Medicare Compliance & Reimbursement

Number of drug categories will make it tough to contain costs, groups say.

With the Part D drug benefit less than 16 months away, health plans need to start thinking about how they're going to design their Medicare drug packages.

On Aug. 19, the United States Pharmacopeia released its draft guidelines for evaluating health plans' Medicare drug packages. Though they are only guidelines, insurers would do well to take a close look at them, as any plans' drug package would likely receive federal approval if it followed the USP blueprint, explains John Gorman of Gorman Health Group in Washington. If plans want to take advantage of the federal Medicare subsidy, their benefit design will need to be roughly equivalent to the USP formulary, Gorman says.

The USP guidelines "will serve as a benchmark against which plans ... will be evaluated," says Dan Mendelson, president of The Health Strategies Consultancy in Washington. In addition, plans that follow the guidelines will be "immune from anyone accusing them that they've tried to engage in adverse risk selection on the basis of their formulary," Mendelson says.

So far, the main associations for health plans and PBMs are guarded in their comments about the guidelines. The primary complaint is that the guidelines contain 138 therapeutic categories, which is such a large and inclusive number that health plans and pharmacy benefit managers would have a hard time containing costs.

"We believe 138 classes for Part D plans could be compressed further still, as the proposed number of classes is still larger than that used by most formularies today," Peggy Johnson, executive pharmacy director for Horizon Blue Cross Blue Shield of New Jersey said before the USP in comments made on behalf of the BlueCross BlueShield Association. Too many classes "will reduce the plans' ability to negotiate favorable prices with the manufacturers of equally efficacious drugs and lead to higher spending under the new Part D program."

The PBM industry agrees with health plans. The Pharmaceutical Care Management Association said in a statement that USP's proposed model formulary "is somewhat overly detailed." It also noted that the guidelines "can, nonetheless, serve as a starting point for formulary development."

"PCMA believes it is not necessary ... to expand further the number of categories and classes contained within the USP proposal," the lobbying group says. "For example, formularies in the commercial marketplace with 80 to 90 categories of drugs can provide coverage for 500 or more different drugs."

The bottom line: It all comes down to whether health plans can establish a formulary that is affordable but also will get good health outcomes, while at the same time corresponding closely enough to the federal guidelines to be assured of federal approval.