1. Status Report on Development of a Medicaid Preferred Drug List Program Presentation to: PDL/PA Implementation Advisory Group Cynthia B. Jones, Chief Deputy Director Department of Medical Assistance Services September 11, 2003 Richmond, Virginia

2. 2 Presentation Outline Background Actions Taken Thus Far Next Steps

3. 3 Medicaid Coverage of Prescription Drugs n Prescription drug coverage is an optional benefit that all state Medicaid programs provide. n In Virginia, this coverage is provided through fee-for-service and managed care programs. n The focus of this PDL program is on the 220,000 clients that are in the fee-for-service program. These clients live in areas of the State that currently do not have a managed care organization available or who are excluded from managed care (such as persons in nursing facilities, community based waiver programs, and foster care). n The 300,000 Medicaid recipients in one of the five managed care programs are already subject to a preferred drug list or similar program.

4. 4 Fee-For-Service (FFS) Pharmacy Costs Have Increased 89% Since 1997 Annual FFS Pharmacy Costs (Millions) Source: Statistical Record of the Virginia Medicaid Program Net of drug rebates

5. 5 FFS Pharmacy Costs As A Percentage of Total Medical Costs Is Increasing Source: Statistical Record of the Virginia Medicaid Program FFS Pharmacy Costs As A Percentage of Total Medical Costs

6. 6 2003 Appropriations Act: Preferred Drug List (PDL) Program n Item 325(ZZ.1) of the 2003 Appropriations Act directs DMAS to: –Implement PDL program no later than Jan. 1, 2004 –Seek input from physicians, pharmacists, pharmaceutical manufacturers, patient advocates, and others –Form a Pharmacy & Therapeutics (P&T) Committee –Ensure drugs on the PDL are safe and clinically effective before considering cost effectiveness –Include several key provisions: 72-hour emergency supply; 24-hour prior authorization process; expedited review of denials; and consumer/provider training and education –Report to General Assembly on main design components n Program must generate savings of $9 million GF in FY 2004, and $18 million GF in subsequent fiscal years.

7. 7 2003 Appropriations Act: P&T Committee Responsibilities n The P&T Committee shall recommend to the Department: –therapeutic classes of drugs to be subject to the PDL and prior authorization requirements –specific drugs within each class to be included on the PDL –appropriate exclusions for medications, including atypical anti-psychotics, used for the treatment of serious mental illnesses such as bi-polar disorders, schizophrenia, and depression –appropriate exclusions for medications used for the treatment of brain disorders, cancer, and HIV-related conditions –other appropriate exclusions and “grandfather” clauses

8. 8 Additional Responsibilities of P&T Committee (cont’d) n Conduct clinical reviews of preferred and non-preferred drugs as needed to maintain the PDL n Conduct clinical reviews of new drugs n Provide advice to DMAS and Contractor on clinical issues regarding all aspects of the PDL program, including the prior authorization process for non-preferred drugs n Provide clinical advice/input to DMAS and Contractor on prior authorization of “more than 9 unique prescriptions”

9. 9 DMAS’ Responsibilities n Ensure PDL program conforms to all statutory/regulatory requirements n Support P&T Committee Members and activities n Procure services of a PDL Contractor –monitor Contractor and ensure performance meets required quality and service standards n Review and approve all Contractor-written communications to clients, providers, and others prior to release n Provide Contractor with all necessary and current client eligibility and utilization data n Coordinate Contractor’s support of P&T Committee –ensure Contractor is responsive to P&T Committee

10. 10 DMAS’ Responsibilities (cont’d) n Interpret policies and make final decisions regarding all aspects of program –Appropriations Act requires that DMAS establish a process for acting on the recommendations of the P&T Committee and documenting any decisions that deviate from recommendations of the Committee n Review and approve all supplemental rebate agreements n Handle all media inquiries

11. 11 PDL Contractor Responsibilities n Provide information and staff support to the P&T Committee n Establish and maintain the PDL based on clinical recommendations of the P&T Committee –cost effectiveness is to be considered only after drug is determined to be safe and clinically effective –exclude from the PDL and prior authorization program for non-preferred drugs those classes of drugs previously excluded by DMAS n Manage the reference pricing process n Ensure all program components required by the Appropriations Act are implemented n Negotiate and administer state supplemental rebates

12. 12 PDL Contractor Responsibilities (cont’d) n Administer the PDL prior authorization program for non- preferred drugs and the prior authorization program for “more than nine unique prescriptions” –administer a reconsideration and appeals process n Provide and maintain Call Center 24 hours/day; 7 days/week n Provide PDL and prior authorization program education services for clients and providers n Ensure confidentiality of client/provider information

13. 13 PDL Development Process All Therapeutic Classes of Drugs P&T Committee Recommends Drug Classes To Be Subject to PDL & P.A. P&T Committee Recommends Drugs Within Each Class That Are Clinically Effective and Safe Preferred Drugs Drugs at or below cost of most cost-effective drug Non-Preferred Drugs Drugs above cost of most cost-effective drug require P.A.

14. 14 Overview of PDL With Reference Pricing and Supplemental Rebates Source: DMAS Staff Illustration $27 $22 $11 $29 $70 $38 $56 Non-Participating Manuf. Drug Available through P.A. Original Price Most Cost Effective Drug

15. 15 Presentation Outline Background Actions Taken Thus Far Next Steps

16. 16 Actions Taken Thus Far: P & T Committee Activities n The Secretary of Health and Human Resources solicited nominations from provider associations for physicians and pharmacists to serve on the P&T Committee n The Secretary appointed eight physicians and four pharmacists to the P&T Committee n The P&T Committee has met four times: June 18, July 30 th, August 12 th, and September 3 rd. Additional monthly meetings will be scheduled throughout the year.

17. 17 Members of P&T Committee Member Background n Randy Axelrod (MD) (Chairman)Anthem Chief Medical Officer n Roy Beveridge (MD)Oncologist n Avtar Dhillon (MD)Psychiatrist (CSB) n James Reinhard (MD)Psychiatrist (DMHMRSAS) n Arthur Garson, Jr (MD)Dean, UVA Med. School n Mariann Johnson (MD)Family Practice n Eleanor (Sue) Cantrell (MD)Local Health District Director n Christine Tully (MD)Geriatrician, VCU/MCV n Mark Szalwinski (Pharmacist)Sentara Health Care (Vice Chairman) n Gill Abernathy (Pharmacist) INOVA Health System n Mark Oley (Pharmacist) Westwood Pharmacy n Renita Warren (Pharmacist) Edloe’s Pharmacies

18. 18 Actions Taken Thus Far : P & T Committee Activities n The initial P&T meetings will determine which drugs will be part of the PDL program during the January 2004 implementation. n Future meetings will determine the drugs that will be part of the PDL program implemented in April and July of 2004. n The goal of this “phased-in” transition process is to minimize the impact of the program on clients and providers.

19. 19 Initial List of Key Classes of Drugs to be Excluded from the PDL Program Therapeutic Class Description n Insulins n Cholinesterase Inhibitors n Platelet Aggregation Inhibitors n Antivirals for HIV n Cancer Chemo. Agents n Anti-convulsants n Immunosupressants n Antiemetics n Anti-psychotics, Atypical and Typicals Used in the Treatment of n Diabetes n Alzheimers n Clotting Disorders n HIV/AIDS n Cancer n Seizure Disorders, Mental Health n Transplant rejections, Arthritis n Nausea in cancer patients, Aging n Serious Mental Illness

20. 20 Actions Taken Thus Far: Therapeutic Classes Reviewed July 30 th Meeting Proton Pump Inhibitors Histamine Type-2 Receptor Antagonists (H2RA) Antihistamines Nasal Steroids Decisions Made All four classes were appropriate for inclusion in a PDL program. All drugs in these classes are considered clinically effective August 12 th Meeting Selective COX-2 NSAID Inhibitors HMG-CoA Reductase Inhibitors Sedatives Hypnotics Beta Adrenergics Inhaled Cortiocosteroids All five classes were appropriate for inclusion in a PDL program. All drugs in these classes are considered clinically effective September 3 rd Meeting Angiotensin Converting Enzyme Inhibtors (ACEI) Angiotensin II Receptor Antagonists (ARB) Calcium Channel Blockers Beta Adrenegic Block Agents (Beta Blockers) All four classes were appropriate for inclusion in a PDL program. All drugs in these classes are considered clinically effective

21. 21 Actions Taken Thus Far: PDL Contractor n May 1, 2003: Issued a Request for Proposals to select a PDL contract administrator n May 15 th: Mandatory Pre-proposal conference held n June 5 th : Deadline for submission of proposal n July 1 st : Published Notice of Intent to Award contract n July 18 th : DMAS awarded contract to First Health n DMAS and First Health are working together to define and develop operational aspects of the program. FHSC is playing a secondary role to the P&T Committee.

22. 22 Actions Taken Thus Far: Enrollment Groups to be Excluded from PDL Process n Third Party Liability enrollees n Hospice enrollees n PACE and Pre-PACE enrollees n Qualified Medicare Beneficiaries n Children who are the responsibility of Juvenile Justice n Refugees that are not covered in a Medicaid group n FAMIS enrollees

23. 23 Actions Taken Thus Far: Enrollment Groups to be Included in the PDL Process n All other Fee for Service enrollees who receive pharmacy services will be subject to the new provisions, including: –Medallion –Aged, Blind, and Disabled –Nursing facility residents –Home and Community Based Care Waivers –Dual Eligibles –Client Medical Management –FAMIS Plus Children (formerly called Medicaid) –Those on Spenddown –Foster Care Children –Family Planning Waiver –Breast and Cervical Cancer Groups

24. 24 Actions Taken Thus Far: Public Comment n DMAS has met with over 30 different groups of stakeholders to solicit input into the design of the PDL program; meetings are continuing n Established a pharmacy web page at DMAS’ internet site (www.dmas.state.va.us) and e-mail address for PDL comments/input (pdlinput@dmas.state.va.us)pdlinput@dmas.state.va.us n At each P&T Committee meeting, time is allotted for presentations on the clinical aspects of the therapeutic classes under review

25. 25 Actions Taken Thus Far: Status Reports to the General Assembly n Submitted first report on April 1, 2003, which provided a general overview of the approach to the PDL program. n Submitted memoranda to Chairmen of the Appropriations Committees and the Joint Commission on Health Care on June 16 th and September 1 st n Made several presentations to Joint Commission on Health Care and the Health and Human Resources Subcommittees of both House Appropriations and Senate Finance

26. 26 Actions Taken Thus Far: PDL/PA Implementation Advisory Group n Established a PDL/PA Implementation Advisory Group, which includes representatives of pharmaceutical manufacturers, providers, and advocates n Purpose: To provide advice to the agency regarding the implementation of PDL program, including the provider and consumer education and the prior authorization procedures for both the PDL and for “more than nine unique prescriptions” n First meeting is scheduled for September 11, 2003; meeting will be held in the Board Room

27. 27 Presentation Outline Background Actions Taken Thus Far Next Steps

28. 28 Next Steps: PDL/PA Implementation Advisory Group n Next Meetings: –Week of October 20 th –Week of December 10 th –Week of January 26th

29. 29 Next Steps n Schedule the remaining P&T Committee meetings for this year n Begin supplemental rebate negotiations with manufacturers n Develop emergency regulations and submit State Plan amendment to Centers for Medicare & Medicaid Services n Provide status reports to the General Assembly at key points in development process

30. 30 Next Steps (continued) n Incorporate other pharmacy-related prior authorization requirements –prior authorization for more than 9 unique prescriptions in 180 days (non-institutionalized patients) or 30 days (institutionalized patients) n Modify Medicaid Management Information System (MMIS) to process PDL and prior authorization-related transactions

31. 31 Next Steps (continued) n Develop provider/consumer education and training program –PDL contractor will have major responsibilities –PDL/PA Implementation Advisory Group will play a key role