CMS Report Lauds Generic Substitution, E-Prescribing, Disease Management Programs As Key to Lowering Drug Costs, Improving Quality

Washington, DC; 09.20.04 — A recent report from the Centers for Medicare and Medicaid Services (CMS) identifying safe and effective approaches to lowering states’ Medicaid prescription drug costs recognizes many of the tools pioneered by pharmacy benefit managers and suggests that many states have yet to realize their full cost-savings and quality-improvement potential, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

“CMS has recognized that even though state Medicaid programs don’t save as much as they could if they used the full range of PBM tools, they still generate substantial savings and quality improvements through generic substitution, e-prescribing, and disease management programs,” said PCMA President Mark Merritt. “This new CMS analysis is only the latest in a series of reports â?? from the Government Accounting Office, the Congressional Budget Office, the Federal Trade Commission, and others â?? about the effectiveness of PBMs and adds to the growing body of evidence about the value PBMs add to the system.”

The report, “Safe and Effective Approaches to Lowering State Prescription Drug Costs: Best Practices among State Medicaid Drug Programs,” was published by CMS on September 9, 2004. The paper explains that states have implemented a variety of cost-containment mechanisms that have allowed them to reduce pharmacy expenditures and maintain beneficiary access to vital health care services. Yet, the report notes that “in general, states have not yet taken advantage of all of these approaches.”

The paper identifies four key strategies for states to lower their prescription drug costs and improve quality for Medicaid beneficiaries:

Generic Substitution. CMS notes that the “potential cost savings that can be achieved by the use of generic drugs has prompted 39 states to require that the generic version of a drug be dispensed to Medicaid beneficiaries when one is available. Under these mandatory generic substitution policies, the brand name drug remains available to beneficiaries through prior authorization.” While broadly available in the commercial marketplace, CMS notes that generics “are not as widely used in some Medicaid programs” â?? even though the savings compared to brand-name drugs can be substantial. The report notes that the state of Minnesota expects to save $10 million annually through its generic substitution program. Similarly, CMS notes that the state of Idaho’s program has saved $11.7 million in state and federal funds and that “pharmacy groups in the state have been very supportive of the state’s generic substitution policy.”
Disease Management Programs in Medicaid. CMS notes that “disease management programs are an emerging strategy for states to reduce overall expenditures, including drug expenditures, through more appropriate medication use for Medicaid beneficiaries with chronic illnesses. These programs usually include adherence to evidence-based practice guidelines, provide support services to assist physicians in monitoring their patients, more closely manage patient care including the proper use of drugs, and promote patient adherence to an individual treatment plan, which includes improved medication compliance.” The CMS report highlights a Washington state initiative which is helping 175,000 non-managed care Medicaid beneficiaries manage complex and chronic conditions â?? including asthma, congestive heart failure, diabetes, and end-stage renal disease â?? through preventive care and patient education and is expected to save the state 5 percent annually on overall medical costs for program participants. In North Carolina, the state’s Community Care program is relying upon 2,000 physicians to work collaboratively with local health departments, hospitals, and social service agencies to help manage the care of 513,000 Medicaid beneficiaries. The program’s Pharmacy Management Initiative has lowered prescription drug costs of participants by 22 percent through the use of a preferred drug list and is expected to save $9 million in 2004 through its drug utilization review program.
E-prescribing. The CMS report highlights a Florida e-prescribing initiative that allows prescribing physicians to prescribe a medication that is on the state’s preferred drug list, to access clinical information about prescription drugs, and to receive patient medical histories that help detect adverse drug interactions and drug allergies. Currently, 1000 prescribers use e-prescribing technology and the state expects to expand the number to 3000, thereby allowing for 80 percent of the drugs to be e-prescribed in Florida. CMS notes that e-prescribing will “improve medical care, reduce cost, and prevent fraud and abuse.” CMS also notes that e-prescribing “has resulted in less inappropriate or duplicative prescribing (polypharmacy), a reduction in severe drug interactions, and fraud detection from individuals seeking narcotics prescriptions from multiple physicians.”
Supplemental Rebate Agreements. The CMS report details have a variety of options states have available in driving down prescription drug prices. In addition to rebates received under the national drug rebate agreement, states may also negotiate state-specific supplemental rebates for their Medicaid population or participate in a multi-state pooling supplemental rebate agreement. According to CMS, 33 states are receiving Medicaid supplemental rebates in additional to those received under the National Rebate Agreement.

The full CMS report may be accessed at http://www.cms.hhs.gov/medicaid/drugs/strategies.pdf

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614