1. Medication Costs – Where are we going Jeanne Tuttle, R.Ph. Pharmacy Benefits Management Service, VA Central Office June 2012

2. VETERANS HEALTH ADMINISTRATION Learning Objectives List two methods historically used to manage medication costs Describe how the national formulary is currently managed in the VA Identify two factors, unrelated to cost, that should be key in formulary decision making 1

3. VETERANS HEALTH ADMINISTRATION Poll Question Trivia Time: What year was the NATIONAL Formulary instituted and what year did it become the ONLY formulary (local and VISN both abolished)? Instituted in 1997, all others abolished in 2009 Instituted in 2001, all others abolished in 2003 Instituted in 2003, all others abolished in 2003 Instituted in 1990, all other abolished in 2003 2

4. VETERANS HEALTH ADMINISTRATION VA Formulary Progression Prior to 1996, 173 local 1996, added 22 VISN 1997, added National 2001, removed local 2006, Froze VISN 2009, removed VISN 3

5. 4 Review: RX volume RX expenditures New Drugs ID areas of opportunity Review: Medical Literature VA Prescribing Clinical Need Assess feasibility Present issue to stakeholders Medical Advisory Panel (MAP) VISN Formulary Leaders (VFLs) Get input from front line clinical staff Chief Clinical Consultants DoD Pharmacoeconomic Center P & T Committee Determine action(s) Nothing One or more of: Guideline Criteria for Use National Contract Incentive Agreement Implement action(s) One or more of: Issue Drug Use Criteria Conduct Solicitation Negotiate BPA Monitor Performance Contract Participation Utilization Management Use of Criteria PBM-MAP Drug Use Management Process START

6. VETERANS HEALTH ADMINISTRATION Basic Tenets Promote appropriate drug therapy and discourage inappropriate drug therapy Reduce the geographic variability in utilization of pharmaceuticals across the VA system Initiate patient safety improvements Improve the distribution of pharmaceuticals 5

7. VETERANS HEALTH ADMINISTRATION Basic Tenets Reduce inventory carrying costs, drug acquisition costs and the overall cost of care Promote portability and uniformity of the drug benefit Design and carry out relevant outcomes assessment projects 6

8. SAFETY Effectiveness Cost 7 Lost cost is NOT a deciding factors if concerns over safety or effectiveness

9. VETERANS HEALTH ADMINISTRATION Historically Traditional methods: – Purchasing – contracts, blanket purchase agreements – Tablet Splitting – Maximize use of generics when clinically appropriate – Criteria for use, clinical guidance Past four years have focused on reducing variance in drug costs across the system – Focus on high cost and high variance – Have addressed area with most opportunity – Will continue, however magnitude is less and effort/resources is larger (e.g. one-on-one communication with patients and providers) 8

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11. 10 DRUG COST VARIANCE TREND

12. 11 DRUG COST VARIANCE TREND

13. Loss of Patent Exclusivity Emphasis on Prescribing Criteria Reduction in the number of low cost OTC RXs due to increase in co-payment from $2 to $7 12

14. VETERANS HEALTH ADMINISTRATION The Data: More Initiatives with Less Cost Avoidance FY ‘07 – 21 National initiatives – $264 million cost avoidance (8% of total outpatient expenditures) – Drug cost per patient ↓ 1.56% compared to FY 06 FY ‘08 – 15 National initiatives – $354 million cost avoidance (11.5% of outpatient expenditures) – Drug cost per patient ↓ 8.11% compared to FY 07 FY ’09 – 12 National initiatives – $192 million cost avoidance (6.1% of outpatient expenditures) – Drug cost per patient  0.61% compared to FY 08 FY ’10 – 26 National initiatives – $120 million cost avoidance (3.6% of outpatient expenditures) – Drug cost per patient  1.08% compared to FY 09 FY ’11 – 36 National initiatives – Target $128 million cost avoidance (~3-4% of projected outpatient expenditures) – Savings through Q1: $60 million (annualized) 13

15. VETERANS HEALTH ADMINISTRATION Pharmacy Game Changers? Expansion of costly chemotherapy regimens with modest/ limited clinical benefit – Ex: Provenge ® : $71,000 per course New, expensive MS drugs – Ex: Gilyena ® (fingolimod): $35,000/year Anticoagulation – Ex: Pradaxa ® (dabigatran): $1843/year (but lots of pts!) 14

16. VETERANS HEALTH ADMINISTRATION Pharmacy Game Changers? “New” old drugs – Ex: Colcrys ® (colchicine): $0.07/tab to $3.40 (lots of pts) New Hepatitis C treatments (lots of pts) – Ex: Victrelis ® (boceprevir): $24,000- $43,500/pt/year – Ex: Incivek ® (telaprevir): $41,000-$46,000/pt/year 15

17. VETERANS HEALTH ADMINISTRATION New Drug Approvals- Cost Increases (Selected Drugs) 16

18. VETERANS HEALTH ADMINISTRATION Why is this important? We have addressed traditional methods of cost avoidance and have done well! – <1% Decrease in VA Average 30 day equivalent RX ingredient cost over 10 years ($12.79 in October 1998 versus $12.76 in Sept 2009 Going forward, the magnitude of cost avoidance using traditional methods has diminished versus the effort and resources High cost, novel new therapies are entering the market at an unprecedented rate Drug shortages have forced us to purchase higher cost alternatives and are expected to continue 17

19. VETERANS HEALTH ADMINISTRATION Colchicine: Something Old, Something New (Old Drug, New Price!) 18

20. VETERANS HEALTH ADMINISTRATION New Drug Impact Example: D abigatran Anticoagulant - Direct thrombin inhibitor indicated to reduce the risk of stroke and systemic embolism in patients with non- valvular atrial fibrillation $117.25 costlier than warfarin per patient per month – Average cost 30 day warfarin (5mg qd) = $0.88 – Average cost 30 day Dabigatran (150mg bid) = $118.25 2667 Veterans currently with active prescriptions Budget Impact for this one drug: – Approximately $3,750,000/year more in drug costs to treat current patients – Number of Veterans receiving this drug expected to grow 19

21. VETERANS HEALTH ADMINISTRATION New Drug Impact Example: Hepatitis C, Boceprevir and Telaprevir Historic annual treatment rate: 2% of eligible patients – Increase to 27% in FY 2000 when standard therapy introduced – Assume deferral of treatment pending availability of new drug s Number of treatment-eligible patients per VISN: National HCV Clinical Case Registry – Conservative estimate: 5% of eligible patients in FY 12 – High-end estimate: 17.5% of eligible patients in FY 12 Cost Impact – Public Health SHG projected $117 - $324 M in first year of use – Purchases for June – December, 2011 = $16,191,883 20

22. VETERANS HEALTH ADMINISTRATION Example: MS Drugs 25,000 VA patients with MS, ~30% have relapsing- remitting disease Fingolimod – first oral disease modifying MS drug. – ~$35,000/ year compared to $10-17,000 for other MS therapies – At least as effective as other agents – If all eligible change, $150 M/year above current drug therapies Dalfampridine- drug to help with symptoms (does not change disease progression) – $9700/ year 21

23. VETERANS HEALTH ADMINISTRATION Example: Provenge ® for Prostate CA (Castrate Resistant) The Facts – Mortality: Live longer (4 months) – Disease free progression: No – Tumor response: No – Cost: $71,000 per patient – Few would consider this cost-effective VA: FY 2009- 146,214 veterans Prostate Ca – If 600 patients/ year = ~$43 million (conservative estimate) New patients? 22

24. VETERANS HEALTH ADMINISTRATION Is This Good Value? Example: Request for erlotinib and gemcitabine for 72 yo veteran with pancreatic cancer, widely metastatic. Erlotinib (Tarceva) FDA approved in combination with gemcitabine, based on study: J Clin Oncol 2007: 25: 1960-66. Recommended by NCCN National Clinical Practice Guidelines in Oncology Cost for 6 cycles, erlotinib alone: $10,920 Benefit: 10 days increased overall survival. “Statistically significant” More side effects with combined treatment ? Quality of life? ? Good Value? 23

25. VETERANS HEALTH ADMINISTRATION High Value, Cost-Conscious Health Care Trajectory of pharmacy costs is likely to become unsustainable Owens, Shakelle, et al (VA physicians) have presented for the American College of Physicians concept of “High-Value, Cost- Conscious Health Care” (Ann Intern Med 2011) – Important distinction between cost and value – Inappropriate to focus only on cost, or benefit – Value considers both benefits relevant to cost, and benefits relevant to other interventions Many current pharmacy treatments do not present high value- for both high cost, and low cost drugs 24

26. VETERANS HEALTH ADMINISTRATION High Value, Cost-Conscious Health Care Recommendations by authors – Decrease or discontinue interventions of no benefit – Ensure provision of interventions that are effective and decrease costs – For interventions that provide additional benefit at additional cost: Assess value (CEA or otherwise) 25

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28. VETERANS HEALTH ADMINISTRATION What Can We Do? Pharmacy costs likely to dramatically increase if we rely on old methods to manage cost – Opportunities to reduce cost through contracting and prescribing criteria have been maximized (or very nearly so) for many years VA PBM is committed to exploring all conceivable solutions to manage pharmaceutical costs – Academic Detailing Pilot – Continue to develop high quality prescribing criteria to optimize best outcomes for expensive drugs 27

29. 28 New drug – MAP/VPE Discuss Evidence and Vote FormularyFormulary With CriteriaNon-Formulary Non-Formulary with Criteria Field Implementation

30. VETERANS HEALTH ADMINISTRATION And then what happens? Wide variation with field implementation Field Implementation Factors – Staffing – IT Resources – Facility Philosophy – Competing performance measures 29

31. VETERANS HEALTH ADMINISTRATION Field Implementation CPRS Decision guided drug specific template with pharmacist review CPRS Decision guided drug specific templates - NO pharmacist review Review centralized to VISN level pharmacist Generic non-formulary drug request with pharmacist review Generic non-formulary drug request – NO pharmacist review 30

32. VETERANS HEALTH ADMINISTRATION Field Implementation Criteria disseminated to clinicians – Message field populated – Restrictions field populated – Links within CPRS How does the message get delivered? What are the expectations for practice? How is ongoing use monitored and medication discontinued appropriately? 31

33. VETERANS HEALTH ADMINISTRATION Poll Question We use templates to assess the need for ongoing therapy AND they are effective: For NO drugs For < 5 drugs For 5-10 drugs For >10 drugs We use templates to assess the need for ongoing therapy but have never determined if they work 32

34. VETERANS HEALTH ADMINISTRATION National Template Survey National Templates developed and posted Dabigatran Boceprevir – Reminder Dialogue – Consult Field Survey through VPEs – 76 responses 33

35. VETERANS HEALTH ADMINISTRATION Survey Results Would your facility be more willing to use a national tool if it was released at the same time as the CFU? – Yes = 91% No = 9% Would your facility be willing to change current processes for implementing CFUs to accommodate use of nationally developed electronic tools? – Yes = 53% No = 7% – Unknown = 40% 34

36. VETERANS HEALTH ADMINISTRATION Survey Results: Dabigatran Implemented (36%) – 14% with no changes – 15% with slight wording changes – 7% with changes that modified the CFU slightly Not Implemented – 28% had developed locally – 9% do not use drug specific consults – 3% could not get IT support – Free text responses 35

37. VETERANS HEALTH ADMINISTRATION Survey Results Boceprevir Implemented (22%) – 15% as consult – 7% as reminder dialogue Not implemented – 24% had developed locally – 4% used template from another medical center or VISN – 1% could not get IT support – 49% did not implement any type of template 36

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40. VETERANS HEALTH ADMINISTRATION Clopidogrel Overall use is driven by those patients who are on for more than 2 years Tremendous variation across system – % of Clopidogrel Patients receiving longer than 2 years range: 4%- 57% – % of Patients receiving Clopidogral longer than 2 years range: 0.02% - 2.02% Should “going generic” matter? 39

41. VETERANS HEALTH ADMINISTRATION Where do we go from here? Risk Share Agreements Coverage with Evidence Development (CED) Provider Level Feedback Prior Authorization: – National – VISN 40

42. VETERANS HEALTH ADMINISTRATION Risk Share Agreements “Pay for Performance”: – VA reimburses drug costs only for those patients who achieve agreed upon clinically relevant outcomes. – both VA and industry share in the cost-risk Caps for coverage of specific drugs: – VA negotiates limits to spending for drug in return for coverage benefits to the manufacturer – Identify a pre-specified cost threshold for coverage of a specific drug- over which the manufacturer would cover costs, or – Provide a cap on costs for specific drug for specific patient 41

43. VETERANS HEALTH ADMINISTRATION Coverage with Evidence Development (CED) Costly drug therapies where safety, efficacy, and cost- effectiveness are in question. Controversial Drugs would only be available to patients and providers if the patient agrees to participate in a study to assess outcomes. – May involve randomization to different treatment arms. – No randomization - all patients agree to participation in the collection of outcome data- including (as appropriate), risks, benefits, and quality of life. 42

44. VETERANS HEALTH ADMINISTRATION Provider Level Feedback Historically PBM has provided facility and VISN level feedback on drug utilization No national effort to provide meaningful, provider level feedback Kaiser: Physician to physician model Identification of extreme outliers- both patients and physicians 43

45. VETERANS HEALTH ADMINISTRATION Prior Authorization Despite criteria, wide variation exists Availability of Subject Matter Experts at local level, at VISN level? – Application of CFU versus overall assessment of patient/disease Determination made by MAP/VPE – Formulary with national prior authorization – Formulary with VISN prior authorization 44

46. VETERANS HEALTH ADMINISTRATION Prior Authorization Considerations Cost Volume Marginal clinical benefit Narrow spectrum of safety Special significance to the mission of the VA (to ensure access to all veterans) Subject matter experts 45

47. 46 New drug – MAP/VPE Discuss Evidence and Vote FormularyFormulary With CriteriaNon-Formulary Non-Formulary with Criteria Field Implementation

48. 47 New drug – MAP/VPE Discuss Evidence and Vote Formulary Formulary With Criteria Non-Formulary Non-Formulary with Criteria Formulary – National Prior Auth Formulary – VISN Prior Auth Formulary – Template Required Formulary – Academic Detailing Required Formulary – Risk Share Agreement Formulary – CED

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