Drug formularies are ground zero in one of the latest battles between managed-care plans and their antagonists.
The dispute is most heated in California, where managed care and criticism of managed care are entrenched.
Regulators there recently ordered six California health plans-including giants such as Health Net, Kaiser Permanente and United HealthCare of California-not to drop some specific drugs from their formularies, pending further review. The plans had indicated they were going to eliminate those drugs, which varied by health plan and included Prozac, a popular antidepressant; Zyprexa, an expensive antipsychotic drug; and Prilosec, an ulcer medicine.
The managed-care industry insists that formularies help health plans use clinically effective and cost-effective pharmaceuticals. For example, some formularies include generic drugs instead of more-expensive brand-name versions, when clinical capabilities are similar.
With drug costs increasing at double-digit rates, such controls are necessary, the HMOs argue.
The state's managed-care industry, led by the California Association of Health Plans, last month blasted the California regulatory action as unprecedented government "micromanagement."
The CAHP argues that the state Department of Corporations, which regulates HMOs, lacks the legal authority to issue such decrees, that it unfairly singled out the six health plans and that it refused to explain its rationale.
"There was no basis given for these demands," says Walter Zelman, president and chief executive officer of the CAHP. "If we behaved like that, people would be outraged."
In an April 10 letter to the agency that oversees the Department of Corporations, Zelman wrote that the department's actions "raise serious legal and practical questions about the department's role" in regulating HMOs.
On April 29 the CAHP unveiled managed-care reform proposals that included a call for a new department of managed care that would replace the Department of Corporations as the overseer of health plans.
Julie Stewart, a department spokeswoman, declined to discuss specifics about the health plans' formulary complaints, but she insisted the department's recent edicts were on firm legal ground.
Stewart acknowledges, however, that "this is not a closed issue."
Spurring the formulary probe in California were suspicions by industry critics-including the Sacramento, Calif.-based Citizens for the Right to Know-that health plans would try to sneak in potentially dangerous formulary changes before a new law takes effect July 1. The law requires HMOs to continue providing FDA-approved prescription drugs to patients who have been using them. The CAHP wound up backing the amended version of the bill after working with its author to change objectionable provisions.
Citizens for the Right to Know says consumers have been complaining more that health plans are substituting cheaper drugs and denying drugs.
The formulary issue is a growing concern for health plans in numerous states.
"We are very concerned about this additional pressure for micromanagement by government," says Susan Pisano, a spokeswoman for the American Association of Health Plans. Skyrocketing pharmaceutical costs and direct-to-consumer marketing already threaten comprehensive coverage of pharmaceutical costs by health plans.
This year, 31 states have introduced legislation dealing with formulary requirements, according to the AAHP.
Maryland, South Dakota and Virginia have enacted related legislation this year, says Susan Laudicina, Washington-based director of research for the Blue Cross and Blue Shield Association.
Despite the burst of legislative activity, "there is no evidence of abuse or misuse of drug formularies," Laudicina says.
Warren Barnes, the California Department of Corporation's in-house counsel, could not be reached for comment, but he recently told the Wall Street Journal that the agency had received "very serious allegations that medically necessary drugs were being taken off the formularies."
However, executives at several California health plans say regulators appeared to ignore health plans' evidence backing their formulary decisions.
Kaiser officials, for example, say they were mystified by the department's insistence that Kaiser continue including a drug to treat serious respiratory illnesses when a newer, more-effective drug from the same manufacturer is now available. RespiGam-the older version-must be administered intravenously during a three-hour procedure. The new drug, Synagis, can be injected in seconds, according to Kaiser.
Since the newer version is more expensive, Kaiser can't be accused of cutting corners to save money, says Sharon Levine, M.D., associate executive director of Permanente Medical Group in Oakland, Calif. "There's no rational basis for recommending RespiGam over Synagis," she says.
Health Net, based in Woodland Hills, Calif., was hit hardest: It was required to keep 14 pharmaceuticals on its formulary, although it won conditional permission to shed 58 others.
But Health Net and other HMOs may have discovered a way to wriggle out of the dispute with California regulators.
Health Net is replacing its formulary with a three-tiered program that lets employers and employees decide what level of prescription benefit they're willing to pay for. That new program, which charges higher copayments for broader access to brand-name drugs, will launch July 1, officials say.
United HealthCare of California has a similar plan in place and has moved about 90% of its prescription drug users out of its traditional formulary plan.