HMO PROPOSES DRUG DEAL; PAYMENTS TO PUT PRODUCTS ON PREFERRED LIST NOT KICKBACKS, FOUNDATION SAYS.

Byline: Ben Sullivan Daily News Staff Writer

Payments to Foundation Health Systems Inc. of up to $1 million a month for giving preference to Bristol-Myers Squibb drugs would not amount to kickbacks, officials at the managed-care giant said Friday.

The payments, proposed in a June draft agreement between Foundation and the New York-based drug maker, were reported Friday in the San Francisco Chronicle. It would compensate the managed-care firm for asking physicians to choose Bristol-Myers products when prescribing medicine in several therapeutic categories.

Ron Yukelson, a spokesman for Health Net, Foundation's biggest health plan, said the deal has not been finalized. But if it were to go through, he said, doctors still could ask for exceptions to the arrangement on a case-by-case basis.

``I won't overstate it by saying often, but we do regularly make exceptions'' to the current formulary, or list of Foundation-approved drugs, Yukelson said.

Even so, the proposed arrangement has raised concern among some health care professionals that financial concerns could take precedent over medical judgment.

``It has a lot of the flavor of kickbacks,'' said Jeff McCombs, a health economist at the University of Southern California School of Pharmacy. ``I'd immediately worry about any formulary that would restrict doctors to only one product within a class.''

McCombs said research conducted at USC found that outcomes are generally worse overall when physicians are limited to a single drug to treat a given illness.

``You're going to get worse results, period, whether it's the best, most expensive drug or not,'' McCombs said. ``So you may be shooting yourself in the foot'' by such an arrangement.

Under the draft agreement, Bristol-Myers would pay $1 million per month for up to three years to a Foundation subsidiary that handles drug benefits for its 4-million-plus HMO members.

In exchange, Foundation would name five Bristol-Myers drugs as preferred products. Physicians treating Foundation members would be encouraged to prescribe those drugs when the illnesses they treat arise. In such cases, nonpreferred drugs would be paid for by Foundation only upon successful appeal by the physician.

Jim Lott, head of policy development and advocacy at the Healthcare Association of Southern California, said such arrangements are not without precedent. But it would be immoral for a managed-care company to chose a drug primarily because of financial incentive, he said, rather than the drug's potential benefit for a patient.

``It's not new ground insofar as limiting drugs available on a formulary, but if it's true . . . that that's the reason for choosing a drug, that's morally bankrupt,'' Lott said.

In a written statement, Bristol-Myers Squibb said it could not discuss the specifics of the proposed arrangement with Foundation, but that it does not seek to ``undermine a physician's . . . independent assessment and choice of appropriate pharmaceutical therapy.''

Foundation shares fell $0.1875 Friday to close at $10.625.