Physicians are being forced to assume more responsibility for pharmacy costs, hich is keeping many medical managers awake at night. Unfortunately, the ituation likely will get worse before it gets better.
"You have to follow the formulary and all the other rules that have been stablished," says Jeff Mason, M.D., chief medical director of ProMed, a large independent practice association in the San Francisco Bay Area. "That leaves you fully responsible but with no means for controlling risk. It's like the Boston Tea Party."
The nation's health plans began adding pharmacy benefits about 20 years ago, primarily as a tool for increasing the market share of commercial and Medicare HMOs. Health plans kept their costs down by obtaining discounts from drug companies based on volume and market share. But drug prices have continued to creep upward, spurred by research costs and the introduction of new drugs.
Dramatic increases in pharmacy costs of 20% to 30% a year put pressure on patients, health plans, Medicare and, most certainly, physicians.
Recently, health plans have been upping the pressure on physicians, requiring them to adhere to formularies to help keep costs under control. Facing thinner margins, health plans are trying to shift some of the risk for pharmacy benefits to physicians.
The argument is physicians will stick closer to the formulary and control costs better if some of their income is at risk. Their motivation is that by doing a good job, they can even make money.
However, many physician consultants urge doctors to avoid assuming pharmacy risk because it is something they cannot control.
In areas with greater managed-care penetration, physicians sometimes unknowingly assume more pharmacy risk than they had intended. Standard capitation contracts have always allowed shared savings within the pharmacy budget. But over the past three to four years, particularly in California, health plans have built in more pharmacy risk.
What's more, injectable drugs have always been built into contracts as an added risk because they were considered in-office treatments administered by doctors.
Now many injectables are administered on an outpatient basis or by the patients themselves.
"Injectables weren't a problem as long as they were given in the doctor's office," Mason says. "Now what's happened is more injectable medications are coming out that are outpatient therapy. So physicians still assume the risk without any control."
On the other side, the National IPA Coalition, based in Oakland, Calif., maintains that physicians already are at risk and had better find ways to control it.
"Everyone's running from pharmacy risk," says Richard Dixon, M.D., NIPAC's medical director. "It's important for physicians to realize they are already taking the risk, like it or not. We live in an environment of relatively fixed budgets. Drugs are necessary, and they are extra.
"(Drugs) are PacMan; they eat everything. No matter who is paying the bills, the provider side gets hurt. As part of capitation, the prescription drug budget is part of that risk, particularly on the injectable side. And with more injectables coming (into the marketplace), the situation is only exacerbated."
The word "control," usually preceded by "lack of," is used a lot in discussing pharmacy risk. In response, NIPAC devised ManageRx, a software program that tries to return some control to IPAs. The program merges drug utilization data from participating health plans and provides it to the IPAs in a format they can analyze.
By using ManageRx, an IPA can determine:
- Drug utilization across the physician and member base.
- Prescription trends.
- Specific utilization history by patient, drug or physician.
- How the IPA compares with other peer organizations of similar size and patient load.
"The program helps cost and care management," Dixon says. "Ultimately, to be successful at controlling risk, the IPA must have an adequate information system to identify what drugs are being used and link that to a patient's use and diagnosis. This is not saying no to drugs but rather having a tool that allows physicians to understand how to use them when necessary.
"The biggest problems in IPAs are physicians don't know they are at risk, and they don't have the mechanisms to control or identify the risk. And most physicians don't have the technology to manage and analyze how drugs are used."
The ManageRx program is a start, but ProMed's Mason says the battle is uphill for physicians. He believes the technique will allow IPAs to cut the deficit but not reach profitability. He argues that physicians do not have enough control because the health plans set the benefits, the formulary and other eligibility rules.
"There are 40 health plans in California," says Mason, whose IPA has 550 physicians and 80,000 enrollees and was part of the NIPAC pilot program for ManageRx. "Therefore, any single group will experience multiple and varying plans and formularies. There is no way to control pharmacy costs within that structure without extensive computerization."
Mason says it's too soon to tell what the financial impact of ManageRx will be.
"We (ProMed) can't do it the way each individual contract says, so we came up with a logical approach that relies on the lowest possible cost," he says. "We try to get the doctors to use it across patients and not (make exceptions) for any one plan. We do the right thing instead of (following) the letter of the law. If we do, we're in a better position. In the process, we cut down on duplication and encourage disease management. All this involves spending more money on a database and a pharmacy manager.
"We want our doctors to focus, so we give them an easy target. We have reduced to a few drugs in every class and try to get them to use those prescriptions preferentially. I give them report cards and tie that to financial incentives.
From my point of view, that's the best I can do without control of the formulary and insurance function."
Some experts argue that physician groups should simply reject pressure from health plans to assume more pharmacy risk.
"I personally suggest that it is something that should not be done," says Jerry Coil, regional vice president of Nashville-based North America Medical Management, which manages physician groups as a wholly owned subsidiary of PhyCor. "It's actually just a floating discount against a physician's risk budget, and it creates a big problem with solvency.
"The reason you put pharmacy at risk is to help control prescribing. The problem is a lot of that is beyond a physician's control. One of the tenets of risk is taking a risk for something you can't control. Physicians can only influence a small slice. The designer drugs like Viagra are an example (of what they can't control)."
William DeMarco, president and chief executive officer of Rockford, Ill.-based DeMarco & Associates, consults with doctors and helps form provider-sponsored organizations. He takes a more cautious approach, telling physician groups not to jump into pharmacy risk.
"They have to mature and learn to manage the fundamentals first," DeMarco says. "It's just too much risk for those not set up for it. I have seen physician groups get killed by it. One took it on and didn't control it, and it killed the network. It's a huge risk."
DeMarco says he has seen the process work when physicians take on nonchronic pharmacy risk and work with a good pharmacy-benefit manager or an electronic prescription company. "If you don't know the business, take on a partner that does," DeMarco says.
Coil adds that certain conditions can help physician groups handle pharmacy risk. "It is not just a matter of provider discipline," he says. "I have seen it work when a physician group has an extensive computer system to help them control it. The problem is most physicians don't have the technological infrastructure."
The requirements include a computer system that allows some of the newer electronic prescription systems to be incorporated, in addition to adding and interacting with formulary, disease management and patient history databases.
Trish Anderson, a partner with Phoenix Healthcare Consulting, agrees that computerization, and educating physicians and helping them monitor prescriptions is the only way assuming pharmacy risk might work.
"But really," Anderson says, "it is a quagmire for physicians. They have no idea what they're getting into. Physicians are always going to be thinking about the patient and not cost. They have to."
The consulting community agrees that physicians are part of the solution but not the solution itself.
"When you package pharmacy risk, you are insulating (the patient and the health plan) from what is happening in pharmacy costs," Coil says. "To change the environment, (the patients) have to fully feel the impact. Physicians have to be responsible, but they can't take the risk."
What exactly is the responsibility of the physician? Anderson says patient education is one place to start, and establishing a pay-as-you-go deductible plan also is important. Such a plan would encourage patients to choose less-expensive drugs.
DeMarco says getting rid of pharmacy benefits and having patients feel the full impact of drug costs is another.
A low copayment exacerbates the situation, Anderson says, because it discourages patients from taking responsibility for drug choices.
"A patient needs to be educated about the correct use of drugs, particularly with expensive designer drugs popping up," she says. "Some hospitals are doing extensive education with videos, but people have to start taking responsibility for their own health and the costs associated with that."
W.A. Weronka is a Los Angeles-based writer who contributes frequently to Modern Physician.