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The
Value
of Pharmaceuticals
and Managed
Pharmaceutical Care
CONTENTS
Introduction
..........................................1
Assessing the impact of recent trends . . . . . . . . . . . . . . . . . . . . . . . . . 1
The direct value of pharmaceuticals
The indirect value of pharmaceuticals
..........................3
.........................4
Maximizing the value of pharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . 5
Demonstrating the value of managed care pharmacy
..............7
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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? Introduction
In an era of continually rising expenditures for health care,
what role do pharmaceuticals play? Why are expenditures for
prescription drugs increasing in comparison to other health
care outlays? Are we getting a fair return on our investment in
pharmaceuticals? What is the managed care pharmacy profession doing to maximize the return on that investment?
Questions such as these do not lend themselves to simple
answers. The role of pharmaceuticals within today’s health
care system is complex, as is the role of managed care pharmacy in promoting their optimal use and effectiveness. The
overriding question is whether pharmaceuticals, properly prescribed and managed, add value to health care, that is,
whether they deliver a fair return on our investment in them. Is
there a positive relationship between costs and outcomes?
The value of some pharmaceuticals can be readily appreciated, especially with the benefit of hindsight. A classic case in
point: polio vaccine. Older Americans can remember the
terror of poliomyelitis, an infectious viral disease of the central
nervous system that often paralyzed children (and was thus
called infantile paralysis) but also struck down adults, including, for example, the young Franklin Delano Roosevelt. Many
polio victims, unable to breathe on their own, spent their lives
in so-called iron lungs. FDR, who lost the use of his legs,
spent four terms as President of the United States in a wheelchair.
Then, in the 1950s, researchers Jonas Salk and Albert
Sabin developed the first vaccines that proved effective against
polio. Figure 1 shows what happened after mass immunizations began nationwide. A disease that afflicted 57,879
Americans in 1952 has all but vanished as a public health
threat.
While most pharmaceutical advances may not be this dramatic, there have been many instances over the years in
which newly developed drugs have not simply reduced mortality, but have also allowed patients to live much healthier and
more productive lives or to return from illness to a higher state
of health than would otherwise have been possible.
In short, pharmaceutical spending may be offset by many
kinds of direct and indirect benefits, including less time spent
hospitalized, convalescing, or otherwise away from work.
These improvements in productivity would otherwise have been
lost on an ongoing basis to chronic physical or mental illnesses. It is in this context that the pharmaceutical cost/value
relationship, along with the role of managed care pharmacy in
maximizing value, needs to be considered.
?Assessing the impact of recent trends
Although pharmaceutical spending accounts for less than 10
percent of the nation’s $1.1 trillion annual outlay for health
care, a recent Mercer/Foster Higgins survey of employer-sponsored health plans shows how dramatically such spending has
risen relative to other health care expenditures. On the medical side, spending increases for 1998, 1999, and 2000 were
6.1 percent, 9 percent, and 12 percent respectively. On the
pharmaceutical side, spend increases for the same period
were 15.5 percent, 16.4 percent, and over 20 percent.
Figure 2 shows 30-year spending trends for hospitals, physicians, and pharmaceuticals, and Figure 3 shows pharmaceutical vs. medical spending increases for 1998–2000.
Figure 2: Health Care Expenditures
450
Figure 1: Pharmaceuticals Reduce Deaths/Deaths from
Polio
250
Polio
Vaccine
1.4
200
•
•
150
1.0
•
0.8
350
300
Deaths from Polio
per 100,000
1.2
400
100
•
50
0.6
0
0.4
0.2
0.0
•
•
•
•
•
1920 1930 1940 1950 1960 1970 1980 1990 1996
Hospital
Physician
Drug
Source: U.S. National Center for Health Statistics, 1999.
The Value of Pharmaceuticals and Managed Pharmaceutical Care A 1
As the data indicate, the shift to newer medications and
increased utilization are clearly factors that merit a closer look.
Figure 3: Pharmacy vs. Medical Trends
>20%
? The shift to newer medications. Newer medications can
16.4%
15.5%
12.0%
9.0%
6.1%
Rx Medical
1998 1
Rx
Medical
19991
Rx
Medical
2000 2
1
Rx & Medical: Mercer/Foster Higgins Survey of Employer Sponsored Health Plans
2
Mercer estimate
The discrepancy between medical and pharmaceutical spend
increases has led many observers to question whether managed care is doing its job in keeping quality care affordable. A
careful look at the facts is warranted.
Data compiled by IMS Health, reflecting actual dollars spent
on prescription drugs by pharmacy benefit management companies (PBMs) and health plans, point to three major factors
(see Figure 4). The data indicate that 4.6 percent of the
increased spending was attributable to price inflation. The
prescribing habits of physicians, that is, a shift to prescribing
newer medications, accounted for 6.3 percent of the increase.
The third factor, and the largest, is increased utilization, which
accounted for 10.8 percent of the increase. In other words,
there was a substantial increase in the number of Americans
taking prescriptions and in the number of prescriptions being
taken.
Figure 4: Increase in Pharmacy Spending
Increased Utilization
10.7%
New Medications
6.3%
be more expensive, especially if they are used instead of a
low-cost generic product. There are many cases, however,
where the shift from older to newer medications can be justified on clinical grounds. Managed care pharmacy has an
important role to play in evaluating new medications to determine the added value they may bring to the management of
disease or symptoms.
Newer drugs may be more effective, may have fewer side
effects, or may lend themselves to being taken more readily,
thus improving the prospects for patient compliance. For
example:
• Increased effectiveness: Only a few years ago there were
few medications that were more than marginally effective
against migraine headaches. Now a new class of triptan drugs, serotonin receptor boosters, is sharply reducing suffering and increasing productivity.
• Fewer side effects: Tricyclics, a relatively early class of
antidepressants, were often effective, but frequently
caused weight gain and drowsiness. Newer antidepressants do not have these side effects.
• Dosage improvements: In the 1970s, patients suffering
from peptic ulcers had to try to ward off surgery using
little else than liquid antacids. Tagamet® revolutionized
the treatment of ulcers by enabling patients to take a
tablet four times a day (at meals and at bedtime). Then
came twice-a-day and then once-a-day dosing. Result:
greatly improved patient compliance and a dramatic drop
(over 72 percent) in ulcer deaths.i
Newer drugs also make it possible to treat previously
untreatable diseases. Although there is still no cure for all
cancer, many forms of it can be treated with pharmaceuticals, often with dramatic results. Cancer deaths among children, for example, have dropped by nearly 60 percent in the
past 25 years. Childhood leukemia, once nearly always fatal,
is now survived by eight out of ten patients.ii
Similarly, AIDS was untreatable when first identified in
1983. Today, combination drug therapy has reduced AIDS
mortality in the United States by more than 70 percent.iii
Thousands of Americans with HIV/AIDS have been able to
remain at work and out of the hospital, thus in many cases
offsetting the relatively high cost (in the range of $15,000
annually) of combination drug therapy.
? Increased utilization. The number of prescriptions dis-
Price Inflation
4.6%
Source: IMS Health, Pharmaceutical Pricing Update, March 2000.
2 A The Value of Pharmaceuticals and Managed Pharmaceutical Care
pensed annually in the United States rose from 2 billion in
1992 to 3 billion in 1999 and, as shown in Figure 5, is projected to reach 4 billion by 2004.iv
abroad showed that treating borderline patients with certain medications would significantly reduce the long-term
risks of heart attacks and strokes. The resulting
best-practice protocols from these studies, coupled with
attention to the studies in the media, and resulting
increase in patient awareness of treatment options have
led to increased use of pharmaceuticals. The increased
use of these medications have reduced both the clinical
and societal costs associated with these life-threatening
conditions. In addition new medications that treat previously untreatable diseases also lead to higher utilization,
but clearly with positive results.
Figure 5: More Users, More Prescriptions
Number of Prescriptions Dispensed in the U.S.
4.0B*
3.0B
2.7B
2.6B
2.0B
1992 1997
1998
1999
2004
* projection
Drug Utilization
Source: National Association of Chain Drug Stores, Inc., “Industry Facts,”
1999.: 1999 Retail Rx Sales Projected to Rise 18%, Surpass $121B on
Volume of Nearly 3 Billion Prescriptions. Aug. 29, 1999.
• The aging of America generally translates into increased
reliance on pharmaceuticals to maintain or restore health
and to do so over longer periods of time. Congestive
heart failure (CHF), for example, affects an estimated 2
percent of Americans age 40 to 59, more than 5 percent
of those 60 to 69, and 10 percent of those 70 or older. vi
As the baby boom generation approaches retirement age,
the population of the elderly will increase by an estimated
33 percent between 2000 and 2020.vii Increased
reliance on pharmaceuticals to prevent and treat CHF
and other conditions affecting the elderly, multiplied by
the predictable increase in the number of persons with
such conditions, will clearly have a significant and continuing impact on overall utilization.
There are four main reasons why utilization is on the rise:
• Managed care makes prescriptions affordable for millions
of Americans who might not otherwise be able to pay for
pharmaceuticals. Health plans offer broad pharmaceutical coverage with generally low out-of-pocket costs. With
enrollment in health maintenance organizations (HMOs)
and preferred provider organizations (PPOs) increasing
from about 75 million in 1991 to more than 175 million
in 1999,v access to prescription drugs has broadly
increased.
• More attention to prevention and improved diagnosis can
mean greater drug utilization. One of managed care’s
hallmarks is its emphasis on diagnostic and screening
programs, which greatly improve the odds of identifying
and treating conditions that might otherwise go undiagnosed until an illness reaches the acute stage. Asthma
and diabetes are good examples. Drug therapies are
often prescribed. Greater utilization also result in part
from the fact that, thanks to the information explosion
and the efforts of managed care organizations, patients
are better informed about the effectiveness of treatment
than ever before.
• An increasing commitment to evidence-based medicine
has led to the development of treatment protocols that
often rely on pharmaceuticals to improve outcomes. In
the case of hypertension, for example, it was common
practice fifteen years ago not to treat borderline-hypertensives. Several multi-year studies in the United States and
? The direct value of pharmaceuticals
As previously noted, pharmaceuticals have both direct and
indirect value. Their direct value is typically seen in their ability
to improve mortality, quality of life, and symptom relief or tolerability, and to prevent or mitigate complications and expenditures for more expensive services.
• Improved mortality: Pharmaceuticals have eliminated or
brought under control many diseases and conditions that
once had high mortality rates (e.g., diphtheria, influenza, pneumonia, polio ) and have dramatically reduced
mortality rates for many others (e.g., AIDS, asthma,
heart attacks, stroke, ulcers). Figure 6 shows the percentage reduction in age-adjusted death rates from 1965
to 1996 for asthma, heart disease, ulcer disease, and
infectious diseases.
Figure 6: Pharmaceuticals Reduce Death Rates
Asthma Medication
Cardiac Medication
Ulcer Medication
Antibiotics
0
20
40
60
80
100
Percent Drop in Age-Adjusted Death Rate, 1965–1996
Source: PhRMA, 1998 & National Center for Health Statistics, 1998.
The Value of Pharmaceuticals and Managed Pharmaceutical Care A 3
• Improved quality of life: Pharmaceuticals can help
patients improve their quality of life in various ways. In
the case of asthma, for example, daily use of certain
medications typically improves well being and reduces
hospitalizations. The debilitating effects of depression,
estimated to affect about 10 percent of adult Americans
and considered the single most debilitating illness in
terms of impaired functioning at work, can often be
relieved by pharmaceuticals. Women at risk for osteoporosis can use pharmaceuticals to help them remain
active and independent. And, as previously noted, pharmaceuticals are helping thousands of HIV/AIDS patients
to avoid hospitalization and disability.
• Symptom relief: Non-steroidal anti-inflammatory drugs
(NSAIDS) can alleviate many kinds of pain and discomfort, and some of the newer NSAIDS can do so with
lower risk of undesirable side effects. Similarly, nonsedating antihistamines can alleviate the sneezing, general discomfort, and even shortness of breath triggered by
allergies, without bringing on the drowsiness associated
with earlier antihistamines.
• Prevention of disease or mitigation of the complications
of disease: Pharmaceutical treatments to guard against
the onset of osteoporosis have the advantage of greatly
reducing the risk of hip fractures and the attendant costs
of hospitalization, rehabilitation, and reduced functioning.
Drugs to control hypertension can reduce the risk of
stroke, and clot-busting drugs can reduce the impact of
stroke when it does occur. Cholesterol-lowering drugs
can prevent heart attacks and their consequences.
Drugs to treat ulcers greatly reduce the need for surgery
and thus avoid the risk of surgical and post-surgical complications. Drugs to manage diabetes can sharply reduce
the risk of diabetic complications such as kidney dysfunction and loss of vision.
The examples above offer just a representative sample of
the many ways in which pharmaceuticals provide direct value.
Another is in reducing reliance on emergency rooms, generally
the most expensive venue in which to receive care and in
some ways the least efficient and effective, since emergency
departments are not geared to meet the patient’s total needs
nor to support continuity of care.
Asthma sufferers, for example, are likely to go to the emergency room when they experience an acute attack. Aggressive
treatment in the ER can open airways and temporarily resolve
a life-threatening situation. But when asthma is inadequately
monitored and managed, patients are likely to experience a
succession of these acute attacks.
The solution for most asthma patients, according to the
guidelines of the National Asthma Education Program, is to
use inhaled corticosteroids daily to combat inflammation. In a
New England study their use has been credited with a 50-percent decrease in hospitalization,viii and a demonstration program in Virginia found that proper management and use of
asthma medications reduced both ER and urgent-care visits by
42 percent.ix In the Virginia case, as Figure 7 shows, for every
4 A The Value of Pharmaceuticals and Managed Pharmaceutical Care
$3 spent on asthma medicines, $17 was saved in emergencyroom costs.x
Figure 7: Pharmaceuticals Reduce ER Costs
For every $3 spent on drugs — $17 saved
30%
20%
10%
0%
-10%
-20%
Asthma
Medicines
Emergency
Room
-30%
-40%
-50%
Source: Virginia Health Outcomes Project (VHOP).
Pharmaceuticals can also reduce reliance on more expensive medical interventions. There are numerous examples of
this, but a dramatic one involves the development of the H-2
antagonists and Proton Pump Inhibitors (PPIs) to treat gastric
ulcers. The availability of these products has reduced the
need for surgery ten fold.
? The indirect value of pharmaceuticals
In addition to their direct value, pharmaceuticals have
important indirect value in helping people live normal, productive lives rather than being forced to succumb to the debilitating effects of illness, particularly chronic conditions. For
employers, the indirect value of pharmaceuticals is reflected in
reduced absenteeism, increased productivity, and overall
improvements in workforce health.
Many employers are working with their managed care pharmacy partners to view pharmaceuticals as an investment and,
as with any investment, are paying close attention to the
cost/benefit ratio. For example, a California study found that
among patients with severe asthma, 71 percent had missed
work because of the disease in the previous three months.xi In
this case the benefits to employers of proactive asthma management are clear.
Health care researchers are assisting employers with this
kind of analysis. For example, in 1997 researchers at the
Massachusetts Institute of Technology (MIT) joined with others
to measure the productivity of employees who suffer from various health conditions when treated with prescription medication.
In one study the MIT researchers examined employees who
suffered from depression, anxiety, migraines, or hypertension. They reviewed pre- and post-treatment work records for
these employees to determine the number of hours worked in
a two-week time period. Figure 8 shows the results.
Employees receiving treatment with pharmaceuticals, particularly those being treated for depression, were able to significantly increase the number of hours worked.xii
Figure 8: Pharmaceuticals Improve Productivity
70
68
66
64
62
60
tiative got under way, Bank One spent 14 percent of its total
health care dollars on depression, much of it for hospitalization. By 1996, although the number of diagnosed cases of
depression had increased substantially, the cost of treatment
had dropped to 6 percent of the bank’s total health care
expenditures. A major factor in the bank’s depression management program has been the usage of selective serotonin
reuptake inhibitors (SSRIs).
As these examples illustrate, the indirect value of pharmaceuticals is an important component of their total value. With
this in mind, researchers have suggested that employers concerned about the rising costs of health care coverage should
make a balanced assessment of such costs by conducting a
careful analysis of physical and mental conditions impacting
employees, identifying the leading cost-utilization drivers, and
exploring the role of various therapies and regimens in mitigating and managing such conditions.xv In many cases the combined direct and indirect value of pharmaceuticals when properly prescribed and managed will be found to far outweigh
their costs.
58
Depression
Anxiety
Pre-Treatment
Migraine
Hypertension
Post-Treatment
Source: Ernie Berndt, “Illness and Productivity: Objective Workplace Evidence,”
MIT Working Paper, May 1997.
In another study, on allergic rhinitis — commonly known
as hay fever — the MIT researchers studied employees whose
job entailed entering claims into a computer system. The
study examined both the number of hours worked pre- and
post-treatment and the number of claims the employees actually entered into the system. Focusing on the difference
between sedating and non-sedating antihistamines, the
researchers found a marked difference in productivity as
measured by the actual number of claims entered per day.
The employees using sedating antihistamines entered 13 percent fewer claims than the group using non-sedating antihistamines. The relative cost to the employer from lost productivity
amounted to an average of $9.00 per employee per day.
The costs and benefits of treating depression and its
effects on the workplace provide another illustration of the
indirect value of pharmaceuticals. In recent years there has
been growing awareness of and sensitivity to the pervasiveness
of the illness and its spillover effects. A 1994 study concluded that major depression was costing employers $33 billion in
reduced productivity and work time missed.xiii And a 1997 survey identified depression as by far the most prevalent of the
five most impairing conditions in terms of their effect on the
workplace (the others were anxiety/panic, ulcers, chronic sleep
problems, and autoimmune disorders).xiv Some employers
have been proactive in encouraging early diagnosis and treatment of depression, with positive results. For example, Bank
One of Chicago through its Employee Assistance Program
(EAP) in the mid-1980s began to emphasize identification and
coverage of appropriate therapy. In 1983–84, before this ini-
? Maximizing the value of
pharmaceuticals: the role of managed
care pharmacy
The pharmaceutical industry at any given moment has more
than 500 new drugs in the pipeline of research and development, with most targeted at major diseases estimated to cost
more than $640 billion annually in direct medical expenses
and lost productivity. xvi Some of these drugs will obviously be
more efficacious and cost-effective than others. Assessing the
relative merits of various drugs for various patients in various
settings is clearly an enormous challenge.
With more than 175 million Americans currently receiving
their health care through managed care arrangements, the
role of managed care pharmacy in maximizing the value of
pharmaceuticals is significant. That role, however, is not
always well understood.
The goal is simple: to provide the right drug, to the right
patient, at the right time. The challenges involved in meeting
that goal, however, are numerous and complex.
? Pharmaceutical selection. The first challenge is to pro-
vide the right drug from among the panoply of available products. Managed care develops formularies, which are lists of
preferred medications, as judged by a panel of experts, used
as prescribing guides to help select the most appropriate medication within a specific class of drugs.
The process of making formulary determinations begins with
a pharmacy and therapeutics (P&T) committee consisting
mainly of physicians and pharmacists whose mission is to
review medications and determine their effectiveness, safety,
and overall value, both on their own merits and relative to
alternatives.
The Value of Pharmaceuticals and Managed Pharmaceutical Care A 5
The P&T committee usually examines medications by therapeutic category and first examines overall safety and efficacy.
Once the most favorable medications have been identified, the
committee examines cost factors to determine the best value.
When this process has been completed, the committee determines the level of coverage that a medication will have. If a
lower cost generic medication has been shown to produce an
equivalent or superior clinical response, P&T committees promote them as the best value for that pharmaceutical class.
P&T committees must constantly evaluate newer medications
to determine which ones truly deliver excellent value as well.
The medication selection process is made more complicated
because of individual responses to drug therapy. Even when
the most ideal medications have been selected for preferred
coverage, there will be times when an individual patient will
need to receive a different agent. The process for making
individual exceptions where appropriate is an important aspect
of this formulary management process and it underscores the
goal of meeting individual patient needs.
? Drug utilization review. Further complicating drug selec-
tion is that there are other factors to consider when a specific
medication is prescribed for a patient. A formulary may
include some of the best medications, but clinicians need to
determine if a drug is appropriate for a particular patient at the
time the patient is receiving it. For example, there may be
other medications that a patient is taking that will conflict with
the new therapy.
To deal with such issues, managed care has developed a
vitally important process called drug utilization review
(DUR). Prior to a medication being dispensed, it is reviewed
against all other medications that the patient is known to be
taking. Possibly a different prescriber has ordered a medication that might cause an adverse interaction or might duplicate
the actions of another drug. When these types of situations
arise, the managed care system warns the pharmacist that a
potential problem exists. The pharmacist must then communicate with the patient and/or physician to determine the appropriateness of the new medication being dispensed.
The DUR system can also be used to ensure that new prescriptions comply with plan benefit parameters. Medications
are commonly covered for a specific time period (for retail prescriptions the norm is 30 days). The DUR system will review
all new prescriptions to determine that the day’s supply is
within coverage limits. DUR can be helpful in assessing
patient compliance and in detecting people who may be
attempting to defraud a prescription drug program.
DUR’s principal function is to help ensure that the right drug
gets to the right patient at the right time. In doing so, however, DUR also helps maximize the value of pharmaceuticals and
pharmaceutical expenditures. A 1994 study by Minnesota
researchers determined that every dollar spent on the DUR
process saved $2 to $3 in pharmaceutical costs.xvii These savings were realized mainly by preventing drug-to-drug interactions, controlling for under- and over-utilization of medications,
and improving compliance with benefit parameters.
6 A The Value of Pharmaceuticals and Managed Pharmaceutical Care
? Providing information to all members of the health
care team. Physicians and other members of the health care
team are constantly challenged to find the time to locate,
assess, and absorb information regarding the latest and most
effective drug therapies. One of managed care pharmacy’s
responsibilities is to disseminate such information by mail, fax
and, increasingly, online. Access to this kind of information is
important for health care professionals, plan sponsors, and
patients.
Managed care organizations work with physicians and other
health care team members to meet national guidelines for
drug treatment of specific disease states, such as diabetes,
asthma and hypertension. In this way managed care pharmacy makes an important contribution to the adoption of best
practices and the advancement of evidence-based medical
care.
For example, considerable research in recent years has
shown that patients who have had a myocardial infarction
(MI) are much more likely to recover and to have fewer relapses when their hypertension is treated with a class of drugs
called beta-blockers. Studies have shown, however, that betablockers have been underutilized. Many managed care organizations are identifying patients who may benefit from these
medications and then working with their physicians to ensure
that patients will receive the benefits from this class of drugs.
The National Committee for Quality Assurance (NCQA),
studying data from NCQA-accredited health plans, found that
physician use of beta-blockers to treat MI patients increased
from 62.5 percent of cases in 1997 to 82.3 percent in 1998,
nearly a one-third increase in a single year. xviii In terms of mitigating the effects of MI, this has clearly been a cost-effective
initiative. Even more importantly, it has saved lives: NCQA
estimates that increased use of beta-blockers meant the difference between life and death for 2,000 patients in 1998.xix
To put the value of beta-blockers and, by extension, other
drug therapies into a broader context, we can use economic
analysis to compare the cost of saving the life of a heartattack survivor with other life-saving interventions. Figure 9
shows some comparisons. For example, the nation must
invest about $210,000 in smoke detectors to save a single
life. We must spend $110,000 on mammography to detect
and treat a single life-threatening cancer. xx These are rightly
considered good investments. By comparison, beta-blockers
cost $850 per patient on average. The extraordinary value
they deliver is measured not only in saving lives, but also in
preventing severe complications and improving the prospects
for a healthier life.
Figure 9: Life Saving Comparisons
$210,000
Home Smoke Detectors
$110,000
Annual Mammography Women 55–64
$42,000
Driver Airbag/Lap Belt
$26,000
AZT for People with AIDS
Lovastatin Men 55–64 with Heart Disease
Beta Blockers for Heart Attack Survivors
$0
$20,000
$850
$50,000
$100,000
$150,000
$200,000
$250,000
Source: Tengs et al. Risk Analysis, Vol. 15, No. 3, 1995.
? Medication distribution networks. Managed care organi-
zations establish and oversee regional and national networks
of pharmacies qualified to meet members’ needs, including
mail-order and internet-based pharmacy services. Programs
are also in development to promote quality improvement and
to minimize prescribing and dispensing errors by creating new
networks that use the latest in hand-held computer
technology.
Once again, the goal is to get the right drug to the right
patient at the right time. The Institute of Medicine (IOM) in its
recent much-publicized report on medical errors identified mistakes in prescribing and dispensing drugs (often in hospitals)
as the single largest cause of medical errors responsible for an
estimated 44,000 to 98,000 preventable deaths annually. xxi
Managed care organizations are in the forefront of efforts to
reduce the prevalence of such errors by designing and implementing systems to anticipate and control them.
? Demonstrating the value of managed
care pharmacy
Numerous studies support the conclusion that active care
management maximizes the value of pharmaceutical benefits.
To improve treatment of congestive heart failure (CHF), for
example, a major health plan enrolled 2,100 patients in a CHF
disease management program emphasizing education about
the disease, the importance of adhering to a treatment regimen including taking prescribed medications such as
angiotensin-converting enzyme (ACE) inhibitors, and dietary
changes.
The program produced impressive results. A study found
that although pharmacy costs increased by $243,000 (60
percent) primarily because of increased use of ACE inhibitors,
the program saved $9 million in hospitalization costs avoided.
On a per-patient basis, the increased cost for drugs amounted
to $1,674, while the hospital costs avoided totaled $10,617.
This cost offset resulted in a net savings of $8,943 per
patient.xxii Given that CHF affects millions of Americans and
accounts for nearly 900,000 hospitalizations annually, xxiii the
benefits of active pharmacy management, in tandem with programs to manage diet and other lifestyle changes, are abundantly clear.
The databases used by managed care organizations have
many benefits above and beyond controlling medical errors
and inappropriate utilization of pharmaceuticals. Data can
also be used to evaluate the treatment of patients with specific diseases. A good example is the Diabetes Netcare
Management Program, operated by seven different managed care organizations.
In 1998 there were 7,000 diabetic patients enrolled in the
initiative, which included a patient-education program, a program to promote compliance with prescribed therapy regimens, and a program to keep physicians informed of evolving
national best-practice guidelines. A key element contributing
to the success of the initiative was the use of advanced information technology to link all aspects of the program.
A progress review, conducted after the first year of the program, found that hospital admissions had dropped by 18 percent and that the program had achieved a savings of 12.3
percent in overall expenditures on diabetes management.xxiv
This is a clear-cut example of how the best care can also be
the most cost-effective. With managed care organizations
coordinating care with all members of the health care team,
everyone wins: patients enjoy better health and health care
purchasers can see the value of their health care outlays.
Another such program, for patients with asthma, was put
into effect by one of the largest pharmacy benefit managers in
the United States. AdvancePCS designed a program with the
goal of improving patients’ health and reducing overall costs.
A total of 1,811 patients with chronic asthma were enrolled in
the program and followed for 12 months. The program
involved educating them about asthma and explaining the purpose and proper use of each medication; performing followThe Value of Pharmaceuticals and Managed Pharmaceutical Care A 7
ups on a scheduled basis; performing treatment reviews; and
educating physicians about national best-practice guidelines
and informing them of their patients’ compliance with prescribed regimens.
A program assessment at the 12-month mark showed significant progress. Although medication costs increased, emergency room visits declined by 17 percent; hospital admissions
declined by 14 percent; the number of hospitalized days
declined by 21 percent; and doctor visits declined by 22 percent. In one year the program saved $270,000, or $150 per
enrollee.xxv
Another example in the treatment of asthma involved a
health plan in Utah. Intermountain Health Care reviewed the
medication usage patterns of its asthmatic patients. By working with their participating physicians, the plan was able to
increase the use of inhaled corticosteroids, which help control
the disease, and reduce the need for beta-agonists, which
treat the symptoms such as wheezing. While improving the
care of these patients the plan was able to reduce emergency
room visits by 54% and hospitalizations by 34%.
These are excellent examples of managed care initiatives
that improve health while constraining overall costs. Consider
the implications for a moment. It is estimated that 17 million
Americans have asthma and they make more than 1.9 million
emergency room visits per year. The direct costs of asthma
are estimated at more than $9.8 billion annually. Proper use
of pharmaceuticals, through well-conceived disease state
management programs can improve the health of millions of
Americans, while at the same time producing a dramatic overall savings.
? Conclusion: Maximizing the return on
our investment
Whether you are an employer, a patient, a physician, a pharmacist, a health plan administrator or a policymaker, the challenge in the years ahead is essentially the same. Given the
combination of factors driving health care spending — including new science, broader coverage, better practice, the aging
of the population, and the staggering array of illnesses for
which people are at risk — it is a given that health care
expenditures will continue to increase. The challenge is to be
ever more resourceful about how we invest our health care
dollars, in order to maximize the return on our investment.
As this overview suggests, it is shortsighted to look at pharmaceuticals only in terms of their costs. The task is to make
a balanced assessment of costs and benefits, taking into
account both direct and indirect benefits. In case after case,
the evidence suggests that pharmaceuticals, when properly
chosen and managed, yield benefits that more than justify
their costs. In short, they add value.
It is equally shortsighted to assess the value of managed
care only in terms of its ability to reduce costs. Managed
care’s mission is to maximize value by making sure patients
8 A The Value of Pharmaceuticals and Managed Pharmaceutical Care
get the right care at the right time and in the right setting. In
the case of managed care pharmacy, the task is first to put
the right drug into the hands of the right patient at the right
time and then to see that drugs are used as directed, progress
is monitored, care guidelines are observed, and optimal outcomes are achieved.
This is no small task, but the examples sighted throughout
this report show that the hard work is being done. Above all,
it is the work of partnership. Health plans, patients, physicians, pharmacists, employers; each has a crucial role to play
in maximizing the effectiveness of pharmaceuticals. The key
to future successes, then, is to build stronger partnerships
among the stakeholders, based on better understanding the
true costs and benefits of pharmaceuticals and our role in
maximizing their value.
Employers, as the major providers of health coverage for
working-age Americans, may have the most to gain from
strengthening these partnerships. There is much that employers can do to maximize the value of pharmaceuticals. For
example:
• Develop meaningful data on the leading illnesses affecting the workforce.
• Work with health plans and pharmacy benefit managers
to identify exemplary programs to improve identification,
treatment, and monitoring.
• Encourage employees to participate in disease-management initiatives.
• Avoid blanket policies limiting or denying coverage for
pharmaceuticals solely on the basis of price.
• Conduct a one-year review of progress to measure the
costs and benefits of drug therapies in terms of increased
productivity, lower hospitalization rates, fewer lost workdays, etc.
Assessing the efficacy of pharmaceutical therapies on a
workforce-by-workforce basis is not simple. Health plans,
pharmacy benefit managers, and pharmacists can greatly
assist employers, especially smaller companies with limited
data-management capacities, by proactively identifying opportunities for targeted disease management initiatives and developing innovative programs in which employers, individually or
in groups, can participate.
The key point is that the value of pharmaceuticals cannot be
maximized in a vacuum. The arrival of a new drug or treatment regimen is only the first step toward optimizing its effectiveness. There will always be a need to balance the demand
for pharmaceuticals and the resources available to pay for
them. The question is whether those resources will be used
for optimal effectiveness. We all have a role to play in maximizing the return on our investment in pharmaceuticals. A
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The Value of Pharmaceuticals and Managed Pharmaceutical Care A 9
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