affordable for beneficiaries and reduced costs to the federal government.   Beneficiaries, who were initially expected to pay $38 per month in Part D premiums, are paying an average of $25.  This is a savings of nearly one-third of the predicted premium amount, and the projected cost of the program to the federal government has been reduced by $7.6 billion in 2006 and $30 billion over the next five years.  For this success to continue, Part D plans need to rely on the proven best practices in pharmacy benefit management that are already providing Medicare beneficiaries with affordable, high-quality prescription drug benefits.              

The formulary is a list of drugs that have been reviewed for safety and efficacy and are approved for coverage by the plan. Such drugs commonly are categorized into several “tiers,” with cost-sharing for the drug determined by the tier to which it is assigned.  Formularies play an integral role in ensuring beneficiaries have cost-effective access to clinically appropriate drugs.  Part D plans have Pharmacy and Therapeutics (P&T) Committees, primarily composed of physicians and pharmacists that make decisions about which drugs to include on formularies based upon a clinical review of the scientific evidence.  Formularies promote affordability by encouraging competition among pharmaceutical manufacturers.  Once the P&T Committee determines there are multiple drug products with similar therapeutic value, they consider cost effectiveness to ensure that beneficiaries receive the greatest value from their prescription drug benefit. 

The Centers for Medicare & Medicaid Services (CMS) evaluates and approves all Medicare Part D formularies to ensure they are comprehensive in accordance with CMS standards.  CMS has established clear procedures under which beneficiaries and their physicians can request coverage of prescription drugs that are not on a plan’s formulary.  This process establishes strict timeframes and includes an opportunity to appeal to external reviewers who have no affiliation with the plan. 

ENSURING CONTINUITY FOR BENEFICIARIES

In addition to premiums and out-of-pocket costs, the drugs included on a Part D plan’s formulary and the tier structure are important factors that Medicare beneficiaries evaluate when determining which Part D plan best meets their specific needs and circumstances. 

Appropriate formulary management improves clinical benefits and reduces costs for Medicare beneficiaries.  The prescription drug arena is continuously evolving, with new scientific evidence emerging almost daily regarding the efficacy of various medication therapies, side effects and adverse reactions of both newer and older medications, interactions among medications, and disease specific concerns.  With that in mind, Plan sponsors may need to make formulary changes during the year to provide Medicare beneficiaries with a prescription drug benefit that reflects the latest in scientific evidence.

At the same time, AHIP members strongly support maintaining continuity of care if a formulary change is made.  Accordingly, we will support CMS’ efforts to ensure that Medicare beneficiaries who have been prescribed a covered Part D formulary medication will not be required to change their medication or pay increased copayments or coinsurances throughout a contract year except when:  

• Safety or efficacy concerns have been identified by the Food and Drug Administration and/or the plan’s Pharmacy and Therapeutics (P&T) Committee based upon scientific evidence; or

• An FDA approved generic alternative to a brand name drug becomes available.

In these two circumstances, changes for existing enrollees are justified to protect the health of beneficiaries or enable them to receive greater value for the dollars they spend on prescription drugs while ensuring quality.  Changes would only be made following appropriate notice as specified by CMS.

[1] AHIP analysis of CMS data, November 2005

[2] CMS, Presentation by Abby Block, Director of Centers for Beneficiary Choices, April 5, 2006

[3] HHS, Secretary’s Progress Report II on the Medicare Prescription Drug Benefit, February 22, 2006

[4] CMS Office of Policy, Analysis of Savings Available Under Medicare Prescription Drug Plans, March 1,

2006

[5] PricewaterhouseCoopers, Medicare Tomorrow: Future Savings for Beneficiaries, August 25, 2005

[6] The Lewin Group, Chronic Health Conditions & the New Medicare Part D Benefit: Savings on Frequently Used Medications, April 12, 2006

[7] HHS, Secretary’s Progress Report II on the Medicare Prescription Drug Benefit, February 22, 2006

[8] CMS, Presentation by Abby Block, Director of Centers for Beneficiary Choices, April 5, 2006

[9]   CBO, A Detailed Description of CBO's Cost Estimate for the Medicare Prescription Drug Benefit, July 2004

[10] Associates & Wilson, Prescription Drug Benefit Management: Improving Quality, Promoting Better Access and Reducing Cost, October 2003

[11] Government Accountability Office, Federal Employees’ Health Benefits: Effects of Using Pharmacy Benefits Managers on Health Plans, Enrollees, and Pharmacies (GAO-03-196), January 2003  

[12] AHIP, Most Medicare Drug Enrollees Already Saving, March 13, 2006

[13] AHIP, Ninety Percent of Low-Income Seniors Surveyed Say No Problems Using Medicare Drug Benefit, March 13, 2006