Chpt 9 Prescription Drug Benefits

Question 1

Prescription drug benefit plan design issues

1. Cost sharing and
2. Mandatory generics and dispense as written benefit issues

Answer 1

1. Cost sharing
   
   1. 1 copay: typically different copay amounts for different tiers
   2. 2 Coinsurance:
      
      1. 2.1 if part of an integrated plan, medical deductible must be met before the Coinsurance take effect
      2. 2.2 if plan is not integrated, only drug claims are counted in meeting the drug deductible
   3. 3 cost sharing disadvantages
      
      1. 3.1 members will use less medication. May adversely affect health
      2. 3.2 too much cost sharing makes the package unaffordable
2. Mandatory generics and dispense as written benefit issues
   
   2. 1 mandatory generics without exception: generic is covered at tier 1 and the brand is always tier 3
   3. 1.1 member also pays the difference in cost between the brand and its generic
   4. 2 Mandatory generics unless physician writes DAW: generic is covered at tier 1 and brand is tier 3
      
      2. 2.1 if physician orders the brand, the member does not have to pay the cost difference between brand and generic
   5. 3 Voluntary generics: member does not pay the cost difference, regardless of how the prescription is written

Question 2

Discuss how formularies are designed

Answer 2

1. Pharmacy and therapeutics (PT) committees
   
   1. 1 determines whether a drug should be added to formulary
   2. 2 if committee decides drug is safe, effective and worth the cost, then
      
      1. 2.1 health plan determines financial impact and makes final selection
2. Financial model considers AWP, WAC, discount from AWP, dispensing fee, rebates
3. Pharmacoeconimic analysis: a decision analytic model is built around a decision tree
4. Comparative effectiveness research (CER): Provides info to help decide which treatment to choose

Question 3

Manufacturer Rebates

Answer 3

1. Payment from manufacturers for preferred status on a formulary
2. Can be per script sold, aggregates based on formulary status, market share, and volume
3. PBMs get better rebate arrangements than a health plan
4. Negotiating leverage with manufacturers:
   
   4. 1 number of lives represented
   5. 2 Ability to move market share to preferred products
   6. 3 Consistency of plan response to a manufacturers actions
5. PBMs source of revenue from the health plan is a percentage of the rebates earned
6. Rebate agreements are often not disclosed fully to the health plan

Question 4

Legal issues arising with respect to PBMs

Answer 4

1. When contracting with a PBM, be clear that the health plan owns the formulary
2. Health plan documents a formulary design that shows no conflict of interest from the PBM or any manufacturer

Question 5

Prescription drug benefit plan design issues

Answer 5

1. Contracts may limit or exclude certain drugs
2. Formularies (Designs are closed, open, tiered)
3. Formulary tiers
   
   3. 1 Group drugs into tiers, and differentiate cost sharing by tier
   4. 2 Two tier: tier 1 (genetics) and tier 2 (brand name drugs)
   5. 3 three tier: tier 1 generic, tier 2 is preferred brands, tier 3 is non-preferred
      
      3. 3.1 cost sharing levels increase as the tier level increases
   6. 4 four tier: 3 tier designs with a particular drug group assigned to a 4th tier
   7. 5 5 and 6 tiers also exist
4. Cost sharing (DETAILS ON SEPARATE CARD)
5. Value based insurance design
6. Limitations on usage
7. Mandatory generics and dispense as written issues (DETAILS ON SEPARATE CARD)