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Inside the medicine cabinet: health plans must decide whether to place a host of new prescription drugs on their formularies.

The shelves hi the medicine cabinet are becoming more crowded. The U.S. Food and Drug Administration recently approved several new prescription drugs mid is slated to approve several more in the coining months. Health plans are keeping a close eye on these new entrants to the market, and they have begun or will soon begin the review process to determine ff and where the drags will be placed on formularies, along with any restrictions that might be attached to them.

Health plans are also anticipating another change. Several brand name drugs' patents are set to expire soon, and health plans hope their generic equivalents will shed some costs from plans' and members' pockets. But some plans don't expect to see overall prescription drug costs taking a downturn anytime soon as costly biotechnology or specialty drugs join the new lineups.

Coming on Formulary

Health plans go through a vigorous process to determine coverage provisions on newly FDA-approved drugs.

For many carriers, those decisions rest primarily with their pharmacy and therapeutics (P&T) committee. The committee oversees pharmacy policies and procedures and reviews the clinical merits, safety, effectiveness and clinical value of new drugs as they come to market. The committee is generally composed of internal and external physicians and pharmacists, who review clinical trials and other peer-reviewed clinical data, in addition to determining it drugs require pre-authorizations or quantity limits.

Part of Cigna HealthCare/Cigna Pharmacy Management's P&T committee's review includes consideration of the FDA's approval ranking--a classification system that ranks drugs as either priority or standard review, said John Poniatowski, vice president of coverage policy. "The FDA considers if the drug is unique, whether there are other alternatives for a condition or if it fails into a standard 'me-too' drug category." Drugs that fall into priority review are generally reviewed by the P&T committee within six months of FDA approval; standard review drugs generally aren't presented to the committee for at least six months following approval. "That process helps us be responsive to what the FDA considers clinically significant drugs," he said.

If Cigna's P&T committee finds a drug to be superior to other similar drugs on the market, it's then placed on the preferred tier of the formulary, said Poniatowski. Inferior drugs--medications that are less safe or effective than similar drugs on the market--on the other hand, typically are placed on the nonpreferred tier of the formulary, while drugs that fall into the "neutral" category are then reviewed by Cigna's business group for placement on the formulary, he said.

Health plans' P&T committees are active throughout the year, said Dr. Gary Owens, vice president of medical management and policy for Pennsylvania-based Independence Blue Cross. The health plan's committee notifies physicians of any changes through its Partners in Health newsletter, direct mailings and on the company's Web site.

Where drugs are placed and how they're covered varies among plans. In BlueCross BlueShield of South Carolina's open formulary benefit design, "once a drug is FDA approved, we will cover it. The day it's approved, it will be covered at the highest tier of our preferred drug list," said Dr. John Little Jr., chief medical officer and vice president of health-care services. "Our philosophy is to let the tiering and cost sharing control some of the utilization to the extent it can and use prior authorization programs as a fallback."

Humana Inc. says it has a somewhat unusual approach when it comes to drug review. While the process is similar to that of other plans' P&T committees, "where we may be a bit different is when we put a drug on formulary, everything is covered on our benefit unless it's specifically excluded," said William Fleming, vice president of pharmacy and clinical integration. Some categories not generally covered in its benefit designs include smoking cessation, cosmetic and sexual dysfunction drugs, and some antibiotic steroids. "The question is what does the member pay, what tier is it on and whether there's a step therapy or prior authorization required. Some competitors have a 'not covered' bucket, but we've chosen not to take that path at this time," he said.

For The Permanente Medical Group in Northern California, putting a prescription drug on formulary and coverage of a drug aren't the same thing, said Dr Sharon Levine, associate executive director. "The contract the health plan has with enrollees stipulates that the plan will cover, unless there's a contractual exclusion like cosmetic services, anything determined to be medically necessary by a Permanente physician. Utility in the organization is to signal a preferred drug list rather than those covered or not covered." However, several drugs, such as antiretroviral and some cancer drugs, are always on formulary, she said.

The Permanente Medical Group does not have a prior authorization procedure for prescribed drugs. "There are some drugs, however, which are prescribed only by specialists, and these are chosen by mutual agreement between specialists and primary care physicians," said Levine.

Safety, efficacy and clinical value are key components to the review process, but when does cost factor into the equation? "On the medical side where physicians and specialists administer drugs, cost is never a factor for coverage because the benefit is written so that the drug is covered for its FDA-approved indication," said Owens. "However, where cost becomes a factor is when a drug has the potential for off-label use. Using a drug off label where its use cannot be substantiated by evidence may be a medical resource being inappropriately used."

On the pharmaceutical side, cost may factor in when comparing similar products. "For example, five drugs that all decrease blood pressure similarly would require the committee to decide if there are any tangible differences between the products that would benefit our members," said Paul Urick, vice president of pharmacy services for Independence Blue Cross.

New Entrants

One of the new entrants recently approved by the FDA is prescription sleep aid Lunesta. Because of other sleep aids currently available by prescription, many health plans classify Lunesta as a "me too" drug under their prescription benefit. "If the drug is chemically similar to other products, along with having a similar safety and efficacy profile, we're not going to put it on the fast track," said Mark Rubino, chief pharmacy officer for Aetna Inc. Aetna is currently performing a therapeutic chapter review to search for new studies about Lunesta. Rubino said the P&T committee also examines if a drug such as Lunesta has any habit-forming behaviors to determine the need for quantity limits.

Lunesta is currently placed on Independence Blue Cross' third tier and requires prior authorization for use for FDA-approved indications, said Urick. "It is a new drug that only recently became available for sale in the United States. We will continue to gather data in order to fully evaluate its safety, effectiveness and economic value compared to currently available products."

Another newly approved drug is Macugen, an intraocular Injectable for treatment of wet age-related macular degeneration. Because it's prescribed and administered by a retinologist or ophthalmologist, it's covered under most plans' medical benefit. "Macugen is a case of a fairly expensive drug that doesn't really need any management because use is self-limited to some very specific indications for physicians and by highly specialized doctors," said Independence Blue Cross' Owens.

Drilling Down Costs

Health plans hope that the upcoming release of several generics onto the market will provide significant savings by generating less expensive alternatives to branded pharmaceuticals. Some of these include Zoloft, for the treatment of depression and certain types of anxiety disorders, and statin Zocor for high cholesterol levels. "We're hoping these generics will help lower pharmaceutical costs to make room for some other new products," said Aetna's Rubino. With the drug's patent expiration in June, Aetna planned to move Zocor and some other branded statins to a more expensive tier; simvastatin--Zocor's generic equivalent--will be offered at the lowest copay level.

But while generics will provide savings, growth of biotechnology or specialty drugs and injectables is driving up costs. Biotech drugs generally use laboratory-created versions of proteins and other essential building blocks of the body's cells to treat life-threatening or debilitating diseases. "While prescription drug costs in general have moderated as some blockbuster drugs have become available as generics over the past several years, there's now 15% to 25% year-over-year growth in the spend on biotech drugs," said The Permanente Medical Group's Levine. Many of the drugs come with hefty price tags, reaching as high as $100,000 to $400,000 a year for rare conditions. "To the extent they are orphan drugs for very small populations ... that's what insurance is for," she said. "When we begin to look at drugs for things such as rheumatoid arthritis with larger populations at a cost of $20,000 to $30,000 a year, we begin to see the impact on the cost of care. We're concerned about the dramatically increased release prices we're seeing and the impact they will have on beneficiaries because prices get reflected in the cost of health care."

Although biotech drugs currently aren't available in generic form, some health plans are optimistic that may soon change.

A Look Ahead

Consumers' demands are changing. Levine said consumers' views on direct-to-consumer marketing of drugs has shifted over the past five years, and consumers have become more wary and sophisticated about viewing drug ads for what they are, which is marketing to sell a product. "Now they're turning to other sources of information rather than relying on TV ads. And physicians are becoming more leery of thinking that every new drug represents a 'breakthrough' or improvement over existing therapies--something that resulted in part from the problems around Vioxx and Bextra," she said. "There's both some caution now, as well as continued interest and optimism about new drugs being introduced to the market."

One of the issues all constituents in health care struggle with is striking the appropriate balance between profitability of the industry and the return on investment consumers make with their health-care dollars, Levine said. "The art is finding the appropriate balance between adequate profitability to ensure a stream of innovation, and at the same time assuring that consumers get a fair ROI of their dollars--both their tax dollars used to fund basic research that drives pharmaceutical development, as well as their premium dollars that pay for health-care services and drugs." She said that's an opportunity that doesn't exist without the generic framework for biologics.

In the Pipeline

Health plans are keeping a close watch on several drugs that are expected to see some action by the FDA soon.


The anti-anginal and anti-ischemic drug Ranexa is for the treatment of chronic angina in patients failing first-line therapy. If the drug is approved, it will initially default to Cigna's nonpreferred status, said John Poniatowski, vice president of coverage policy. "That status may change dependent on the review and finding of the pharmacy and therapeutics committee."

The way BlueCross BlueShield of South Carolina looks at Ranexa is that it's a treatment for a high-risk population, said Dr. John Little Jr., chief medical officer and vice president of health-cars services. "We want those patients to have access to products appropriately, so I anticipate we'd have no restrictions on [Ranexa]. On drugs like this, we're talking about more than just a pain reliever, but rather life or death. If we think it has inappropriate utilization of other causes, however, then we may re-evaluate if we need to put in any restrictions or other programs to control utilization," he said.


Sutent is one of the first in a new class of drugs that selectively targets multiple protein receptors, according to the FDA. Sutent is indicated to treat advanced kidney cancer and gastrointestinal stromal tumors--a rare stomach cancer, It's currently pending P&T committee review by many health plans.


Acomplia, which is indicated for the treatment of obesity, was slated for FDA approval in early 2006. In February, however, the FDA declined to issue final approval until a number of unspecified issues were resolved. "We'll listen very closely to clinical experts on the FDA approval board and continue to keep up with the data that's released," said Paul Urick, vice president of pharmacy services for Independence Blue Cross.

There's some concern in the health-care community over anti-obesity drugs such as Acomplia. Once promising drugs, including Xenical and phentermine, resulted in troublesome side effects over the years. As a result, some health plans have opted not to place anti-obesity drugs on their formularies.

Some exports say Acomplia may also have potential as a treatment for smoking cessation. While its manufacturer has yet to specify the final treatment indication for the drug, it won't change the issue of coverage for The Permanente Medical Group, said Dr. Sharon Levine, associate executive director. "Our physicians will determine collectively those patients for whom a drug represents an advance over existing therapies, and our approach is not as much about covered vs. not covered but rather identifying the population who gains an advantage and then target the drug's use to that group."


Health plans are also keeping an eye on another drug that, if approved, will likely fall under many health plans' medical benefit coverage because it would be administered in a physician's office. Ruboxistaurin is currently under investigation and is now in clinical trial for the proposed treatment of diabetic retinopathy, diabetic peripheral neuropathy and macular edema.


Drug manufacturers are now working on several vaccines, including the somewhat controversial human papillomavirus vaccine and RotaTeq--a live, oral, three-dose vaccine for prevention of gastroenteritis associated with rotavirus infections in infants. Vaccines generally are covered by most plans under their medical benefit.

Independence Blue Cross is one of many plans that follow the Advisory Committee on Immunization Practices recommendations for vaccines. The committee is composed of 15 experts in fields associated with immunizations who provide advice and guidance to the U.S. Department of Health and Human Services and the Centers for Disease Control and Prevention on the most effective means to prevent vaccine-preventable diseases.


One of the most highly anticipated drugs is Exubera, the inhaled version of insulin, that's gaining much publicity. While it was approved by the FDA in January, it's not yet on the market because the manufacturer is still preparing for its release.

Some health plans, however, have some concerns about Exubera's full potential, which may dictate where the drug is placed on their formularies. "Because this is a short-acting powder form of insulin, it won't do away with injections and people will still have to inject themselves with a long-acting insulin," said Mark Rubino, chief pharmacy officer for Aetna Inc. "Because the product is inhaled, absorption can be erratic for patients who have a cold or other respiratory conditions. For smokers, more of the inhaled insulin enters individuals' bloodstreams, which increases the possibility of an insulin overdose and severe hypoglycemia."

The Newcomers

The FDA recently approved two new drugs:

Lunesta--A prescription sleep aid.

Macungen--Intraocular injectable for the treatment of wet age-related macular degeneration.

Key Points

* The FDA recently approved several new drugs, and several more are slated to be approved this year. Health plans will review the drugs to see where they'll be placed on the plans' formularies.

* The patents of several brand-name drugs are set to expire, and health plans hope their move to generic form will lower health-care costs.

* Use of costly biotechnology drugs continues to grow, adding costs for health plans and consumers.

Learn More

Aetna Health and Life Insurance Co. A.M. Best Company # 08189 Distribution: Brokers, consultants, retail network (pharmacy products)

BlueCross BlueShield of South Carolina A.M. Best Company # 01727 Distribution: Independent agents, brokers, consultants, direct sales reps, direct

Cigna HealthCare A.M. Best Company # 68124 (Cigna Insurance Group) Distribution: Agents and brokers

Humana Health Plan Inc. A.M. Best Company # 68898 Distribution: Agent/brokers, direct to employees, direct

Independence Blue Cross A.M. Best Company # 64553 Distribution: Direct sales representatives, brokers, association administrators, consultants, direct

Kaiser Foundation Health Plan Inc. A.M. Best Company # 64585 Distribution: National consulting houses, regional brokers and brokerage firms, membership exchanges, direct

For ratings and other financial strength information about these companies, visit
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Article Details
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Author:Chordas, Lori
Publication:Best's Review
Geographic Code:1USA
Date:Aug 1, 2006
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