1. Evaluation of Virginia’s Preferred Drug List: Interim Report Policy and Research Division March 16, 2004Department of Medical Assistance Services

2. 2 Presentation Outline  Components of DMAS’ PDL Evaluation  PDL Process: Movement of Prescriptions  PDL Process: Inside Prior Authorization  Budget Savings: Analysis Plan and Next Steps  Health Impacts: Analysis Plan and Next Steps  Conclusions

3. 3 DMAS’ Review of the PDL Has Several Major Components n The framework for this review is broadly designed to address the following three issues: 1)the vendor’s implementation of the program including a focus on the process for prior authorizing non-preferred drugs 2)the impact of the PDL program on the agency’s budget and whether the mandated savings targets are realized 3)the impact of the PDL program on Medicaid patient health outcomes

4. 4 Three Important Research Questions Provide The Focus For The Study n Within the context of this issue framework, the following specific research questions will be addressed in the agency’s full review of the PDL: Has the PDL program been implemented in a way to ensure a high rate of compliance by physicians without adversely affecting patient access? Has the PDL program produced the $27 million in general fund savings for FY 04 and 05 as required by the General Assembly? Is there evidence to suggest that the PDL program has adversely impacted patient health outcomes for those Medicaid recipients who are switched from non-preferred to preferred drugs?

5. 5 Study Report Schedule Scheduled Report Dates and Frequency of Reporting Research ComponentFirst Report DateReport Frequency PDL Process ReviewMarch 16 th, 2004Quarterly PDL Budget ImpactJune 1stSemi-Annually PDL Health ImpactsDecember 1stSemi-Annually

6. 6 Presentation Outline  Components of PDL Evaluation  PDL Process: Movement of Prescriptions  PDL Process: Inside Prior Authorization  Budget Savings: Analysis Plan and Next Steps  Health Impacts: Analysis Plan and Next Steps  Conclusions

7. 7 Dataset To Track The Movement of Prescriptions Must Account For Numerous Outcomes Bolded Boxes Represent PDL Compliance Pre-PDL Post-PDL Prescription ActivityOutcome Status of Drug Claim 1Patient was on non-preferred drug Doctor changes prescription to preferred drug Prescription is filledDrug claim paid 2Patient was on non-preferred drug Prescription written for non- preferred drug and doctor requests PA First Health or DMAS appeals officer approves the non-preferred drug Drug claim paid 3Patient was on non-preferred drug Doctor requests prior authorization for approval of non-preferred drug Request denied and no prescription filled No paid drug claim 4Patient was on non-preferred drug No denial or approval found in system No prescription filledNo paid drug claim 5Patient was on preferred drug Prescription written for PDL drug Prescription is filledDrug claim paid 6Patient was on preferred drug No denial or approval found in system No prescription filledNo drug claim found

8. 8 The First Health National Drug Code File With PDL Indicator and DMAS Claims Data Used To Create PDL Analysis File DMAS File Drug Name Hard Edit Date Drug Class National Drug Code Preferred Indicator First Health File Drug Name NDC File National Drug Code Hard Edit Date Drug Class Drug Name Preferred Indicator DMAS Claims File National Drug Code Paid/Denied Status Service Dates Recipient Information PDL Claims Analysis File Service Date Hard Edit Date Paid/Denied Status Drug Class Drug Name Preferred Indicator Recipient Information National Drug Code PRE-PDL Claims File Paid Claims 90 days prior to Hard Edit Date POST-PDL Claims File Paid or Denied Claims 1 to 6 Weeks After the Hard Edit Date

9. 9 Drug Claims For This Report Were Selected From Files Containing Over Six Million Records and 1.4 Million PDL-Eligible Claims Claims Database (Oct 03 to Feb 04) 6,212,505 PDL Eligible Claims 1,486,105 Pre-PDL Claims 90 Days Prior to Hard Edit Date (multiple claims per recipient and drug) 592,609 Post-PDL Claims 1 to 6 Weeks After Hard Edit Date (multiple claims per recipient and drug) 220,424 Pre-PDL By Prescription Single Claim Per Recipient Per Drug 289,487 Post-PDL By Prescription Single Claim Per Recipient Per Drug 156,163

10. 10 DMAS Policy and Research Staff Tracked The Movement of Nearly 300,000 Drug Claims In The PDL System Total Claims 289,487 Non-Preferred Rx 102,806 Preferred Rx 186,681 Change to Preferred Rx* 51,459 Approved as Non-Preferred 3,417 No New Claim 47,930 Remained on Preferred Rx 64,269 Recent Pre-PDL Rx 48,538 No New Claim 73,874 Later Refill ???? No Refill ???? Recent Pre-PDL Rx 19,308 Not Found 28,620 Denied 2 Walk aways ???? Headed to PA ???? Later Refill ???? No Refill ???? * This count excludes 792 possibly duplicate claims Pre-PDL Post-PDL Walkaway ???? Claim Not Yet Submitted ????

11. 11 PDL Compliance Rate Is High But Future Status Of Unpaid Claims Must Be Monitored Pre-PDL Period (Oct 03 to Dec 03) Post-PDL Period (Jan 04 to Feb 04) Post-PDL Period (Jan 04 to Feb 04) 36% 64%97% 31% 69% 289,487119,145*167,075** * Includes only paid claims. ** Includes adjudicated claims and claims not found for drugs that were categorized as non-preferred in the pre-PDL period. Not on PDL PDL Status PDL Drug Total Claims

12. 12 It Is Too Soon To Draw Conclusions Regarding Unpaid Claims In The Post-PDL Period For Drugs That Were Non-Preferred Prior To PDL Implementation Key Facts About Pre-PDL Non-Preferred Claims With No Matching Post-PDL Claim Jan 1 st Feb 29 th Feb 1 st Jan 15 th Jan 19 th Was Last Pre-PDL Prescription Paid After Jan 15 th ? Did Hard Edits For Drug Class Occur After Feb 1 st ? 40%60% 59%41% 20% 23% 19% Cardiac (Beta Blockers) Analgesics Gastrointestinal Total Claims = 47,930 YesNo Yes No

13. 13 Compliance Rates Do Not Vary Significantly By Drug Class Total Gastrointestinal Medications Cardiac Medications Asthma Medications Central Nervous System Medications 97% 96% 94% 93% 83% Compliance Rate Needed to Achieve Budget Savings 85% 55,562Total Claims5,50835,43312,5172,104

14. 14 Presentation Outline  Components of PDL Evaluation  PDL Process: Movement of Prescriptions  PDL Process: Inside Prior Authorization  Budget Savings: Analysis Plan and Next Steps  Health Impacts: Analysis Plan and Next Steps  Conclusions

15. 15 Four Out Of Every 10 Requests To The Call Center Result In A Change To A Preferred Drug. There Have Been No Denials. Total Since January 5 Jan. 5 n=173 Jan 12 n=398 Jan 19 n=787 60% 40% 62% 38% 75% 25% 59% 41% Prior Authorization Approved Physician Agreed to Change to a Preferred Drug Jan 26 n=1,482 56% 44% Feb 2 n=1,572 Feb 9 n=1,351 52% 48% 59% 41% 64% 36% 67% 33% Feb 16 n=1,404 Feb 23 n=1,498 Week Start Date

16. 16 Calls To The Center Are Increasing Weekly AverageJan 5Jan 12Jan 19 Total Issues Addressed Total Calls Calls on Peak Day 2,640 1,643 349 Jan 26 241 1,137 1,822 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 Feb 2Feb 9Feb 16Feb 23 Week Start Date

17. 17 Physicians Raise Most of The Calls To The Center Average 71% 24% 5% 60% 26% 15% 67% 26% 7% 62% 32% 6% Physician Pharmacist Recipient 73% 23% 75% 21% 74% 21% 73% 24% 72% 22% Jan. 5 n=455 Jan 12 n=821 Jan 19 n=1,421 Jan 26 n=1,944 Feb 2 n=2,463 Feb 9 n=2,314 Feb 16 n=2,516 Feb 23 n=2,640 6% Week Start Date

18. 18 Most Inquirers Concern Requests For Prior Authorization PA Requests PDL/PPL Other Reject 68% 9% 89% 11% Physician Pharmacist Caller Type Inquiry Type 6% DUR Codes 4% Guidelines 4%

19. 19 First Health Call Center Staff Are Answering Calls In Less Than 30 Seconds 0:23 2:54 Average Speed to Answer Average Length of Call 0:00 0:28 0:57 1:26 1:55 2:24 2:52 3:21 3:50 AverageJan 5Jan 12Jan 19Jan 26Feb 2Feb 9Feb 16Feb 23 Week Start Date 0:24 2:42

20. 20 Presentation Outline  Components of PDL Evaluation  PDL Process: Movement of Prescriptions  PDL Process: Inside Prior Authorization  Budget Savings: Analysis Plan and Next Steps  Health Impacts: Analysis Plan and Next Steps  Conclusions

21. 21 Budget Impact Will Be Assessed By Comparing Predicted Costs To Actual Costs Month 4 $ Millions Actual Medicaid Spending Month 4 Month 3 Month 2 Month 3 Month 1 Month 1 Month 2 Pre-Implementation MonthsPost-Implementation Months PDL Implementation Projected Savings Due to PDL Projected Medicaid Spending Actual Medicaid Spending

22. 22 Other Components of Budget Impact Study n Market share analysis. Model predictions will need to be validated. Market share analysis will allow DMAS to accomplish this. Specifically: –If large savings are estimated using the prediction models and the PDL is comprised of drugs that controlled only a small share of the market, a large shift in market share should be observed n Analysis of Savings Among Eligibility Groups. The DMAS study team will also determine which eligibility groups witnessed the largest reduction in drug costs. Calculations will be made on a per-member, per-month basis to dampen the effect of enrollment changes.

23. 23 Presentation Outline  Components of PDL Evaluation  PDL Process: Movement of Prescriptions  PDL Process: Inside Prior Authorization  Budget Savings: Analysis Plan and Next Steps  Health Impacts: Analysis Plan and Next Steps  Conclusions

24. 24 Evaluation of PDL Health Effects Poses Methodological Challenges Severity of Condition Pre-PDL PeriodPost-PDL Period Time Atypical High Level Movement Towards Typical Level

25. 25 Research Design Strategies Design TypeHow It WorksAdvantagesDisadvantages Non- experimental PDL patients’ health status/expenditures are compared from the periods before and after the PDL was implemented Easy to implement and understand Design does not address what would have occurred in the absence of the program – results unreliable ExperimentalPatients are randomly chosen to participate in the PDL and outcomes are compared to those who were randomly screened off of the program Cadillac of research designs in terms of producing reliable, unbiased measures of program impact Not feasible Quasi- Experimental Develop a non-randomly assigned group of PDL participants and compare to a non-randomly assigned group of non- participants Produces measure of program impact without the burden of random assignment Subject to selection bias which produces non-equivalency among study groups

26. 26 Sample Size For PDL and Control Group Will Be Driven By Program Compliance Rate Total Claims 289,487 Non-Preferred Rx 102,806 Preferred Rx 186,681 Change to Preferred Rx* 51,459 Approved as Non-Preferred 3,417 No New Claim 47,930 Remained on Preferred Rx 64,269 Recent Pre-PDL Rx 48,538 No New Claim 73,874 Later Refill ???? No Refill ???? Recent Pre-PDL Rx 19,308 Not Found 28,620 Denied 2 Walk away ???? Headed to PA ???? Later Refill ???? No Refill ???? * This count excludes 792 possibly duplicate claims PDL Group Control Group

27. 27 Quasi-Experimental Option Selected By DMAS Study Team n Construct two study groups from the universe of persons who were on non-preferred drugs prior to participating in the program: –The first group would consist of persons who were switched to a preferred drug by their physician to comply with the PDL program –The second group would consist of persons who were approved for the non-preferred drugs by First Health or DMAS n These groups could then be tracked over time and compared across the following measures post-PDL: – Total Medicaid expenditures – Rate of hospitalizations – Total inpatient and outpatient Medicaid costs n Statistical modeling will be used to account for non-equivalency between the two groups.

28. 28 Presentation Outline  Components of PDL Evaluation  PDL Process: Movement of Prescriptions  PDL Process: Inside Prior Authorization  Budget Savings: Analysis Plan and Next Steps  Health Impacts: Analysis Plan and Next Steps  Conclusions

29. 29 Conclusions n Study results of the early implementation of PDL in Virginia are favorable: – PDL compliance rate is high and most changes are being made voluntarily – Patients are not being denied drugs – The Call Center is working well n More conclusive findings must be held in abeyance until the program matures and DMAS has had the opportunity to examine the health effects of the new program. n Interim results on the health effects of the program will likely be presented in the early part of 2005.