1. Evaluating the Impact of Medicare Part D on the Virginia Preferred Drug List Program Justin Lester, PharmD, MBA First Health Services Corporation August 31, 2005

2. Dual Eligible – Individual entitled to Medicare and also eligible for some level of Medicaid benefits 7.5 million (13.6%) of Medicaid’s 55 million recipients nationwide are “duals” (FFY 2003 data) This population accounts for approximately 51% of Medicaid prescription drug expenditures and 40% of total Medicaid costs –Source: Dual Eligibles: Medicaid Enrollment and Spending for Medicare Beneficiaries in 2003. Kaiser Commission on Medicaid and the Uninsured. July 2005. Impact on Recipients

3. Virginia Medicaid: –Dual eligibles are estimated to represent approximately 18% of the state’s total Medicaid population –Within the fee-for-service population dual eligibles are estimated to account for 57% of all drug expenditures

4. Impact on Utilization PDL classes treating disease states dominated by the elderly will see a decline in drug utilization –Cardiovascular Disease –Diabetes –Osteoporosis –Glaucoma –COPD These therapeutic categories are responsible for a significant portion of the state’s FFS drug utilization

5. Impact on Utilization Disease states effecting a younger population will assume a larger proportion of Medicaid drug spend –CNS medications Antidepressants Antipsychotics CNS stimulants (ADHD) Remaining PDL classes will see much of their reduction in utilization, varying widely by therapeutic category

6. PDL Strategy Encourage addition of new PDL classes for comprehensiveness and to continue to add year- over-year program savings  Topical Immunomodulators  Electrolyte Depletors  Urinary Tract Antispasmodics  Lipotropics Non-Statins: Fibric Acid  Lipotropics Non-Statins: Niacin Derivatives  Phosphodiesterase 5 Inhibitors for Erectile Dysfunction  Phosphodiesterase 5 Inhibitor for Pulmonary Arterial Hypertension

7. PDL Strategy Encourage addition of PDL classes that will retain a high proportion of utilization in Medicaid and/or will have significant future cost implications –Specialty pharmacy products Multiple Sclerosis Immunomodulators

8. Conclusion Virginia’s fee-for-service Medicaid program will lose a significant percentage of its drug spend to Medicare effective January 1, 2006 Classes predominantly used in the elderly and disabled will see the largest reduction in utilization FHSC will continue to assist the state in maximizing PDL savings through the addition of new drug classes coupled with the continued optimization of the current program