Junkfood Science: Generic formularies

January 27, 2008

Generic formularies

It is not hard to understand why a major health insurer would pay doctors by how well they comply with medication prescribing guidelines, why it would pay doctors to switch patients to certain generic prescription medications (such as for cholesterol-lowering), and why it would team up with an electronic prescribing service to monitor physicians and ‘alert them’ to patients that should be enrolled into the company’s disease management program.

It’s not hard at all.

Three recent examples in the news and medical journals remind us to think of insurers and pharmaceuticals in the same breath. There are enormous profits on prescription drugs possible through pharmacy benefit management (PBM) companies and most major insurers own their own PBMs. As John Richardson with Health Strategies Consultancy, LLC, explained at FTC hearings on June 26, 2003, PBMs contract with managed care organizations, self-insured employers, insurance companies, Medicaid and Medicare managed care plans, the Federal Employees Health Benefits Program and other government entities to provide managed prescription drug benefits. “PBMs manage about 70% of the more than 3 billion prescriptions dispensed in the U.S. each year... [and] manage pharmacy benefits for nearly 200 million Americans, including 65% of the country’s seniors.”

The more prescriptions written, the greater the profits for PBMs, i.e. most of our insurers. Not that honest profits are a bad thing at all. The troubling aspects come when conflicts of interests enter into the picture:

· When these same insurers also have electronic databases with all of our medical records, lab results and prescription records

· When these insurers tie reimbursements made to our doctors to how well they comply with performance measures, screenings and prescribing practices the insurer decides

· When these insurers determine our premiums, or even ability to get insurance, by how well we comply with their health assessments and managed care — guidelines the insurer helped to create. And in order for most adults to meet the ever lower recommended health indices, means prescriptions.

The more prescriptions written, the greater the profits. As professors at Creighton University School of Pharmacy and Health Professions explained in a recent issue of U.S. Pharmacy Review, the profit point spread insurers make on each prescription written adds up to unfathomable amounts. And insurers, through drug formularies that tier drugs to member co-pays, steer utilization of pharmaceuticals to those with greater proven effectiveness and safety, but cost factors are undeniable. Even before health risk assessments and insurer disease management programs became widespread, the Creighton researchers estimated the typical plan could generate about 100,000 prescriptions a year per 6,000 covered members. Applying their most conservative mark-ups to Blue Cross Blue Shield Association, with a database on 79 million enrollees, for instance, translated to potential PBM profits for BCBS plans alone of about $4.74 billion a year, plus about $2.8 million in administration fees.


Friday, BCBS of Massachusetts announced a new partnership with Zix Corporation. Their pilot project will use Zix’ electronic prescribing service (eRx) to monitor patients and identify those ‘eligible’ for the insurer’s disease management program. BCBS has created the country’s largest electronic prescribing network and said they believe it “can be leveraged to provide additional value to the prescribers, further increase patient safety and reduce overall healthcare costs to payers, physicians and patients.”

Generic rewards

Generics typically offer the lowest costs and greatest mark-ups for PBMs. Insurance plans that offer financial incentives to entice doctors to prescribe certain medications, primarily generics said to save money, have drawn scrutiny, according to this week’s Wall Street Journal. Concerns have been raised about these financial kickbacks, that are unknown to patients, entering into doctors’ medical decisions. Blue Cross Blue Shield of Michigan, for instance, launched a three-month program, called Blue Reward$, which rewarded primary-care physicians $100 for every plan member they switched from a brand-name drug to a generic cholesterol-lowering statin. The insurer provided each doctor with a list of every patient in the network who were taking brand name statins, Lipitor and Lescol. This initiative, according to BCBS, was to take advantage of the generic Zocor, as in the ENHANCE trial. BCBS said it spent $2 million in payments to doctors, and saved the insurance company $5 million in drug costs and plan members $1 million in co-payments. That sounds truly good, but it did not report how much the insurer made off of the sales of the generics.

Other insurers make generic prescriptions part of the doctors’ pay-for-performance (P4P) measures, which typically reward doctors 2% to 8% more in reimbursements if they meet certain criteria, such as prescribe more drugs electronically and reduce cholesterol levels in their patients. Blue Cross Blue Shield of Massachusetts, for example, gives doctors a bonus of up to $4 per patient a month for meeting a list of goals that includes higher generic prescription rates.

P4P incentivization

A six-year study published in last month’s issue of Health Services Research examined the effectiveness of the P4P program of BCBS of Hawaii — the largest provider of health care coverage in Hawaii, ensuring about half the state’s population — in changing doctors’ practices. In 1998, it had launched a doctor incentive program among their PPO providers, giving them bonuses based on the doctors’ meeting certain P4P measures that included clinical metrics measurable on claims data, their use of electronic medical records, and complying with medical and drug utilization measures. Among the Quality Indicators was compliance with prescribing lipid lowering drugs for adult members with ‘high’ cholesterol.

Doctors who participated in the voluntary program were given a direct financial award calculated by ranking each practitioner’s overall score to other participating doctors. The monetary rewards ranged from 1 to 5 percent of their base professionals fees in 1998-200, and increased to 7.5 percent in 2002-2003.

The study authors noted that P4P measures didn’t consider the severity of illness or the individual preferences of patients when they evaluated the doctors. In other words, doctors caring for older or sicker patient populations, or for ‘noncompliant’ patients, would be rated poorer by the insurer, giving doctors increasingly fewer incentives for caring for these patients. “Patient compliance is an important factor in the measurement of physician quality,” said the health plan.

By 2003, fewer than one-quarter of all physicians had chosen to not participate in the Hawaii incentive program. But the compliance results on the eleven P4P measures were mixed. They found only an untenable 6% increased odds ratio of patients who were seeing doctors in the P4P program receiving the healthplan’s recommended interventions, compared to patients seeing nonparticipating doctors. In fact, among patients seeing doctors who were both participating and not participating in the healthplan’s P4P program, the likelihood of them getting the healthplan’s recommended care dropped by 6% during the study years.

The study found that older, male patient members were less likely to meet the healthplan’s clinical measures to ensure rewards for their providers. And doctors who had “higher performance” before participating in the program (patient acuities were not reported) “received a disproportional higher percentage of the overall incentive budget,” indicating the program didn’t appreciably change doctors’ practices. The average participating physicians brought in $2,428 to $4,785 over the 6-year period.

The concept of P4P measures is growing in popularity among health insurers despite the problematic evidence, however, because of its potential for increasing provider compliance with recommended performance indicators, the authors wrote. They noted that single-payer or managed care plans that don’t give patients the freedom to see providers outside the network are more likely to have success in increasing adherence to guidelines. That’s because of mandatory participation of members in disease management, monitoring of members, and members are more likely to be subjected to “systematic interventions to improve care processes and outcomes.” They concluded: “Notwithstanding the limitations of evaluating the effects of a quality-based incentive program in a real-world setting, it is important to recognize the wide dissemination and interest for this new breed of physician reimbursement models by some of the leading private and public payers in the United States.”

This has real-world significance for consumers and healthcare providers who want to make medical decisions based on what is best for individuals, not just best for insurers.

Bookmark and Share