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The Medicare Part D Prescription Drug Benefit

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1 The Medicare Part D Prescription Drug Benefit
Understanding the Formulary Requirements and Related Implications Welcome and thank you for allowing me to discuss the formulary implications related to the Part D implementation. My name is Mike Sharp, I am a pharmacy consultant for the Indiana Medicaid program. I am suspecting that a great deal of this presentation will be review for many of you. Given this is the case, I will move the through the presentation fairly quickly in lieu of the group responding to the questions you may have. Michael Sharp, R.Ph, Pharmacy Consultant Office of Medicaid Policy and Planning, State of Indiana

2 Areas of Focus Basic benefit principles, fundamental formulary requirements and CMS review processes Exceptions/Appeals overview Formulary implications for dual-eligibles and the Indiana Medicaid approach Implementation considerations, timeline and recommended resources Today, I will focus on a brief overview of the following areas- Go to slide

3 Medicare Coverages Part A
Hospital insurance for inpatient stays, some skilled nursing facility care, hospice care and home health care Part B Medical insurance for physician services, outpatient hospital care, durable medical equipment, some medical supplies and selected drugs Part C Medicare Advantage (MA-PD) for benefits through private health plans – old Medicare+Choice Part D Prescription drug benefit for persons eligible for Part A or enrolled in Part B We are all familiar we Part A and Part B. Coverage does not change at all with respect to these coverages. There has been a great deal of discussion with respect to potential overlap between Part B and D. Part B drugs continue to remain part B drugs until the benefits are changed through legislation. Prescription drug coverage will be provided by plans in partipating in Part C and Part D. The difference between these is that a Part D PDP is a fee-for service model which only manages a members prescription drug coverage, whereas MA-PDs provide complete medical coverage for the patient including prescription drug coverage. Part C plans may have specific benefit packages available for those who choose not to participate in the prescription program.

4 Medicare Prescription Drug Benefit, 2006 and Beyond
Beginning in 2006, beneficiaries have choice of:   Traditional Medicare, with access to private drug-only plans (PDPs) Medicare Advantage (MA-PD) plans for Medicare benefits and Rx drugs New plans provide “standard” prescription drug benefit or its “actuarial equivalent” Plans have some flexibility to determine which drugs are covered and cost-sharing requirements, subject to certain constraints Premium and cost-sharing subsidies for low-income beneficiaries with incomes up to 150% poverty and modest assets Medicaid will no longer pay for Medicare D covered drugs after December 31, 2005 First of all, this benefit is a massive undertaking. A benefit is being made available to a population that has either had a different benefit in place or no drug benefit at all. Here are a few basics that I felt were important to share. I personally find that I learn something new every day and guidance clarifications continue to be released by CMS as questions arise. Go to 1st two bullets on slide Grace and the others will presenting further information on beneficiary subsidies so I will not discuss here. For those members who are eligible for Medicare and Medicaid, commonly referred to as dual eligibles, Medicaid will no longer be paying for Medicare Part D covered drugs. I will discuss this further later in the presentation.

5 Medicare Prescription Drug Plans
Must offer basic drug benefit Standard benefit May offer supplemental benefits Alternative Benefit Enhanced benefit Can be flexible in benefit design May look different than standard benefit May have different co-pay or co-insurance Cannot change actuarial equivalence Medicare prescription drug plans, or PDPs, must offer a basic drug coverage that we call a standard benefit. They may choose to offer supplemental benefits through enhanced alternative coverage for an additional premium. The PDPs have flexibility in how they design their prescription drug coverage. For example, they can establish a formulary to designate specific drugs that will be available within each class of therapeutic medications, or they can have cost-sharing structures other than the standard benefit structure. The coverage variances across the various PDP’s will obviously present additional complexity that will require additional comprehension.

6 Part D Sponsors – Risk-Bearing Entities
Prescription Drug Plans (PDPs) Pharmacy Benefit Managers Private Insurance Companies Medicare Advantage-Prescription Drug (MA-PDs) Must offer at least 1 option for Rx coverage May offer plans with no drug coverage for beneficiaries who decline Part D coverage May offer Special Needs Plans, focusing on Duals & selected diagnoses I want to make it clear that the Medicare Part D benefit is provided by risk bearing plans. The benefit is, by all means, an insurance vehicle. These plans have no intent on losing money. There is a high level of risk for these plans, depending on the population characteristics of the members that voluntarily enroll or auto-enrolled in the plans. Go to slide for brief overview

7 Formulary Coverage Fundamentals
CMS says “clinically appropriate medications, at lowest possible cost” Formularies must not discriminate against: Individuals with HIV/AIDS, mental health and other cognitive disorders The Dual eligibles CMS utilizes the USP formulary classification model as the minimum benchmark for formulary appropriateness USP model consists of 146 therapeutic classifications and related pharmacologic categories Plans must accommodate all medically necessary medications at all levels of care Slide first, The USP formulary classification model is comprehensive and serves as the minimum threshold for plan formularies. (I have provided documentation for your review on the USP model-these were handed out earlier) The basic premise here is that plans may not discriminate for any reason whatsoever • Guaranteed issue – Prescription drug plans and the Medicare Advantage plans generally have to accept all eligible enrollees who reside in their service area, regardless of age or health status. • Uniform benefits and premiums –Plans must provide all enrollees with the same benefits and charge a uniform premium.

8 Medicare Prescription Covered Drugs
Prescription drugs, biologicals and insulin Medical supplies associated with injection of insulin (syringes/swabs/etc) Cases where a drug is not FDA approved for an indication but it has clinical literature to support its use Vaccines not covered by Part B Viagra, Levitra and Cialis Brand name and generic drugs will be included in each formulary* *Less for generics or preferred Rx, more for brands. Multi-source brand name products can be excluded. A covered drug would include prescription drugs, biological products, and RX/OTC insulin. Medical supplies associated with the injection of insulin, such as syringes, needles, alcohol swabs, and gauze, are covered. (Used needle containers are not covered insulin supplies.) A Medicare-covered prescription drug must be available only by prescription, approved by the Food and Drug Administration (FDA), used and sold in the United States, and used for a medically accepted indication. The indications does not have to be the approved, labeled indication IF the indication it is being used for is medically accepted. Go to slide for Vaccines and a special reference to the erectile dysfunction agents which are somewhat controversial in terms of coverage policy. There will be brand name and generic drugs on each formulary, however, multi-source drugs with equivalentally rated generics do not have to be included on the formulary. Undoubtedly, plans will place emphasis on high utilization of generic drug products. Not all “covered drugs” eligible for Medicare D coverage will be covered by the PDP or MA-PD plan. I prefer to consider medications in three categories. Medicare D covered drugs are either Formulary drugs or non-formulary drugs and those that remain after that are considered Medicare D excluded drugs. I will address the excluded drugs shortly.

9 Formulary Requirements
Plan formulary must be developed by a Pharmacy and Therapeutics Committee Formulary must include at least 2 drugs in each therapeutic category and pharmacologic class of covered Part D drugs and in certain categories, must contain “all or substantially all” of the following medications: Each plan will develop their formulary and are required to meet certain standards. The formularies are then submitted to CMS electronically and reviewed via a formulary management review tool. The formulary must include drugs in each therapeutic category and pharmacologic class of covered drugs per using the USP model as a baseline. (Category or class mean the same – depends on classification system used by Plan.) CMS’ expectations are that best practice formularies contain all or substantially all the drugs within the following classes: antidepressants, antipsychotics, anticonvulsants, antiretrovirals, immunosuppressants, and antineoplastics. Following common best practices, CMS will check to see that beneficiaries who are being treated with these classes of medications have uninterrupted access to all drugs in that class via formulary inclusion, utilization management tools, or exceptions processes. I will not attempt to define the term “access”. Each one of us probably have a different view of what the term actually means. Recent conversations with CMS indicate that they will allow utilization controls if a patient is “new” to a specific therapy contained within 5 of the 6 classes, with antiretrovirals being the exception. When medically necessary, beneficiaries should be permitted to continue utilizing a drug that is providing clinically beneficial outcomes. In cases where practices may deviate from the above, plans must provide justification to support their utilization control practices. Please note exceptions to 2 drugs per class rule: if one is clinically superior or only one drug available Note specific exceptions. Celexa vs Lexapro, Antidepressants Antipsychotics Anticonvulsants Antiretrovirals Antineoplastics Immunosuppressants

10 Part D Drug Exclusions Drugs for Anorexia, weight loss, or weight gain
Fertility Cosmetic purposes or hair growth Symptomatic relief of cough and colds Prescription vitamins and mineral products Except prenatal vitamins and fluoride preparations Non-prescription (OTC) drugs*, with the exception of OTC insulin Barbiturates Benzodiazepines Outpatient drugs for which the manufacturer seeks to require that associated tests or monitoring services be purchased exclusively from the manufacturer or its designee as a condition of sale *Plans may choose to pay for OTC products as an administrative cost, with the member not incurring a co-pay, these products do not count towards formulary requirements. Recall earlier that I mentioned drugs that are deemed to be excluded from the Medicare D benefit. The drugs excluded from Medicare prescription drug coverage are the same drugs that were excluded under the transitional Medicare-approved drug discount cards. These drugs are excluded by statute. These include: Go to slide Go to slide. Note Drugs used for wasting syndromes or morbid obesity may be included on the PDP formulary.

11 Part D Drug Exclusions (cont)
Part A Prescriptions – In skilled nursing homes – up to 100 day stay Related to the terminal illness for hospice patients Part B Outpatient Drugs Durable Medical Equipment Drugs (e.g., inhalation therapy, insulin w/pumps & some chemotherapeutics) Immunosuppressive Drugs Hemophilia Clotting Factors Selected Oral Anti-Cancer Drugs Selected Oral Anti-Emetic Drugs, up to 48 hrs after chemotherapy administration Erythropoietin for persons on dialysis Intravenous Immune Globulin, provided in the home To continue with Part D exclusions, we al must consider the drugs covered under Medicare Part A or Part B are not covered and should not be billed through Part D mechanisms. Go to slide…these include

12 P&T Committee: Requirements
Membership includes the following: The majority are practicing physicians and pharmacists. Various clinical specialties that reflect the needs of the plan beneficiaries. At least one practicing physician and pharmacist who are experts in the care of the disabled or elderly. CMS provides extensive guidance on the expectations surrounding the composition and activities of the P&T committee Lets step back and provide a little more background on the P & T Committee. The majority are practicing physicians and pharmacists. Various clinical specialties that reflect the needs of the plan beneficiaries. At least one practicing physician and pharmacist who are experts in the care of the disabled or elderly. CMS has chosen NOT to define what an “expert” in the care of the disabled and elderly it. At this point, it is left up to the Plans. Formulary protections – As I mentioned earlier, plan formularies must include at least two drugs from every therapeutic category and class, with only a few exceptions. They must also develop the formulary with the help of a pharmacy and therapeutic committee consisting of practicing pharmacists, physicians, and experts in geriatric and disabled care, using best practices that have worked in prescription drug coverage for seniors and beneficiaries with a disability. This committee is to use best scientific evidence on drug safety and efficacy, including side effects, to enhance quality while controlling costs.

13 Formulary Review: Rationale
Medicare Modernization Act requires CMS to review formularies and related processes to ensure: Beneficiaries have access to a broad range of medically appropriate drugs to treat all disease states, and Formulary design does not discriminate or substantially discourage enrollment of certain groups Medicare D Principle #1 – Rely on Existing Best Practices: CMS’ review will rely on widely best practices for existing drug benefits serving millions of seniors and people disabilities, to ensure appropriate access for Medicare beneficiaries. Principle #2 -- Provide Access to Medically Necessary Drugs: CMS will require plans provide access to Part D drugs determined to be medically necessary. Principle #3 -- Flexibility: CMS will allow plans to be flexible in their benefit promote real beneficiary choice while protecting beneficiaries from discrimination. Principle #4 – Administrative Efficiency: CMS will develop a streamlined process effective reviews of plan offerings within a compressed period of time.

14 Formulary Review: CMS Validations
Checks for appropriate utilization management strategies Checks for two drugs per USP category and class Checks for Key Drug Types as defined by USP Checks for the most common drugs used in the LTC population Checks “all or substantially all” requirement CMS has develop a fairly sophisticated processes for reviewing plan formularies. Plans are required to submit their formulary electronically via an NDC based format that CMS imports into a health plan management system. Utilization control mechanisms are reviewed as well as an automated formulary review by comparing the formulary file submitted to that of the USP. CMS reviews and discusses outliers with the plan prior to approving the plan initially, as well as an ongoing formulary changes. I consider this to be an added safeguard that is not currently taking place in the private sector. If you reference the USP document I provided, you will see the various USP categories and classes in addition to the Key Drug types. Looking for among other things: appropriate variety of meds non-discriminatory design appropriate tiering. Possibility of 10 tiers but expect on average.

15 Formulary Considerations
Safety and Efficacy Cost-effectiveness* In general, formulary design will be similar to that of commercial plans today, with the added benefit of CMS oversight for adherence to published guidelines. *The federal government can’t negotiate or mandate pharmacy payment rates or manufacturer rebate levels In summary, the PDP’s and MA-PDs will be relying on the same P&T committee practices that occur today. Formulary development and utilization management strategies will continously undergo a rigorous review by CMS, thus resulting in assurances that plans provide a benefit that meets the intent of the legislation. As a side note of interest. The federal government is not permitted to be involved in rate setting or rebate determinations.

16 Provision of Notice Regarding Formulary Changes
Prior to removing/changing drug from formulary the plan must: Provide 60 days notice to prescribers, network pharmacies, pharmacists and other health plans CMS will review and approve modifications For enrollees, must provide either: Direct written notice at least 60 days prior to date the change becomes effective, or At the time a refill is requested, provide a 60 day supply of drug and written notice Formularies will change from time to time. P&T committees must meet at least quarterly and review newly approved drugs within 90days. A formulary status decision must be made within 6 months after the drug has been on the US market. The Plans must provide 60 days notice to CMS, prescribers, network pharmacies, and pharmacists when formulary or tier change is likely to occur, the pharmacy will likely be authorized to fill a 60 day supply of medication for the patient. Traditionally, notifications of this nature have largely been ignored, and I would suspect this will continue, particularly if the Indiana/Kentucky regions ends up with a multitude of available plans.

17 Exception Requests Enrollees or their authorized representative may request an exception when: A non-formulary drug is prescribed and is medically necessary The cost-sharing status of a drug an enrollee is using changes A drug covered under a more expensive cost-sharing tier is prescribed because the drug covered under the less expensive cost-sharing tier is medically inappropriate The enrollee is using a drug that has been removed from the formulary Ensures access to medically necessary Medicare D covered prescription drugs This slides depicts situations where CMS has determined that an exception request process must be available. It is important, as a health care provider, to be aware of the situations that warrant the pursuance of an exception request. These are also referred to as initial coverage determinations. Here are some specific situations that would warrant the pursuance of an exception request. Go to slide The exception process is a type of coverage determination that is unique to the drug benefit, was created to ensure enrollees receive the drugs they need. An exception process allows an enrollee to request, under certain conditions, a non-formulary drug to be covered, or a non-preferred drug to be covered under the terms applicable for a preferred drug.

18 Cost and Utilization Controls
Prior Authorization Step Therapy Quantity Limits Frequency Limits Generic Substitution Drug Utilization Review-Prospective and Retrospective Tiered formulary design As I mentioned earlier, these prescription drug plans are “at risk”. The majority of plans will be utilizing pharmacy benefit management tools that are identical to those utilized today. These include: reference slide. Some of these tools will require prescribers and pharmacists to contact the PDP to obtain prior approval prior to paying for a particular drug. At this point in time, it is not possible to determine how difficult the overrides will be able to obtain. I would speculate that the majority of plans will be extremely flexible out of the gate. Again, these processes will be very similar to those that prescribers and pharmacists must go through today in the commercial and medicaid arena.

19 Appeal Processes 1st Step: Plan Re-determination 7 days to respond
72 hours, if expedited 2nd Step: IRE Reconsideration Independent Review Entity (IRE), CMS contractor, which reviews plan redeterminations 3rd Step: Administrative Law Judge Must satisfy minimum amount requirement 4th Step – Medicare Appeals Council 5th Step – Federal District Court Given the fact that cost and utilization controls exist, it is guaranteed that PA processes will be in place, and from time to time, these PA determinations will not be acceptable. In instances where grievances, coverage determinations or appeals are necessary, new drug benefit includes rights and protections similar to those beneficiary rights and protections assured in other parts of Medicare, so all beneficiaries have access to medically necessary treatments. Plans are required to have a timely and straightforward grievance, coverage determination and appeals processes that provide plan enrollees with access to medically necessary Medicare-covered drugs. Physicians and appointed representatives, such as a family member, can help beneficiaries file a grievance or request a coverage determination or an appeal. As required in the MMA, the enrollee or an appointed representative can file an external appeal if the response to the initial exception request is not acceptable. As an initial step, enrollees may request their plan to make a coverage determination in certain circumstances, such as when their plan does not pay for a Part D drug.

20 Characteristics of Medicare Population
Nursing Home/Assisted Living Resident Under Age 65 & Disabled Dual Eligible Cognitive Impairment Rural Fair to Poor Health 1+ Functional Limitation Low-Income < 150% FPL Excludes Part A only beneficiaries This slide is very informative. It lists the various characteristics of the Medicare population that will be exposed to the new drug benefit. I want to focus on the dual eligible population here. These are folks that have both Medicare and Medicaid. There are approximately 7 million dual eligibles across the country and around 100,000 duals residing in Indiana who currently have their drug coverage provided by Medicaid. Percentage of Total Medicare Population Sources: Kaiser Family Foundation based on Medicare Current Beneficiary Survey, and Low income estimate from CBO, July 2004

21 Issues for the Duals What happens, when they …
Ignore notices regarding Rx changes Don’t know how to use their assigned plan Learn the drug Medicaid paid for isn’t covered by their new Medicare plan Have higher out of pocket costs for copays, non - covered drugs The Medicare Part D benefit is a major change for the dual eligibles. If there is a positive here, it is that they will be automatically enrolled into a PDP if they do not make a choice of one. The coverage will not be as generous as what is supplied by Medicaid today. The group here today has discussed and will discuss further the communication efforts taking place to inform and educate these recipients and the health care community. What happens when…… Refer to slide Remember the formulary classifications from earlier…..formulary, non-formulary, excluded?

22 Formularies – Transition Process
Plans have flexibility, but CMS guidance expects: 1-time transition supply for new enrollees Ambulatory 30 days Nursing Home 90 to 180 days 1-time temporary emergency supply for others For changes in level of care (nursing home, acute hospital, hospital, etc.) or during appeals The non-covered drus will present transition issues that will be extremely critical to the initial success and uptake of the benefit. CMS has issued guidance to assure that transitional and “emergency” supplies be made available to recipients of the benefit. Refer to slide for supply numbers Drug plans that want to serve Medicare beneficiaries enrolling in the new prescription drug benefit next year must meet strict standards to assure that older and disabled Americans will be able to make the transition to the new coverage smoothly. Mark B. McClellan, March 16, 2005, CMS Press Release

23 Indiana Medicaid: Specific Approach for Dual Eligibles
Indiana Medicaid will continue to cover Medicare D excluded drugs to the extent that they are covered in the Medicaid program today. Current dual population estimated at 100,000 lives. Examples: Over the counter drugs on the Indiana Medicaid formulary Agents for treating symptoms of cough/colds and prescription vitamins Barbiturates and benzodiazepines The State of Indiana will assure that the 100,000 or so IN dual eligibles continue to receive drugs that are excluded by Medicare D to the extent that the medications are currently covered in the FFS Medicaid program today. These medications include medications such as: See slide

24 Everyone Agrees: It’s Difficult to Comprehend all the Details
“You choose a prescription drug plan and pay a monthly $35 premium. Okay, now it gets a little complex…” - Reader’s Digest, April 2004 I found this interesting quote and thought it was appropriate for this presentation. I think we can all understand what the benefit is, but now, the trick is getting these folks signed up.

25 Decisions for Medicare Beneficiaries
Medicare Beneficiary Do Not Enroll in Part D Plan Enroll in Part D Plan Medicare Advantage HMO PPO (regional) Private Fee-for-Service Traditional Medicare Prescription Drug-Only Plan (PDP) Apply for Low-Income Subsidy No Rx Coverage (late enrollment penalty) If Dual Eligible Auto-Enrolled “Creditable” Employer Plan (no low-income subsidies) Social Security Medicaid Decisions to be Made: Premiums Covered Drugs Cost-Sharing Anytime I see a slide like this, I get a little concerned. These folks have lots of choices and decisions to make. They will come to their physician, nurse and their pharmacist for advice. Information – Plans must provide a wide range of information to beneficiaries, including how the formulary works, what the plan benefits are, and how the plan’s medication therapy management program works. They must also provide information on the grievance, coverage determinations, reconsiderations, exception process, as well as appeals rights and procedures. Information on how the plans have performed in this area must be provided, upon request. Medicare will also provide standardized information on drug payments, participating pharmacies, less expensive generic medicines and other information that can be used by beneficiaries to get the most out of their drug coverage. Medicare support will be available through MEDICARE customer service line, personal counseling from state health insurance assistance programs (SHIPs) and other beneficiary support organizations and the Internet. If meet income and asset test, qualify for subsidy: Medigap Coverage (but not “creditable” = late enrollment penalty) Below 100% FPL ($9,570 in 2005) Below 135% FPL ($12,920 in 2005) Assets $6,000/single; $9,000/couple Below 150% FPL ($14,355 in 2005) Assets $10,000/single; $20,000/couple Source:

26 “ Unfortunately, you have what we call ‘no insurance.’ ”
This is exactly what you don’t what to happen. Remember the Part D benefit is an insurance benefit. It is extremely valuable to have when a patient has the need be on several medications chronically. It provides a financial safeguard.

27 Issues for Practicing Physicians
Assisting beneficiaries with understanding the new coverage available Motivating patients to take action and apply for the benefit that comes closest to meeting their needs Navigating multiple drug formularies Coordinating prior authorizations & appeals Comprehending the ongoing changes that will likely occur Physicians and pharmacies will be caught in the middle, time is already constrained. Encourage the use of a single pharmacy, with this benefit, there is little incentive to price shop, assess current drug history by asking patient to get pharmacy printouts of past purchases. Motivate these folks or their caregivers to understand the benefits available and get signed up. There is no question in my mind that prescribers and pharmacists will spend more time navigating drug formularies, seeking PA, and explaining the coverage policies to these beneficiaries. Understanding the fundamental elements of the benefit and using the resources some of the others will present today will go along way in making your life easier as a practitioner. Associates and staff should also become knowledgeable. I encourage pharmacies and physician practices to have a Medicare Part D in house “expert”. The more we know and understand, the more we can share with those who the program intends to benefit.

28 Medicare Prescription Drug Benefit Positive Effects
Enhancement of existing Medicare benefit package Access to subsidized prescription drug coverage Improved availability and compliance with treatment regimens Improved health and reduction of adverse health effects The last three slides list a few of the obvious positive benefits of the program, some important timeframes to be aware of, and some resources to get more additional information. In the interest of time and duplicity, I will conclude my portion of the presentation at this time. I hope you have found the information informative and look forward to the questions you may have. Thank you.

29 Medicare Prescription Drug Benefit Timeline
January 21, Final Rule Published June 6 - Bid submission July - Finalization pharmacy contracts September 14 - PDPs announced October 1 - Marketing begins October 13 - Prescription Drug Plan Finder Tool rollout November 15 - Enrollment begins January 1, Benefit begins May 15, 2006 – Last day to enroll before late enrollment penalty These are some very important timelines that will be of interest you. June 6 - Formularies approved or disapproved CMS is reviewing all PDP marketing materials for approval in June 2005. July 15 - final contracts with retail pharmacies in network to be obtained. August 1 - final retail pharmacy network to be transmitted. We were anticipating that we would be made aware of the specific plans in the Indiana and Kentucky region this week. However, CMS has indicated that the official announcement will be made next week. October 13 - Prescription Drug Plan Finder Tool PDPs can begin marketing in October 2005. Enrollment begins November 15 January 1, 2006 – Benefit begins

30 Sources of Information
CMS Website 1-800-Medicare Social Security Administration [Look under Medicare Outreach] Kaiser Family Foundation United States Pharmacopoeia (USP)


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