The Value of Medications and Managed Pharmaceutical Care Steven G. Avey Executive Director, FMCP Updated June 2003

Out-of-pocket Drug Spend Drop % 66% 48% 25% Source: HCFA

Health Care Costs for 2002

 Pharmaceutical expenditures continue to rise  Prescription medications are a valuable investment  Managed pharmaceutical care maximizes the value of the investment  Pharmaceutical expenditures continue to rise  Prescription medications are a valuable investment  Managed pharmaceutical care maximizes the value of the investment The Facts

Healthcare Expenditures

Pharmacy Spend Rising Annual Percent (%) Change Source: HCFA/Henry J. Kaiser Foundation Rx Data – American Institutes for Research analysis of Scott-Levin data 18.8%

Source: National Institute for Healthcare Management, 2001 New Medications 5.55% New Medications 5.55% Increased Utilization 5.85% Increased Utilization 5.85% Price Inflation 3.6% Price Inflation 3.6% Increase in Pharmacy Spending

Price Inflation Price Inflation CPI Rx Costs Source: U.S. Dept. of Labor, Bureau of Labor Statistics

New Drug Approvals New Medications New Medications

 Enhanced technology -More effective -Fewer side effects -Enhanced dosage forms & schedules  New Treatments -Cancer -HIV -Multiple Sclerosis -Alzheimer's Disease  Enhanced technology -More effective -Fewer side effects -Enhanced dosage forms & schedules  New Treatments -Cancer -HIV -Multiple Sclerosis -Alzheimer's Disease New Medication Advantages New Medications New Medications

New Medication Advantages Competition  Multiple products within therapeutic classes moderating cost HMG CO-A for cholesterol HMG CO-A for cholesterol SSRI for depression SSRI for depression Triptans for migraine headaches Triptans for migraine headaches PPIs for ulcers and GERD PPIs for ulcers and GERDCompetition  Multiple products within therapeutic classes moderating cost HMG CO-A for cholesterol HMG CO-A for cholesterol SSRI for depression SSRI for depression Triptans for migraine headaches Triptans for migraine headaches PPIs for ulcers and GERD PPIs for ulcers and GERD New Medications New Medications

Ulcer Arthritis Mental Health Women’s Health AIDS Cancer Alzheimer’s Proton Pump Inhibitors anti-TNF agents SSRIs, Atypical Anti-Psychotics Osteoporosis Protease Inhibitors/cocktail Hodgkin's/Leukemia/Breast Cancer Cholinesterase Inhibitors New Medications New Medications New Medications

Number of Prescriptions Dispensed in the U.S. 4.0B* 3.0B 2.7B 2.6B 2.0B Source: National Association of Drug Stores, Inc., “Industry Facts,” : 1999 Retail Rx Sales Projected to Rise 18%, Surpass $121B on Volume of Nearly 3 Billion Prescriptions. Aug. 29, *projection More Users - More Prescriptions Drug Utilization

 Employers Pay / Managed Care’s influence - Prescriptions now affordable for millions - Focus on prevention - Increased focus on “evidence-based medicine”  More patients using drugs - Aging population - Longer survival rates Why The Utilization Increase? Drug Utilization

All Ages Average Number of Prescriptions 2002 Copyright 2000   AdvancePCS., Schneider Institute for Health Policy Utilization Increases With Age Drug Utilization

The Numbers Grow Steadily Thousands U.S. Bureau of the Census, 1996, Age Power

 Pharmaceutical expenditures are rising  Prescription medications are a valuable investment  Managed pharmaceutical care maximizes the value of the investment  Pharmaceutical expenditures are rising  Prescription medications are a valuable investment  Managed pharmaceutical care maximizes the value of the investment The Facts

The Health Care Value Equation VALUE Cost Outcome =

Value To Stakeholders Value Physicians Patients Employers Health Plans

Employers pay both Direct and Indirect Expenses Medications Hospitalization ER Visits Physicians Absenteeism Productivity Employee Retention Disability Direct Expenses Indirect Expenses

The Value of Pharmaceuticals: Case Studies

Asthma Medication Cardiac Medication Ulcer Medication Antibiotics Percent Drop in Age-Adjusted Death Rate, Source: National Center for Health Statistics, 1998 Pharmaceuticals Reduce Death Rates

Deaths from Polio per 100,000 Source: U.S. National Center for Health Statistics, Polio Vaccine Pharmaceuticals Reduce Death Rates

New Drug Therapies Can Reduce Overall Health Care Costs % of total $ Cost of depression as a percent of total health care cost Case Study: Bank One Depression and SSRI’s Pharmaceutical Research and Manufacturers of America “The Value of Pharmaceuticals” November 1998.

New Drug Therapies Can Reduce Overall Health Care Costs HIV / AIDS Treatment with Protease Inhibitors Mitchell, JM, and Anderson, K., Effects of Case Management and New Drugs on Medicaid AIDS Spending, Health Affairs 2002,

For every $1 spent on ACE inhibitors, there was a decrease of over $6 on hospital costs for patients with documented CHF 3-Year Drug Therapy Hospital Costs Avoided Source: The SOLVD Investigators, New England Journal of Medicine, 325(5): , 1991; Walsh America/PDS. Pharmaceuticals Can Reduce Overall Health Care Costs

-50% -40% -30% -20% -10% 0% 10% 20% 30% Asthma Medicines Emergency Room Virginia Health Outcomes Project (VHOP) For every $3 spent on drugs - $17 saved Pharmaceuticals Reduce ER Costs The Williamsburg Institute of Virginia Commonwealth University and NPC The Virginia Health Outcome Project- A Demonstration Project, 1997.

DepressionAnxietyMigraineHypertension Hours Worked Over 2 Week Period Pre-TreatmentPost-Treatment Source: Berndt, E., “Illness and Productivity: Objective Workplace Evidence,” MIT Working Paper, May 1997 Pharmaceuticals Help People Remain At Work...

Source: Berndt, E., “Illness and Productivity: Objective Workplace Evidence,” MIT Working Paper, May ,200 1,600 2,000 Depression Migraine Claims Processed Over 2 Week Period Pre-TreatmentPost-Treatment Pharmaceuticals Improve Productivity

Pharmaceuticals Decrease Absenteeism Vaccination For Chicken Pox Reduces Loss-of-Work Costs Medical Costs Loss-of-work Costs Source: US News and World Report, March 27, 1995; based on data published in the Journal of the American Medical Association $98 $48 $50 $439

Statistics – For every 100 employees in the workplace… –60 are sedentary –25 smoke –20 are obese –27 have active CVD –10 have diabetes –50 have high cholesterol –24 have  BP –50 are distressed or depressed Drug therapy is a critical component for treating these problems and is a major focus of new drug research Source: National Center for Health Promotion

 Pharmaceutical expenditures are rising  Prescription medications are a valuable investment  Managed pharmaceutical care maximizes the value of the investment  Pharmaceutical expenditures are rising  Prescription medications are a valuable investment  Managed pharmaceutical care maximizes the value of the investment The Facts

Right Drug Right Patient Right Time Managed Pharmaceutical Care

Medication Prescribing Physician Pharmacist Patient

Goal of Clinical Programs Quality Care Just Right Overuse Underuse Utilization

Managed Pharmaceutical Care Drug Therapy  Technology to reduce ADEs  Compliance to therapy  Generic drugs where appropriate  Step therapy guidelines  Formularies based on value  Appropriate use management  Outcomes research

Managed Pharmaceutical Care Benefit Design  Three tier co-pay structure  Prior authorization  Optional generics  Mail order options

Pharmacist  Prevent drug interactions  Duplicate therapy  Over-under dosing  Continuing education Physician  Benchmark prescribing patterns  Continuing education  30,000 clinical articles/year  Quality Improvement measures Managed Pharmaceutical Care

Managed Care Pharmacy Improve Patient Outcomes and Bring Added Value

Managed Care Pharmacy Improves Overall Health Prescription Solutions Beta Blocker Post MI Intervention

Managing Care Saves Lives Beta-blocker Usage Nonteaching Minor teaching Major teaching IHC Allison JJ et al. Relationship of hospital teaching with quality of care and mortality for Medicare patients with acute MI. JAMA 2000;284(10): (Sep 13).

60% -62% -52% -80% -60% -40% -20% 0% 20% 40% 60% 80% Cost of CHF Medicines CHF Hospital Costs CHF Outpatient Costs Managed Care Pharmacy Reduces Health Care Costs & Improves Outcomes Source: Raymond James and Associates Report, December 30, 1999

Managed Care Pharmacy Reduces Health Care Costs & Improves Outcomes AdvancePCS Asthma Management Program involved education, follow-up, treatment reviews, and use of national guidelines of care Decreases resulted in a savings of: $150/enrollee or > $270,000 ER Visits Hospital Admits Hospital Days Doctor Visits 17% 14% 21% 22%

Managed Care Pharmacy Retrospective Analysis of Databases Express Script’s Retrospective Study Treatment of Acute Uncomplicated Sinusitis with 1 st and 2 nd line Antibiotics Piccirillo, et.al.”Acute sinusitis- treatment with 1 st and 2 nd line antibiotics” JAMA (15)

Source: American Diabetes Association Managing Diseases (e.g. Diabetes)

Diabetes – The Costs 6-8 million people are not diagnosed. Diabetes pts risk debilitating complications such as blindness, kidney disease and amputations. Heart disease, stroke and high blood pressure are 2-4 times more common among persons with diabetes. Health care and lost productivity costs $98 billion annually.

Improves quality of life: Higher retention of employment Greater productivity Less absenteeism Fewer days of restricted activity Cost effectiveness: 26% reduction of in-patient days 10% reduction in length of hospital stay 25% reduction in number of specialty visits Sources: National Pharmaceutical Council, Health Care and Productivity 2000; Wagner, Edward H., et al, “Effects of Improved Glycemic Control on Health Care Costs and utilization,” JAMA, January 10, 2001, Vol. 285, No.2. Controlling Blood Glucose Levels in Diabetics is Cost-Effective

Pharmacoeconomics : Why Use It? $$ Effectiveness _ Just say no! Just do it! Now what??

Evaluation of New Medication Slide One Obenchain and Johnstone, Drug Information Journal 1999;33: $2,737 $489 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Drug A Drug B Drug Costs Represent One Year of Therapy

Evaluation of New Medication Slide Two Obenchain and Johnstone, Drug Information Journal 1999;33: $2,737 ($1,286) ($11,753) ($10,301) ($14,000) ($12,000) ($10,000) ($8,000) ($6,000) ($4,000) ($2,000) $0 $2,000 $4,000 DrugOutpatientInpatient $10,301 total medical savings per patient Annual Cost Difference by Category

Quality of Life Productivity Outcomes Survival Disability Health Care Costs Pharmaceuticals – A Valuable Investment