Doctors can't seem to get a break. In the 1990s, the revenues of medical practices and the income of individual physicians took major hits from managed care. Now that they are accepting more risk-based contracts, they are being socked by skyrocketing drug costs.
"There is clearly a crisis in terms of costs," says Mark Frisse, M.D., vice president of clinical information at Express Scripts, a pharmacy benefit management company (PBM), in St. Louis. At an annual growth rate of 15 percent, drug costs are the fastest rising component of the medical dollar spent by managed-care organizations, he says. Indeed, the cost of providing pharmaceutical benefits exceeds the cost for the hospital bed and the cost of physicians' professional services in group health insurance products, according to research by David J. Gibson, M.D. and CEO of RxPhysician.com. He presented the findings at the National Congress on the Future of Pharmaceuticals in Washington last December.
Rising drug costs profoundly affect medical groups that enter into risk-based contracts, which include pharmacy benefits. Medical groups, particularly in Southern California, have entered into unrealistic contracts with health plans in which they agree to deliver per member per month pharmacy benefits of $14 to $16 but wind up spending $20 due to rising drug costs and utilization, Gibson says. Under their contracts, Southern California medical groups face annual seven-figure penalties for delivering the pharmacy benefit over budget.
But doctors shouldn't hang up their white coats just yet, experts say. Physician and patient education, technology, and disease management programs can help to control drug costs, they say.
Drug price drivers
Drug costs are rising as a result of a variety of factors, Frisse says. For example, there are many new and more efficacious classes of drugs coming onto the market, often with high price tags. Another cause is the incredible amount of direct-to-consumer advertising by drug companies, creating demand for costly drugs.
Tiger Management, a large hedge fund in New York City, estimates that direct-to-consumer advertising will grow to $2.7 billion by 2003 from less than $500 million in 1994. Drug companies are specifically trying to induce demand for newer, more expensive drugs, Gibson says. He cites Claritin, the antihistamine from Schering-Plough, pointing out that the company spent $57 million marketing the drug. It now enjoys 58 percent of the U.S. antihistamine market, he says.
Thomas Mayer, M.D., executive director of managed-care education at the Institute for Healthcare Advancement in Whittier, Calif., says that steps that managed-care organizations have taken in the past, such as showing physicians the prices of drugs they prescribe, simply are no longer sufficient to handle pharmacy risk.
"The pharmacy reps have found an end run in direct-to-consumer advertising, and the health plans are delegating that risk (for pharmaceutical benefits) to physician organizations who are likewise ill-prepared to handle the consequences," Mayer said.
"Placing hope in PBMs is misguided because of their lack of financial risk. Anyone who thinks PBMs are going to be utilization managers are drinking something." PBMs serve as the middleman between health plans and drugmakers and retailers by managing about a third of all drugs prescribed in the country.
Their aim is to lower pharmaceutical costs, sometimes by getting discounts from drugmakers and pharmacies for their employer clients.
Drugmakers, for their part, oppose regulation of drug prices or advertising, pointing out that they should be allowed to recoup the tens of billions of dollars they spend every year in drug development.
In an effort to control drug costs, Partners Community HealthCare in Boston has sharply increased the use of generic drugs through physician education, says Jessica Dudley, M.D., an internist and assistant medical director. For example, in 1997, only about 18 percent of cholesterol drugs prescribed by the group were generics but in early 1999, 64 percent were. Partners, which represents about 1,000 primary-care physicians and several thousand specialists, is a physician network operated by the Partners HealthCare System, which is comprised of eight hospitals and clinics, including Massachusetts General Hospital.
The Partners HealthCare System is an integrated delivery system that is attempting to provide a continuum of coordinated care in the Boston area.
Partners Community HealthCare, which enters into many risk-based contracts, employs six full-time pharmacists and nurses to educate its doctors, says Dudley, who herself sees patients and works in the same environment as other doctors.
"They go out and meet with physicians in group settings, and we target" the drugs most prescribed, Dudley says. "Pharmacists are perceived as working for the physicians rather than as a PBM or HMO coming in and telling them what to do."
Partners targets the areas where its physicians write the most prescriptions, including cardiovascular drugs, antidepressants and cholesterol and gastrointestinal drugs. It also publishes a variety of reports on current and new drugs in an effort to keep doctors informed and less vulnerable to pharmaceutical reps, she says.
The battle to cut drug costs amounts to "well over" a half million dollars a year but is worth it because the program is saving more than it costs, Dudley says. "We have effectively written for less costly (drug) agents."
Now, Partners is set to implement an even more ambitious target--utilization.
Staff pharmacists will remind doctors of existing guidelines and share peer data among physicians.
The project will involve comparing drug usage guidelines, drugs prescribed and clinical data and will include interviews with patients in an effort to find out whether patients stayed on a particular drug for the right amount of time.
Although no specific time frame has been established, Partners also hopes to save on drug costs. If the plan works, doctors will be able to discuss medication usage with their patients the next time they come in.
"What's really important is utilization," says Richard Fry, senior director of pharmacy affairs at the Academy of Managed Care Pharmacy in Alexandria, Va., which represents pharmacists in managed-care organizations. Doctors need to make sure that patients are correctly taking the right dose and that the side effects are being appropriately managed, he says.
He points out that 50 percent of patients with hypertension fall off their drug regime within six months to a year. While that saves a plan money in the short term, it has the potential of big costs over time in increased hospital utilization.
Like a number of other systems frustrated over pharmaceutical costs, Partners has put drug detailers on a tight leash (see November, page 10). Three years ago, the group began restricting drug representatives from visiting some doctors' offices to days when pharmacists will be on hand so doctors can hear both sides of the story.
Finally, Partners has instituted a "direct-to-consumer anti-campaign." Staff pharmacists in conjunction with the medical director put out weekly one-page notes on new brand-name drugs to allow doctors to advise patients on whether the drug is worth taking. Doctors have been thrilled to get the information, Dudley says.
Doctors also are using technology to help fight drug costs. Quantum Southwest Medical Management, a physician practice management company in San Antonio, has sharply increased the use of low-cost generic drugs using technology. Quantum, which manages 14 practices with 250 doctors, uses Allscripts' TouchScript medication management system.
Such systems use mobile, hand-held wireless devices that provide physicians with information as they prescribe, regarding potential drug interactions, drug histories and payer-specific formulary guidelines. They also allow ordering of laboratory tests and can capture billing charges at the point of care.
Similar medication management software is available from a number of new companies that have jumped into the electronic prescribing marketplace, including Way Over the Line, creators of PocketScript; and iScribe, a San Mateo, Calif., company founded in January 1999 with the assistance of several venture capital firms. By March, iMedica of Mountain View, Calif., plans to launch a system it tested at Stanford Medical Center.
Quantum CEO Alvaro Montealegre says that two years ago, the practice's doctors were prescribing generics about 42 percent of the time. Now it's 51 percent, and Montealegre predicts that figure will rise to 62 percent in a few years as more doctors adopt the system and begin shopping for the best and cheapest brand name drugs when no generic equivalent exists.
Quantum started using Allscript's software in September 1998. When doctors want to prescribe a drug, they can automatically see which drugs are on the formulary for that patient's health plan. According to spokeswoman Brenda Stewart, there is no limit as to the number of formularies its software can follow, currently at 800.
The technology also allows doctors to see the names of brand drugs and their clinically equivalent generics side by side with prices.
When doctors decide to "write" the prescription, they put the relevant information into the electronic form. The prescription is then electronically sent to a selected pharmacy and a printout is given to the patient. Montealegre says that the system saved Quantum $1 million in the first year of implementation and is expected to save at least $1.5 million in the second year.
Montealgre declined to comment on how much the software cost to install and support. But Allscripts executives say setting up a system runs about $250 per month, per full-time (or equivalent) physician.
Most large drugstore chains have computer systems equipped to deal with medication management software, and those that don't need only a fax machine that receives a computer-generated prescription.
The system not only allows doctors to prescribe less costly generic drugs but also improves patient satisfaction. Montealegre says that the system eliminates the potential of a doctor writing a prescription for a drug not covered by the patient's formulary. This would be an embarrassing moment at the drugstore when the patient is asked to pay a steep bill to get the prescription filled. It also eliminates the time needed for doctors and nurses to talk with the pharmacist to resolve the problem and time spent by both doctor and pharmacist in deciphering an illegible script.
Finally, the system circumvents patient complaints about generics, Montealegre says. In the past, the physician would check off the generic box on a prescription pad, which patients perceived as lower in quality, and so would complain. With the electronic system, the prescription prints the chemical name.
Despite the introduction of the system, however, pharmaceutical costs are still growing by 15 percent to 17 percent a year, Montealegre says, as utilization goes up and more expensive drugs come on the market. But that's OK with him.
"The objective isn't necessarily to reduce access to drugs to patients," Montealgre says. "What we're interested in is the most effective use of the resource dollar." He explained that medication costs should consume a larger part of the medical portion of a healthcare dollar as the patient is shifted away from costly hospital settings, for example, by taking drugs to control diabetes instead of suffering seizures and winding up in an emergency room.
One of the big drawbacks to electronic prescribing, Fry says, is that few systems link the pharmacy component, the medical data and the insurance information together. As a result, if patients see specialists and then return to their primary-care doctor, the patient's medical records will not be complete.
Stewart said, however, that her company's software allows doctors in different offices to share the same database. For example, if a patient sees a cardiologist in one office and then goes to see an internist in another office a few days later, the internist can see what drugs the cardiologist prescribed. If the physician doesn't look and begins to prescribe a drug, a signal will alert the doctor if the drug, dosage or other variables are inappropriate based on medical and drug data already entered into the database.
One proven method of keeping costs in check, Fry says, is using pharmacists to help doctors dispense and monitor medications.
"Most of our members are involved in some way in disease management programs for chronic diseases," Fry says. "While we don't have a large database on those studies, the ones we do have have shown significant reductions in overall costs."
For example, a study published in 1998 found that one diabetes disease management program achieved savings of $50 per diabetic member per month.
Hospital admissions per 1,000 diabetic member years decreased by 18%, and bed days fell by 21%.
Another study compared two clinics to determine the effectiveness of an ambulatory care clinical pharmacist in assisting recognition of drug therapy problems for physicians and decreasing drug therapy costs. The clinic with the pharmacist realized savings of four times the pharmacist's salary. And another study found that the intervention of a clinical pharmacist decreased the average cost of antihypertensive treatment from 33.4 to 27.2 cents per day.
Based on such studies, Fry believes that there's probably more opportunity to impact the indirect costs of pharmaceuticals than the direct costs. "The thing you find is that because they (disease management programs) emphasize compliance, your pharmaceutical costs invariably go up but you're impacting admissions," he says.