Proposed guidelines for formularies

Washington - Dermatologists should be aware that the Center for Medicare and Medicaid Services (CMS) is in the process of developing "standards and processes" under the new Medicare drug discount program that takes full effect in January, 2006. The legislation will have a major impact on what drugs are covered and for how much.

In late August, the United States Pharmacopeia Convention (USP), a Maryland company that sets quality standards for the pharmaceutical industry, submitted "advance draft model guidelines" to CMS.

"This is an important first step toward clear guidance on how drug plans can design formularies that appropriately reflect current medical practice," says CMS administrator Mark B. McClellan, M.D., Ph.D.

Under the new Medicare drug program, coverage will be paid for by Medicare but delivered by private health plans and pharmacy benefit managers (PBMs). The Medicare Modernization Act requires those providers to pay for at least two drugs in each therapeutic class of drugs.

Thus, the critical issue for dermatology will be which drugs are approved and included in the formularies, and at what level.

"The idea is to make sure your beneficiaries have access to the latest and greatest drugs out there and that plans have the opportunity to offer robust formularies," says Bill Pierce, spokesman for the U.S. Department of Health and Human Services.

A major consideration is cost, which can be expected to influence what pharmaceutical products are included in the formularies. The Bush administration estimates that the program will cost $534 billion through 2014. With increasing numbers of baby boomers becoming eligible for Medicare coverage, that number can be expected to go even higher.

According to a discussion paper published by CMS on the role of the USP draft model guidelines, the agency explains that they "do not reflect a pure classification system, but rather a starting point for structuring formulary categories and classes."

"Maintaining some breadth in how the categories and classes are described will provide plans with the ability to tailor their formularies," CMS says. The agency adds that it would review formularies for "adequacy and nondiscrimination" to make sure patients have reasonable access to important drugs.

CMS says it realizes that pharmacy benefit management involves "much more" than categorizing and classifying drugs in a formulary; that utilization management strategies "can significantly affect access to prescription drugs."

Some common strategies include tiered cost-sharing, step therapy and prior authorization requirements, the discussion paper explains.

CMS says plan formularies must include drugs from each therapeutic category and class, and available drug choices must represent a full range of drug therapies necessary to adequately support current medical practice.

"This requirement could be satisfied with two drugs in some categories and classes, but the majority will need to include more drugs," the agency says, promising to evaluate formularies closely to make sure they include sufficient choices of clinically significant drugs.

"CMS also will not allow plans to discourage enrollment by requiring higher levels of cost-sharing on drugs that disproportionately affect specific groups of beneficiaries," it says. For example, plans will not be permitted to price all antiretroviral drugs in the highest tier. However, this does not mean that these beneficiary groups cannot be subject to tiered cost-sharing, according to CMS - just that such "tiering" cannot be designed to discourage enrollment of that specific beneficiary group.

This could be an area of controversy when the plans are released, as tiering requirements could result in seniors having to pay a greater out-of-pocket share for more expensive drugs, or it could mean restricted access to those medications until physicians verify that less costly medications would not be successful for individual patients.

Moreover, CMS says it would review drug plan prior authorization requirements, exceptions criteria and appeal policies.

"We understand that prior authorization techniques include clinically appropriate step therapies or diagnosis-related restrictions," the agency says. "Nevertheless, our focus will be to determine if specific beneficiary groups are disproportionately affected by such requirements." CMS cautions that it will "examine the drugs that are subject to prior authorization and the associated criteria for obtaining approval."