By Christopher Guadagnino, Ph.D.

Pa. Secretary of Aging Richard Browdie

Published August 2001

• Mending Pa.'s senior Rx coverage crisis (January 2002)
  
• React to this article in the Discussion Forum.

A growing number of elderly Pennsylvanians may find themselves unable to obtain medications that their physicians prescribe, as recent trends are fueling a mounting crisis of affordable access.

An estimated 33 percent of Pa.’s seniors have no prescription drug coverage, according to AARP of Pennsylvania, while many of the state’s Medicare HMOs have either exited from the market, eliminated or reduced prescription drug coverage, or significantly raised premiums and copayments.

While Medicaid covers medications for the poorest elderly Pennsylvanians, the state’s model program assisting the low-income elderly with the purchase of prescription drugs—the Pharmaceutical Assistance Contract for the Elderly (PACE) and its Needs Enhancement Tier (PACENET)—is in financial trouble. Although legislators and Gov. Ridge have recently agreed to a tobacco settlement allocation which devotes eight percent—roughly $28 million—to expanding income eligibility for PACE and PACENET, that amount falls far short of the program’s needs and enrollment increases may actually hasten the program’s demise.

Pa. legislators are meeting this summer with the Pa. Department of Aging, which oversees PACE, to review several cost containment proposals to save the program. Among the proposals on the table are: mandating discounts on retail drug prices beyond current rebates available to PACE; instituting a drug formulary; requiring therapeutic substitution (generic instead of brand-name) for most medications; and requiring "step therapy" protocols, whereby physicians would refrain from ordering the most expensive drugs before prescribing less expensive alternatives.

Legislation introduced in the Pa. Senate and House also includes broader cost reduction mechanisms such as increasing purchasing clout by combining all of the state’s prescription drug purchasing programs into one pool overseen by a single pharmacy benefits manager and having the state set price controls on pharmaceutical companies.

Meanwhile, physicians find themselves pressured by quality guidelines and by patient demand to prescribe more and newer medications, which sometimes go unfilled or are taken at reduced dosages by elderly patients trying to minimize their costs.

Although physician recourse is limited, there are some avenues they can pursue to help their elderly patients afford their prescriptions, such as dispensing samples and enrolling patients in free drug programs offered by pharmaceutical companies.

The availability of prescription drug coverage has a material impact on drug usage and on quality of health care delivered. According to a Kaiser Family Foundation study, Medicare beneficiaries with drug coverage filled an average of 24 prescriptions in 1998, while those without drug coverage filled an average of 16 prescriptions, notes Beaufort Longest, director of the University of Pittsburgh’s Health Policy Institute. People without insurance probably have poorer health and are likely to require more, not fewer, prescriptions than those with coverage, Longest maintains.

Elderly patients get tremendous benefit from pharmaceuticals, which are required in advance to be proven safe and efficacious, thereby offering a much higher cost-to-benefit ratio than other types of treatment, says Bernard Bloom, Ph.D., senior fellow of the Leonard Davis Institute of Health Economics and research professor in the Department of Medicine at the University of Pennsylvania.

Increasing expenditures on pharmaceuticals is 90 percent driven by the growing volume of their use, Bloom says, citing a recent study in the American Journal of Managed Care. He believes that increased usage is necessary and good news because most chronic diseases in an increasingly older population are now treatable with pharmaceuticals, which also decrease hospitalization rates.

PACE in Trouble

A model program to address the problem of affordable drug access among Pa. seniors is about to slip deeply into the red. Pa.’s PACE and PACENET provide prescription drug coverage for the poor elderly who earn too much to qualify for Medicaid. Seniors must have less than $14,000 annual income for singles and $17,200 for married couples to be eligible for PACE; and $14,000-$17,000 for singles and $17,200-$20,200 for married couples to be eligible for PACENET. The upper eligibility threshold for PACENET reflects a $1,000 increase funded by the state’s tobacco settlement allocation agreement.

PACE requires a $6 copayment for each prescription, while PACENET enrollees are responsible for a $500 yearly deductible after which they pay an $8 copayment for generic drugs and a $15 copayment for brand name drugs.

Dept. of Aging data indicates that, as of this February, PACE enrolled 26 percent of eligibles, or 208,000 Pa. seniors, while PACENET enrolled 20 percent of eligibles, or 22,000.

Pa. Secretary of Aging Richard Browdie defends the program by noting that most unenrolled eligibles have drug coverage from other sources, e.g., Medicare HMOs cover 12 percent of PACE eligibles and 35 percent of PACENET eligibles, and employer retirement plans cover 28 percent of PACE eligibles and 25 percent of PACENET eligibles. Only ten percent of PACE eligibles and 18 percent of PACENET eligibles had no drug coverage as of this February.

"We’re doing great on behalf of the people we can cover," claims Browdie. With low administrative costs, the PACE and PACENET program is an efficient and effective administrator of the drug benefit compared to claims processing of private benefits managers, he maintains.

The question, says Browdie, is whether the state can afford to expand eligibility to cover more people. He notes that the combination of drug cost increases and the growing number of medical problems that are becoming treatable through pharmaceutical intervention makes the PACE program’s effective inflation rate about 22 percent each year. With an average age of 80 years, the PACE enrollees’ drug utilization is also higher than the national average, Browdie adds. Except for mandatory use of generic drugs when an A-rated generic equivalent is available, the program does not use a formulary, a list of preferred drugs used by most HMOs, to rein in costs.

As PACE is funded by a state lottery with a flat annual revenue stream, he says, there is growing concern that the fund can maintain, much less expand, its eligibility limits. With the cost of PACE rising 22 percent each year, the state lottery fund is projected to be nearly $500 million in debt by FY2004-05.

The program also lacks a cost-of-living eligibility index, something Browdie says the General Assembly has never been able to afford, resulting in PACE enrollees losing their eligibility because of increases in their Social Security earnings. Money from the state’s tobacco settlement has been allocated to fund a two-year moratorium on people being bumped out of PACE because of Social Security income increases, Browdie notes, while he expects PACENET’s enrollment to increase by 10,000 since the tobacco settlement funding increased its income eligibility threshold by $1,000.

Legislative Recourse

The tobacco agreement also mandates that a cost containment committee discuss measures to sustain the PACE program in the face of its projected deficits and deliver a recommendation by the end of September. Browdie points to four specific cost containment proposals to be examined by the Dept. of Aging and Pa. legislative leaders this summer, each of which is contained in SB 700, introduced by Sen. Tim Murphy (R-Upper St. Clair):

• Step therapy protocols, based upon recommendations by a technical advisory committee composed of physicians and pharmacists, to "ensure appropriate utilization in the management of medical care." Such protocols would call for prescribing less costly pharmaceuticals reimbursed by PACE and PACENET before more expensive ones were tried.

• A formulary and three-tiered copayment schedule for generic, preferred and nonpreferred pharmaceuticals reimbursed by PACE and PACENET.

• Maximum allowable prices based on national Medicaid data to enhance the drug rebates received by PACE and PACENET (currently 17 percent) by limiting what drug companies could charge for multisource drugs.

• Mandatory best pricing offered to state agencies such as PACE based on the best price that drug companies charge hospitals and other health care organizations in the state, also aimed at enhancing the rebate to PACE.

Browdie believes that the most potent cost control mechanism among the proposals would be a formulary with a medical exception process built in, which he says poses the least administrative burden and could effectively move discretionary users to less expensive medications.

Murphy’s bill would also address the problem of diminishing access to prescription drugs by creating a new program targeting seniors not covered by PACE or PACENET whereby the state would contract with one or more pharmacy benefit managers to allow seniors to purchase a low-cost, catastrophic prescription drug insurance program that would cover a large percentage of drug costs up to a certain annual amount and cover all costs over that amount. The program would be funded by a progressive scale of premiums and copayments based on enrollee income and the coverage thresholds would need to be worked out in consultation with the Dept. of Aging, says Murphy.

"To be honest, I’m not sure how much interest there is in the General Assembly to provide a wide-ranging insurance plan, particularly because we have no idea yet what the federal government is going to do," says Murphy, noting that some legislators fear that a comprehensive plan might diminish future federal funding, as happened with the CHIP program, where Pa. got less on the dollar from the federal government than other states because it had a CHIP program already in place.

Pa. should not wait for the federal government to fix the problem through a Medicare drug benefit, believes Longest. According to Congressional Budget Office cost projections, he notes, the overall rate of increase of all Medicare benefits over the next ten years will be 5.7 percent, while drug spending by the Medicare population, whether covered or not, is projected to rise by 10.3 percent, making a Medicare prescription drug benefit a significant limiting factor in Congressional Medicare reform.

Murphy says a bipartisan sentiment does exist in the Pa. General Assembly to put together a plan to preserve the PACE program and explore further drug cost control mechanisms without waiting for Congress to pass Medicare reform.

SB 300, introduced by Sen. Jay Costa, Jr. (D-Allegheny), would pool all of the state’s 20-plus drug purchasing programs under a single pharmacy benefits manager for all public drug coverage plans, including PACE, the retirement systems for state and public school employees, and—pending a review by the Department of Public Welfare—the state’s Medicaid program.

By pooling all state-affiliated programs under one purchasing entity, says Costa, the state would have more clout to negotiate enhancements to the price rebates it currently receives from drug companies. Moneys saved through enhanced rebates, which Costa projects would total between $105 million and $120 million per year, would be used to expand the eligibility of the PACE program. In addition, the bill would allow all Pa. seniors to purchase prescription drugs at the PACE program price, which Costa estimates would amount to a 10 to 15 percent savings to all Medicare recipients.

Costa’s plan would also address the erosion of seniors’ access to PACE. "We can increase the income limits of PACE by $3,000, expanding its pool of participants, and get the pharmaceutical companies to pay for it, instead of using state money," says Costa.

Similar to Murphy’s bill, Costa’s proposal would create an oversight committee to develop a system to provide prospective, concurrent and retrospective review of drug utilization patterns designed to compare those patterns to national benchmarks and to educate licensed prescribers and pharmacists on proper drug utilization. The bill would also explore the possibility of creating a uniform drug formulary for all state drug coverage plans.

Murphy, as chair of the Senate Aging and Youth Committee, will oversee the review of potential drug cost savings contained in the various legislative approaches. Both he and Costa are open to combining elements from each bill, as well as those of other proposals.

One proposal they both reject as politically unrealistic and vulnerable to legal challenge is contained in HB 444, introduced by Rep. Don Walko (D-Allegheny), which would create a program in which the state functions as the pharmacy benefits manager, establishes price controls on drug companies and brings civil actions with monetary penalties against drug companies that engage in profiteering. Maine passed such a law, and a federal appeals court recently lifted an injunction that barred the state from enforcing the law until a constitutional challenge from the pharmaceutical industry was heard.

Murphy’s bill also leaves open the possibility for Pa. to enter into a multistate agreement to purchase drugs in bulk, similar to a plan by six states—West Virginia, Georgia, North Carolina, South Carolina, New Mexico and Washington—that hope to assemble more than a million state employees, retirees and their families under a single pharmacy benefits manager and use the combined leverage to demand steep rebates from drug companies.

Physician Recourse

Until the General Assembly addresses these issues, physicians can begin to address them by thinking more carefully about their prescribing behavior. Although newer medications are often safer and more effective than older ones, those that are still under patent can cost $100 to $200 for a one-month supply, producing "sticker shock" in patients and leading some to avoid filling their prescriptions, while others stretch their supply by reducing their doses—all without telling their physician, says Susan Denman, M.D., medical director of the Temple Continuing Care Center.

Physicians need to be more aware of drug costs when prescribing, says Denman, and should be more proactive on the issue by asking patients if they are taking their medications, prescribing as few as possible and taking the time to consider switching a patient’s old medication instead of prescribing a new drug to treat side effects of old ones. Newer communication tools such as palm pilots can help inform physicians, not only about drug interaction data, but about drug costs as well, she adds.

In the recent past, geriatricians had tried to curtail prescribing of an excessive number of medications because the threshold of a patient’s ability to comply with a prescription regimen drops off steeply after five or six medications, perhaps because of cost, says Eric Rodriguez, M.D., medical director of UPMC’s Benedum Geriatrics Center.

The situation today is more complicated, he says, because the availability of efficacious drugs for new indications—especially treatments for chronic diseases such as hypertension, congestive heart failure, cardiovascular disease, osteoporosis, dementia and Alzheimer’s disease—confounds a physician’s impulse to reduce the number of medications he or she prescribes to elderly patients. Whereas physicians used to prescribe for symptomatic treatment, a major role of medication today is to reduce complications of chronic diseases and many practice guidelines regard a higher prescribing volume as an indicator of quality, Rodriguez points out.

Dispensing samples has been a traditional way for physicians to help indigent patients receive medications, and Rodriguez says he reserves that avenue on an ongoing basis for those patients with the highest need and lowest ability to pay. But that solution is not efficient, he notes, as his institution requires more paperwork for dispensing samples than for writing a prescription, and it is difficult to maintain a full stock of samples.

Samples are an even less reliable source of medications for chronic problems.

Another stopgap measure, says Rodriguez, is to apply on a patient’s behalf to free or discounted medication programs offered by most pharmaceutical companies as a goodwill gesture for physicians. Such programs typically provide a one-month supply of a drug, which can be repeated by filling out a new application each time, he says.

There is a website, NeedyMeds.com, that lists nearly 180 such programs categorized by drug company and allows physicians to access each company’s application forms and procedures, notes Rodriguez.

Although physicians are becoming increasingly aware of the problem that high-cost drugs presents to elderly patients, Rodriquez believes that it has not significantly informed physicians’ decision-making on which drug to select for a given patient. He recommends that "counter-detailing" systems be implemented, either by hospital staff physicians or through the medical literature, to balance the presentations given by pharmaceutical representatives, who often pitch the most expensive drugs, and to point out less expensive drugs that have gone off-patent and could achieve equally good results.