How Effectively Do Managed Care Organizations
Influence Prescribing and Dispensing Decisions?
Norman V. Carroll, PhD
S
ince the mid-1990s the costs of prescriptiondrugs have been rising at a rapid and increas-ing rate. In 1993, national expenditures on pre-scription drugs at the retail level were $51.3 billion; by 1999 they had grown to $99.6 billion.1 In
addi-tion, the overall rate of spending on drugs has grown
by at least 10% every year since 1993. In 1999 the growth rate was 16.9%.1As this growth has occurred,
the employers and health plans that pay for pre-scription drugs have increasingly turned to health maintenance organizations (HMOs) and pharmacy benefit managers (PBMs) for help in controlling pre-scription drug costs. (In this article, HMOs and PBMs will be referred to as managed care organizations [MCOs]. It is reasonable to consider HMOs and PBMs together in the context of drug benefit programs because both use the same types of tools to control pharmaceutical expenditures and because more than 90% of HMOs use PBMs in their drug benefit programs.2)
One of the major means by which MCOs have attempted to control drug costs has been through influencing physicians’ prescribing and pharmacists’ dispensing decisions. The primary tools that MCOs have used to influence prescribing and dispensing are formularies, therapeutic interchange, and prior approval.
The formulary “is a continually updated list of medications and related information, representing the clinical judgment of physicians, pharmacists, and other experts in the diagnosis and/or treatment of disease and promotion of health.”3 The goal of a
formulary is to identify “drug products and therapies that are the most medically appropriate and cost-effective to best serve the health interests of a given patient population.”3 A formulary can reduce drug
costs directly by guiding physicians and pharmacists to use less expensive, equally effective products and
Objective:To examine the extent to which managed care organizations (MCOs) use formularies, therapeutic interchange, and prior approval and to determine how effectively these tools influence prescribing and dispensing decisions.
Research Design:Literature review.
Patients and Methods:Studies relating to effectiveness were identified through a comprehensive literature review using the MEDLINE and International Pharmaceutical Abstracts databas-es. Only peer-reviewed studies done in outpatient settings were included. Studies measuring extent of use were taken pri-marily from published and widely available marketing research reports.
Results: Closed formularies were found to be effective in decreasing the utilization, but not necessarily the cost, of pre-scription drugs. Just under half of health maintenance organi-zations (HMOs) and 10% of employer-sponsored health plans use closed formularies. Prior approval programs have been shown to reduce use of target drugs and drug costs in a small number of drug classes. Nearly all HMOs and most employer-sponsored health plans use prior approval programs. How extensively the programs are used is not reported. About half of HMOs and employer-sponsored health plans use therapeu-tic interchange. Voluntary programs have been shown to be successful in staff-model HMOs. Mandatory, but not voluntary, programs have been shown to be successful in independent practice association-model HMOs.
Conclusion:The literature indicates that most MCOs have had limited success using formularies, therapeutic inter-change, and prior approval to influence prescribing and dis-pensing decisions. Although these tools have been effective in some situations, their impact has been limited by their low rate of utilization.
(Am J Manag Care 2002;8:1041-1054)
From the School of Pharmacy, Virginia Commonwealth University, Richmond, Va.
Address correspondence to: Norman V. Carroll, PhD, Professor of Pharmacy Administration, School of Pharmacy, Virginia Commonwealth University, Box 980533, Richmond, VA 23298.
indirectly by preventing them from using less effec-tive or more dangerous products.
Formularies can be open or closed. An open for-mulary is a list of drug products that the MCO sug-gests that physicians use. Although the MCO prefers that physicians prescribe and pharmacists dispense products on the formulary, it will provide reim-bursement for nonformulary products. A closed for-mulary is an exclusive list of drug products for which the MCO will provide reimbursement. If the physician prescribes a product that is not included on a closed formulary, the patient has to pay out of pocket for that product. Many formularies are par-tially closed. In other words, they are closed for some drug categories (eg, antilipid or antiulcer drugs) and open for others.
Therapeutic interchange occurs when a pharma-cist dispenses a product that is therapeutically equivalent to, but chemically different from, the one prescribed by the physician. A therapeutically equivalent product is one that is expected to have the same therapeutic results with a similar side effect profile. Therapeutic interchange differs from generic substitution. Generic substitution involves dispensing a different brand of a product that is chemically identical to the one prescribed. Therapeutic interchange involves dispensing a chemically different product. Because a chemically different product is dispensed, the pharmacist (in most settings outside hospitals or staff-model HMOs) must contact the patient’s physician and receive the physician’s approval for the switch before dispensing the product to the patient.
Many MCOs have formal therapeutic interchange programs that contact physicians, pharmacists, and patients to request that they switch to products pre-ferred by the MCO. Frequently, a pharmacist employed by the MCO makes the contact by tele-phone. Other MCOs mail letters to physicians, pharmacists, and patients. As with formularies, ther-apeutic interchange can reduce drug costs by per-suading physicians and pharmacists to use products that are less costly, more effective, or both.
Managed care organizations use prior approval programs to control utilization and expenditures of selected products. Typically, these products are very expensive or have serious side effects. A prior approval program requires that a pharmacist or physician receive explicit approval from the MCO before dispensing or prescribing one of the selected products. Reimbursement is not provided unless prior approval is obtained. Because patients are unlikely to purchase prescriptions for which their
third-party payer does not provide reimbursement, prior approval programs generate savings by reduc-ing the use of expensive products and by inducreduc-ing physicians and pharmacists to switch patients to less expensive products.
The common goal of formularies, therapeutic interchange, and prior approval is to persuade physicians and pharmacists to switch the drugs they prescribe or dispense to therapeutically equivalent products that are preferred by the MCO. Typically, the preferred products are less expensive than those they replace. In this article, these programs will be referred to collectively as drug preference programs.
It is widely assumed that MCOs can and do influ-ence prescribing and dispensing decisions through use of drug preference programs. Although a few studies have examined this assumption in defined and specific instances (eg, the effectiveness of a closed formulary in a given health plan), the assumption needs to be examined in a more com-prehensive manner. It is important that this be done because of the critical relationship between MCOs’ ability to influence prescribing and dispens-ing decisions and their ability to control pharma-ceutical use.
The purpose of this article is to provide a com-prehensive examination of the effects of drug pref-erence programs on prescribing and dispensing decisions. Both the extent to which MCOs use drug preference programs and the effectiveness of these programs in influencing prescribing and dispensing decisions are examined. Also discussed are the out-comes when these programs are used effectively, including changes in drug- and health-related costs and outcomes.
Disease management programs were not consid-ered in this study. These programs are broad, multi-disciplinary, patient-focused programs that attempt to better manage a patient’s disease over the patient’s life span. Attempts to influence prescribing and dispensing decisions are only one component of disease management programs. In contrast, formu-laries, therapeutic interchange, and prior approval programs focus directly on influencing prescribing and dispensing decisions. The intended effects of these tools on prescription drug use are direct and straightforward. These programs are intended to decrease the use of nonpreferred products and increase the use of preferred products. The effects of disease management programs on drug use are nei-ther direct nor straightforward. Although they may direct physicians and pharmacists to use selected products, disease management programs’ emphasis
on prevention and early and aggressive treatment may result in increased use and drug costs for both preferred and nonpreferred drugs.
METHODS
Studies that examined the effectiveness of drug preference programs were identified through an exhaustive review of MEDLINE and International Pharmaceutical Abstracts databases. MEDLINE was searched for the period from 1966 through December 3, 2001, using the terms “drug product selection,” “formulary,” “therapeutic interchange,” “therapeutic substitution,” “prior authorization,” and “prior approval.” The search was limited to studies that were conducted in humans, published in English, and included one of the search terms in the title or abstract. The search identified 848 arti-cles. The International Pharmaceutical Abstracts database was searched for the period from 1970 through December 3, 2001, using the same terms. The search of article titles identified 930 articles. The author identified additional relevant articles by scanning the references of those identified by the computerized search. In addition, experts in the field were contacted and asked to identify rele-vant articles.
The author selected data-based research articles in peer-reviewed journals that examined the
effec-tiveness of formularies, prior approval, or therapeu-tic interchange in outpatient settings similar to those served by MCOs. Excluded were studies con-ducted in inpatient hospital settings, long-term care facilities, or indigent-care clinics and studies that were based on modeling rather than actual data. Studies conducted in outpatient hospital settings were included in the review because they are simi-lar to the programs operated by staff-model HMOs. Both serve ambulatory populations; use formula-ries, prior approval, and therapeutic interchange to influence pharmaceutical use; and serve patients who get most of their prescriptions through in-house pharmacies because drugs are provided there at reduced cost. The review excluded studies of therapeutic interchange in which patients were switched to a different dosage form of the same drug or that included a switch from one drug to a combi-nation of drugs. Also excluded were studies of state Medicaid formularies that excluded entire classes of drugs. Formularies operated by MCOs typically exclude products within classes, but not entire ther-apeutic classes. Fifty-six studies, spanning the years 1984 to 2001, met these criteria. Studies of closed formularies were more prevalent early in this peri-od, and studies of therapeutic interchange were more prevalent in recent years.
Most of the information on utilization of drug preference programs came from reports published annually by marketing research companies (Table 1).
Table 1.Marketing Research Reports Used to Estimate Frequency of Use of Drug Preference Programs Company Conducting Research Sample on Which
Report Title and Compiling Report Sponsor of Report Report Is Based
The Wyeth-Ayerst Prescription Pharmacy Benefit Management Wyeth-Ayerst 446 employers representing
Drug Benefit Cost & Plan Design Institute, Inc 15 million employees and dependents
Survey Report: 2000 Edition4
Managed Care Digest Series 2000: SMG Marketing Group Aventis Census of the 820 HMOs operating
HMO-PPO/Medicare-Medicaid in the United States in 1999
Digest2
Novartis Pharmacy Benefit Report: Emron/IMS America Novartis Sample of HMOs representing
Facts & Figures, 2000 Edition5 19.2 million members
Novartis Pharmacy Benefit Report: Emron/IMS America Novartis 50 HMO pharmacy directors
Trends and Forecasts, and 27 medical directors
1998 Edition6 representing 70 health plans
and 19 million enrollees Pharmacy directors of 12 PBMs serving 23.5 million consumers HMO indicates health maintenance organization; PBM, pharmacy benefits manager.
These reports are widely available and well known within the pharmacy field. They are funded by major pharmaceutical companies but are produced independently, and without editorial input, from the sponsors. It is unlikely that sponsors bias the results because of the nonproprietary, non–prod-uct-specific nature of most of the information pro-vided in these reports. The reports consist of basic statistics describing the managed care industry and use of pharmacy benefit management techniques by MCOs. Other sources included reports published by professional associations, benefits management companies, and government agencies. Because use of drug preference programs has grown steadily over the past 10 years, this review focused on the most recent utilization reports available. These included reports published between 1998 and 2001.
RESULTS
The literature review results are presented by type of program. For each type, evidence of both its effectiveness and the frequency with which it is used is presented.
Formulary Effectiveness
Little information is available about the effective-ness of open formularies. The available information suggests that open formularies have minimal impact on prescribing and dispensing decisions.7,8 This is
probably because open formularies provide few incentives for pharmacists, physicians, or patients to use listed products. In addition, open formularies may be less rigorously or scientifically determined and, therefore, may be perceived as providing less appropriate guidance.
A number of studies have examined the effec-tiveness of closed and partially closed formularies (Table 2). Most have indicated that increasing the restrictiveness of a formulary will result in lower utilization of restricted products.9-15 Some have
noted increased use of formulary products,9,10,13-15
although others did not examine use of specific products.11,12
Lower utilization has not always been shown to result in lower drug expenditures, however. Two studies have documented lower drug costs in a closed formulary.9,12Others have indicated no
statis-tically significant differences between costs in for-mulary and nonforfor-mulary groups.10,13,15
A few studies have suggested that restricting for-mularies may lead to negative health consequences.
These consequences have included increases in inpatient hospitalizations11,12,16,17 and emergency
room visits.16,17 Two of these studies16,17 have been
widely criticized for deficiencies in research design. Major criticisms focused on the small number of data points (ie, MCOs) included in the study, use of an after-only study design without randomization, and ignoring discounts and rebates (which may be substantial in MCOs) when calculating drug costs. 20-22 Two studies have reported that more restrictive
formularies are associated with lower rates of con-tinuation with drug therapy.9,18
Schweitzer examined the relationship between the generosity of a health plan’s formulary and con-sumers’ satisfaction with the plan.19The measure of
formulary generosity considered both the number of products covered and whether expensive products were excluded from the formulary. The results indi-cated no significant relationship between formulary generosity and health plan satisfaction.
Utilization of Formularies
The most recent surveys indicate that 74% of employer-sponsored plans4and virtually all HMOs2,5
use formularies. Use of closed formularies is much less common. A census of all HMOs operating in 1999 indicated that 49% of HMOs use closed
formu-laries.2 Another survey indicated that 49% use
closed formularies and 18% use partially closed for-mularies.5Formulary use is substantially lower
out-side HMO settings. Various surveys indicate that only about 8% to 18% of employer-sponsored health plans use closed formularies.6,23,24Between 24% and
42% of employer-sponsored plans use partially closed6or incented formularies.23(An incented
for-mulary provides some coverage for nonforfor-mulary products, but requires the patient to pay a higher amount to receive these products.) Two other stud-ies, although not providing numerical estimates, also suggest that closed formularies are rarely used by PBMs.25,26
Use of more restricted formularies has increased substantially over the last several years. The per-centage of HMOs using closed formularies grew from 23% in 1992 to 49% in 1999.2,27Use of closed
formu-laries in employer-sponsored plans has remained relatively stable since 1995, but use of incented for-mularies has grown from“ a few plans” in 1996 to 25% of responding plans in 1999.20,28
Effectiveness of Prior Approval
Four published studies have evaluated the effec-tiveness of prior approval programs. All found
posi-Table 2.Studies of Effectiveness of Closed Formularies
Study Setting and Sample Research Design Measure Result
Horn et al16 National sample of After-only without Degree of formulary Increased formulary restrictiveness 12 096 patients from randomization restrictiveness was associated with higher drug 6 managed care costs and increased emergency organizations department visits and hospitalizations Horn et al17 Same as above Same as above Same as above Same as above; in addition, some
associations were stronger for elderly patients
Motheral and 5890 continuously Before and after Closed vs open Smaller increases in drug use and Henderson9 enrolled patients in with control group formulary expenditures in the closed
2 employer-sponsored formulary plan drug plans
Motheral et al10 3084 patients in 2 Case-control, before Closed vs open Smaller increase in drug use in government-employee and after with formulary closed formulary plan; smaller, drug plans control group but not statistically significant, increases in drug costs in closed formulary plan
Kreling et al13 Wisconsin Medicaid Before and after Dropping Slight increase in expenditures on program; sample of without control group propoxyphene analgesics; substantial decreases in more than 18 000 napsylate from number of analgesic prescriptions recipients in each formulary and recipients
time period
Smith and 137 Michigan Survey of patients How patients 46% discontinued the drug, McKercher14 Medicaid recipients taking 1 or more responded to having 23% switched to an alternate drug,
products dropped their medicines 31% paid out of pocket for drug from formulary dropped from the
formulary
Lingle et al11 16 561 patients Before and after Open vs closed Increased use of drugs, physician continuously enrolled without control group formulary office visits, and outpatient hospital in the South Carolina services and decreased inpatient Medicaid program hospitalizations after opening the
formulary
Kozma et al12 Subset from the Same as above Same as above Increased use of and expenditures for sample above of drugs, physician office visits, and 12 139 patients outpatient hospital services, and having at least 1 claim decreased inpatient hospitalizations for a prescription drug and expenditures after opening during the study period the formulary
Soumerai et al15 390 465 patients Time series analysis Changes in use and Use of and expenditures for the enrolled in the expenditures after 12 ineffective products dropped New Jersey Medicaid dropping reimburse- substantially; however, increases in program ment for 12 ineffective use of substitute products completely
but commonly used offset decreased expenditures for drug products the ineffective products Streja et al18 187 patients from a Regression analysis of Formulary with only Patients with only 1 SSRI on
single group practice patients newly paroxetine vs formulary were 80% less likely to in California prescribed a study formulary with complete therapy
antidepressant paroxetine and fluoxetine
Schweitzer19 19 health plans in Correlation of A measure of formulary No significant association between California formulary generosity generosity defined to formulary generosity and satisfaction
and consumer include both the with the health plan satisfaction with number of products
the plan covered and the price of the products SSRI indicates selective serotonin reuptake inhibitor.
tive, but limited, evidence of their effectiveness in reducing drug costs (Table 3).
Two studies evaluated the effectiveness of prior approval programs for brand name nonsteroidal anti-inflammatory drugs (NSAIDs) in state Medicaid programs.29,30Both studies found that prior approval
programs substantially decreased overall utilization of NSAIDs, decreased utilization of brand name NSAIDs, increased use of preferred generic prod-ucts, and yielded significant savings even after accounting for changes in use of related healthcare services. However, authors of both studies caution that their results may not be widely applicable. Both studies examined prior approval programs only for NSAIDs. This drug class has the following character-istics: it includes generic products, brand name products in the class have no significant therapeutic advantages over generics, drugs in the class are used to treat a symptomatic problem of mild to moderate severity, and there is little risk in trying a different
agent from the class because a therapeutic failure is unlikely to result in hospitalization, use of other expensive healthcare services, or serious damage to the patient’s health. Authors of both studies suggest that it may not be reasonable to generalize their results to therapeutic classes that do not share these characteristics.
A third study evaluated drug savings effected by Iowa Medicaid’s prior approval program.31This
pro-gram required prior approval for brand name NSAIDs, brand name benzodiazepines, nonsedating antihistamines, and high doses of ulcer medications (compared with the lower doses needed for mainte-nance therapy). The program generated substantial savings on drug costs, primarily through increased use of preferred products. The majority of savings came from increased use of generic NSAIDs and benzodiazepines. The benzodiazepine class, like the NSAIDs, includes generic products that are thera-peutically equivalent to brand name products and is
Table 3.Studies of Effectiveness of Prior Approval Programs
Study Setting and Sample Research Design Measure Result
Smalley et al29 More than 500 000 Interrupted time series Net cost savings from PA 53% decrease in expenditures on patients in Tennessee for brand name NSAIDs NSAIDs with no concomitant Medicaid Program increases in use of other pain
relievers, emergency room visits, or hospitalizations; 19% decrease in NSAID use
Kotzan et al30 80 064 continuously Interrupted time series Net cost savings from PA Large savings on NSAIDs due to eligible patients in the for brand name NSAIDs decline in use of brand name Georgia Medicaid NSAIDs and overall decrease program in use of all nonnarcotic analgesics Kotzan et al32 Georgia Medicaid Cross-sectional Differences in market The market share of PA products
program and a share of PA products for cash patients was 5.6% of comparison group between the Medicaid prescription numbers and 10.9% of cash-paying population and the of dollars; the market share for patients; sample sizes control group of Medicaid patients was 2.4% of were not reported cash-paying patients prescription numbers and 7.9%
of dollars
Phillips and Larson31 Iowa Medicaid Before and after Changes in drug Decreases in drug costs of between program served more without control group expenditures after $2.51 and $3.83 million for these than 250 000 implementation of PA classes in the 12 months after enrollees at the time program for brand name program implementation of the study; sample NSAIDs and
benzo-size was not reported diazepines, nonsedating antihistamines, and high-dose ulcer products
a class for which a therapeutic failure is unlikely to result in serious health consequences or increased use of more expensive healthcare services.
Kotzan et al used a market share analysis to esti-mate cost savings due to prior approval in the
Georgia Medicaid program.32 They compared
mar-ket shares of products that required prior approval in the Medicaid program with the market shares of those same products among noninsured patients. Medicaid patients were 44% less likely to take a drug requiring prior approval than were noninsured patients. Based on the substantially higher cost of drugs requiring prior approval, they concluded that the prior approval program had resulted in savings for the Georgia Medicaid program. The authors’ con-clusions are based on 2 related assumptions. The first is that market shares of prior approval products would have been equivalent in the cash and Medicaid markets in the absence of the prior approval program. The second is that the differences in market shares were primarily a result of the pro-gram. Given the likelihood of differences in socio-economic and healthcare status between the 2 groups and the absence of baseline measures for either group, it is difficult to accept these assumptions.
Utilization of Prior Approval Programs
Between 80%2 and 88%5 of HMOs use prior
approval programs. Use is lower among employer-sponsored plans. About 66% of these plans use prior approval programs.4 The cited sources report the
percentages of health plans that use prior approval, but most do not indicate how extensively those grams are used. Whether the plans have limited pro-grams that cover only 1 or 2 drug classes or extensive programs that cover many classes is not
reported. However, data from the Novartis
Pharmacy Benefit Report: Facts & Figures, 2000 Editionindicate that about 3% of HMO prescriptions are changed or not dispensed as a result of prior approval.5
The percentage of HMOs using prior approval
increased from 14% in 199433 to 80% in 1999.2
Among employer-sponsored plans, use has grown from 43% of plans in 1996 to 66% in 1999.4,28
Effectiveness of Therapeutic Interchange Programs
A number of studies have examined the cost sav-ings and clinical effects of therapeutic interchange programs in outpatient settings.34-55Most examined
the interchange of a single product in a small sam-ple of patients attending a hospital outpatient clinic.
The majority examined switches of statins, angiotensin-converting enzyme inhibitors, or calci-um channel blockers.
These studies found substantial savings as a result of the switch. In addition, almost all reported an equivalent or an improved clinical effect after patients were switched. However, limitations in the research designs of these studies make it difficult to draw firm conclusions about the effectiveness of ther-apeutic interchange programs. The samples in many of these studies are biased by study inclusion criteria. They excluded patients who did not return to the clin-ic for evaluation after the switch, patients who were switched back to the original drug due to adverse reactions or lack of therapeutic effect, and/or those who stopped taking the drug for any reason. Eliminating noncompliant patients and patients who did not respond, or responded adversely, to the switched medication substantially weakens the con-clusion that switching had no detrimental effects.
A few studies found less positive results after interchange programs. Amidon et al,56Nelson et al,57
and Condra et al58found failure rates between 14%
and 28% for a proton pump inhibitor switch. Oatis and Stowers reported a 15% failure rate for a
calci-um channel blocker switch.59 Stock and Kofoed
reported a 37% failure rate for switches among selec-tive serotonin reuptake inhibitors.60
Several studies also found higher costs after the switch. Oatis and Stowers59 and Mamdani et al40
found higher drug costs after a calcium channel blocker switch as a result of higher doses of the switched product40 and higher use of concomitant
heart medications.59 Amidon et al found that the
high failure rate (28%) for a proton pump inhibitor switch offset any savings.56
A number of surveys have measured patient per-ceptions of the outcomes of therapeutic inter-changes. Surveys of patients switched from loratidine to cetrizine61and from omeprazole to
lan-soprazole57,58found decreased control of symptoms
and lower levels of patient satisfaction with drug treatment after the switch. Gardner et al found that 25% of women switched from conjugated to esteri-fied estrogens experienced a return of menopausal
symptoms and 15% experienced new symptoms.62
Table 4 describes several large evaluations of therapeutic interchange programs that do not suffer from the subject inclusion limitations of the studies discussed above. All indicate that therapeutic inter-change programs can result in substantial savings on drug costs. Most indicate that therapeutic inter-change programs result in savings even after
Table 4. Studies of Therapeutic Interchange Programs
Study Setting and Sample Research Design Measure Result
Brufsky et al63 Staff-model HMO with Interrupted Changes in market share Cimetidine’s share increased by 54% 300 000 members and monthly time of cimetidine after in the staff model and by 10% in group-model HMO series with a voluntary program the group model; net savings of with 170 000 members comparison series consisting of prescriber $1.06 million
education, therapeutic reevaluation of patients, and performance feedback
Baluch et al64 Staff-model HMO with Before and after Voluntary switch of patients 89% of patients were switched from 377 000 members without control from CE to EE; the program CE to EE; after 6 months, 6.5% were group was promoted through switched back to EE; net savings were
newsletters mailed to patients $32 per patient per year and prescribers, and pharmacist
presentations at clinics
Gardner et al62 Same as above Survey of patients Patient evaluation of and 9% of those switched and maintained on estrogens experiences with the switch on EE and 25% of those switched to 3 years after from CE to EE EE then switched back to CE rated the therapeutic switch experience as negative; 25% of interchange those switched and maintained on EE intervention reported return of menopausal symp-toms and 15% reported new sympsymp-toms; of those switched to EE and then switched back to CE, 52% reported return of symptoms and 43% reported new symptoms
Andrade et al66 Mixed-model HMO Before and after Switch of patients from CE 72% of those originally on CE were with 175 000 members with control to EE; switch program,which switched to EE; those switched
group lasted for 18 months, began experienced an excess of 20 office with a newsletter, continued visits per 100 patients in the postswitch with lists of patients who period compared with the preswitch needed to be switched period; at the end of 2 years, 15% of accompanied by phone calls those switched had switched back to from pharmacists, and finally CE. Estimated monthly savings in drug required physicians to “com- ingredient costs were $2.43 per patient plete standardized forms to
justify the need for conjugated estrogen therapy for the patient to be dispensed conjugated estrogen tablets”
Good et al65 Veterans Administration Before and after Switch of patients from 18% of patients initially switched to clinic; study of 704 without control nizatidine to cimetidine; cimetidine were switched to other patients group switches were implemented antiacid agents within 6 months; there
by the pharmacy service were no increases in GI-related hos-without the intervention of pitalizations, clinic visits, or diagnostic individual clinicians tests between the 6-month pretest and
posttest periods. Estimated monthly savings on drug costs were $12.60 Benedetto et al67 Four IPA-model HMOs; Before and after Changes in market share of Market share of fexofenadine increased
membership in HMOs with control fexofenadine at 4 HMOs. by 46% at HMO A, by 6% at HMO B, was 60 000, 250 000, group HMO A used a mandatory by 3% at HMO C, and by 2% at 230 000, and 430 000 switch program;HMO B HMO D, the control HMO
mailed letters to physicians and Within 6 months, more than 50% of patients to inform them that switched patients had switched back fexofenadine was the preferred to their original antihistamine at product; HMO C mailed at HMOs B, C, or D
letters to physicians only; HMO D had no intervention
CE indicates conjugated estrogen; EE, esterified estrogen; GI, gastrointestinal; HMO, health maintenance organization; IPA, independent practice association.
accounting for implementation costs and changes in related healthcare costs.63-67
The studies suggest that the success of voluntary programs is highly dependent on the organizational settings in which they occur. Brufsky et al63 and
Baluch et al64found that voluntary interchange
pro-grams resulted in high rates of switching to the pre-ferred product and substantial savings in staff-model HMOs. The voluntary program evaluated by Brufsky et al also was successful, but much less so, in a group-model HMO. A study of therapeutic inter-change programs in 4 independent practice associa-tion (IPA)-model HMOs found that voluntary programs achieved little in the way of switching or savings.67 In comparison, mandatory switch
pro-grams were found to be successful in an IPA-model
HMO, 67 a mixed-model HMO,66 and a Veterans
Administration outpatient clinic.65
These studies also indicate that financial incen-tives may be important. Brufsky et al and Baluch et al point out that physicians in staff-model HMOs may have been willing to voluntarily switch patients to preferred products because they had an econom-ic incentive to do so; most physeconom-icians realized that their compensation and staffing levels were tied to the HMO’s financial success.63,64 Physicians in the
group-model HMO studied by Brufsky et al were paid by capitation. The only successful program in the study of IPA-model HMOs was a mandatory switch program that provided reimbursement only for the preferred product.67
Utilization of Therapeutic Interchange
Between 38%2and 57%68of HMOs use therapeutic
interchange. About 75% of PBMs offered therapeutic interchange programs in 1997.6 However, the
per-centages of employer and HMO clients that actually used these services were not reported. About 56% of employer-sponsored plans used therapeutic inter-change in 1999.4 As with prior approval programs,
the literature does not indicate how extensively therapeutic interchange was used.
Use of therapeutic interchange has increased in recent years, but somewhat less than the increase in use of prior approval and restricted formularies. Use
has grown from 23% of HMOs in 199269 to 38% in
1999.2 Among employer-sponsored plans, use has
grown from 36% in 199628to 56% in 1999.4
Surveys of Drug Preference Programs in the Population
Table 5 describes studies that examined the impact of drug preference programs in the
popula-tion.70-73 These studies examined any type of drug
switching that occurred when a MCO refused to pay for the originally prescribed product, but was willing to pay for a therapeutic alternate. Thus, they cov-ered drug switching that resulted from closed for-mularies, prior approval, and therapeutic interchange. All indicated that the incidence of drug switching is low. The highest estimate indicated that 5.2% of consumers enrolled in MCOs in California had been forced by their health plan to change med-ications in the past year.73The lowest estimate
indi-cated that only 0.25% of third-party prescriptions dispensed in community pharmacies in Virginia were switched.70
Two studies suggest that drug switching may have negative health consequences for some patients.70,71
These studies found that between 5% and 11% of consumers chose not to have their prescription filled when faced with a drug switch. That is, they received neither the originally prescribed product nor a therapeutic alternate. It is difficult to know whether this is a significant health problem because the studies provide little detail about the types of products involved.
DISCUSSION
If MCOs were successful in their attempts to influence prescribing and dispensing decisions, then drug preference programs should be effective when used and they should be used commonly. Further, if drug preference programs are to have favorable effects on costs and quality, their use should not be associated with negative health outcomes. This case cannot be made from the published literature. Although several studies indicate that some MCOs have exerted substantial influence over prescribing and dispensing decisions, the bulk of the literature indicates that most MCOs have not.
The literature indicates that closed formularies are effective in decreasing use of nonformulary products. However, it also indicates that closed for-mularies are used infrequently. In addition, there is some suggestion that implementing closed formula-ries may result in higher rates of inpatient hospital-ization11and drug therapy discontinuation.6,18
Therapeutic interchange and prior approval are used in the majority of health plans, but how exten-sively they are used within these plans is not known. Further, these interventions have been shown to be effective only in limited circumstances. Prior approval programs have been shown to be effective
primarily with drug classes that include generic products, which are used to treat symptomatic prob-lems of mild to moderate severity, and in which brand name products have no significant therapeu-tic advantages over generics. Many therapeutherapeu-tic classes do not meet these criteria.
Voluntary therapeutic interchange programs have been shown to be successful in staff-model HMOs, but not in IPA models. One could reasonably assume from this that voluntary programs also would not be successful in preferred-provider organizations or other plans with less organizational control than that provided by staff-model HMOs. Compared with other types of HMOs and health plans, staff-model HMOs enroll relatively few patients.2This fact
sug-gests that voluntary therapeutic interchange pro-grams may have little impact on the vast majority of patients covered by prescription drug insur-ance. Given employers’ reluctance to implement closed formularies, it seems unlikely that they would subject their employees to mandatory thera-peutic interchange programs.
The few available studies of the incidence of drug switching provide additional evidence that programs to influence prescribing and dispensing are not wide-ly used, are not highwide-ly effective, or both. Estimates
of the rate of drug switching resulting from all tech-niques (ie, closed formularies, therapeutic inter-change, prior approval) range from 0.25% of third-party prescriptions dispensed in community pharmacies70to 5.2% of consumers in MCOs having
to switch medicines in a year.73
A major limitation of this review is the paucity of research on the effectiveness of drug preference programs. This limitation is especially problematic in light of the number of factors that could influ-ence the effectiveness of these programs. These factors include the type of drug preference program used, the organizational setting in which it is implemented, the patient population affected, the therapeutic use of the drugs involved, and the geo-graphic setting in which the program is implement-ed. It is rare that more than one study has examined the effectiveness of the same type of drug preference program under the same conditions. This limits the confidence with which one can make conclusions about the effectiveness of these programs. The one case in which there has been replication—prior approval programs—suffers from another limitation. All studies of prior approval programs have been done under nearly identical conditions.
Table 5. Studies of the Incidence of Drug Switching in the Population Study Setting and Sample Method of Data Collection Results
Carroll70 23 community Pharmacy students observed Only 54% of drug switches suggested by third-party pharmacies in community pharmacists payers resulted in a drug switch; of the remainder, Virginia; sample of the third-party payer approved 23% to be dispensed as 31 664 third-party originally prescribed, patients paid out of pocket to prescriptions receive the originally prescribed drug for 12%, and
11% were not dispensed
The rate of prescriptions actually switched was 2.5 per 1000 third-party prescriptions dispensed Schauffler et al73 1201 insured Telephone survey 5.1% of PPO members, 5.2% of IPA/network HMO
Californians members, and 2.4% of staff/group HMO members were “forced to change medications” by their health plans in the past year
Nystrom et al72 767 physicians and Mail survey 3% of prescriptions written by physicians and 0.75% 380 community of prescriptions dispensed by pharmacists were pharmacists in switched to a product chemically different from the Virginia one originally prescribed
Pyles et al71 2029 households Telephone survey Only 3.8% of respondents had been asked to accept in Virginia a drug switch in the past year; of those asked, 70%
accepted the switch, 11% paid for the originally prescribed drug out of pocket, 5% received no medication, and 12% obtained approval from the insurer to get the originally prescribed drug
The small number of research studies limits the study in another way. There is considerable vari-ability among studies in the way drug preference programs were implemented. For example, studies of formularies included 1 study of the deletion of a single product from the formulary, 2 studies in which several products were deleted from the mulary, and 4 studies in which most or all of the for-mulary was closed. Because of the substantial differences in the way the formularies were imple-mented, it is difficult to make inferences about the effectiveness of the “typical” or “average” formulary. Because there are only a few studies in each group, it is risky to make inferences about the effectiveness of different ways of implementing formularies.
The limited evidence for the effectiveness of drug preference programs is not conclusive proof that they are ineffective. The literature indicates that some programs have been very successful at influ-encing prescribing and dispensing. Undoubtedly other programs have been successful, but have not been evaluated and reported in the literature.
Although the existing research is not adequate to support firm conclusions about the effectiveness of drug preference programs, it is sufficient to con-clude that they are used sparingly in most drug ben-efit plans. I could find no published research on this topic; however, a number of sources have suggested that the more restrictive drug preference programs are not widely used because plan sponsors are reluctant to burden and inconvenience plan benefi-ciaries.74-78Employers seem especially reluctant to
use these programs in low-unemployment labor markets.76 It will be interesting, and a test of this
hypothesis, to see whether use of more restricted programs increases as unemployment increases.
A related possibility is that MCOs do not imple-ment drug preference programs because of resis-tance from patients, pharmacists, and physicians. Drug preference programs typically are associated with changes in prescriptions after the prescription has been written. This results in extra work for pharmacists and physicians and in inconvenience for patients. As a result of patient and provider dis-satisfaction, a number of states and the federal gov-ernment have introduced legislation to limit or ban the use of drug preference programs.79-85 A recent
study indicates that MCOs may not use capitation more frequently because of provider resistance.86A
similar type of resistance could limit the use of drug preference programs.
It also is possible that MCOs have tested drug preference programs and found that they were
inef-fective. However, the managed pharmacy litera-ture87,88and the major PBMs89,90,91continue to stress
the fundamental importance of drug formularies and related activities in controlling drug use. It is unlike-ly that they would do so if they knew that these pro-grams did not work.
FUTURE RESEARCH
This review has raised a number of issues for future research. The need for more research on the effectiveness of drug preference programs and the reasons that MCOs do not use them more frequent-ly already have been mentioned.
In addition, this review found that increased use of drug preference programs might lead to decreased adherence to drug therapy or to increased use of other healthcare services. This is an important area for future research. Policy makers and payers need to know whether, and to what extent, programs designed to control drug costs result in poorer patient health and increased nondrug costs.
Finally, little research has examined consumer preferences for drug preference programs. Because consumer acceptance may be a key to the success of drug preference programs, more needs to be known about their preferences.
CONCLUSIONS
The employers and health plans that pay for pre-scription drugs depend on MCOs to control pharma-ceutical costs. One of the primary ways that MCOs have attempted to do so has been through influenc-ing physicians’ prescribinfluenc-ing and pharmacists’ dis-pensing decisions using formularies, therapeutic interchange, and prior approval. A review of the lit-erature indicates that these tools can control costs when they are implemented, but that they are used infrequently. This suggests that most MCOs, as they currently operate, exert little control over prescrib-ing and dispensprescrib-ing decisions and, consequently, over pharmaceutical costs.
The problem is aggravated by several factors. First, the demand for prescription drugs is increas-ing dramatically. This is due to the agincreas-ing population, improved diagnostics that result in earlier detection and treatment of diseases,92,93,94and new drugs that
either treat diseases formerly untreatable with phar-maceuticals or that have milder side effects.92,93,94
drugs are substantially more expensive than those they replace.89,94-96 Even when the new drugs are
more effective or have milder side effects, the net result is an increase in the costs of pharmaceuticals. Finally, pharmaceutical manufacturers make substantial efforts to influence prescribing and dis-pensing decisions. Pharmaceutical companies spent $15.7 billion on promotional activities in 2000.97In
recent years, pharmaceutical companies have begun advertising directly to consumers through television, newspapers, and magazines. Spending on this method of promotion has grown from $0.8 billion in 1996 to $2.5 billion in 2000.97,98 Unless
MCOs can counteract these trends, there is little likelihood that they can restrain rising spending on pharmaceuticals.
One obvious change that MCOs could make is to expand the use of more restrictive drug preference programs such as closed formularies and mandatory therapeutic interchange programs. The most fre-quently cited reason that MCOs do not use these programs more frequently is payers’ reluctance to inconvenience consumers. If this is true, then use of more restrictive programs may increase as rising drug costs put increasing pressure on employers and government payers. The growth in the use of more restrictive programs over the past decade provides some evidence that this is already happening.
MCOs also might better control costs through developing and implementing other methods of influencing prescribing and dispensing. One promis-ing method is the use of tiered copayments. Over the last few years, the use of this tool has grown
dra-matically.23 Tiered copayment programs are
designed to allow consumers to use and be reim-bursed for any drug product they choose, but to pro-vide financial incentives for them to choose lower cost products. These programs appear to offer sub-stantial promise for controlling costs by influencing drug choice, but have yet to be adequately studied. Whether through more aggressive implementa-tion of drug preference programs or through use of new programs like tiered copayments, MCOs must change the way they operate if they are to success-fully control drug costs.
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