-CONSULTATION REPORT- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP MARCH 4, 2015 A FRAMEWORK OF VALUES FOR MANAGING THE VALUE FORMULARY

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1 -CONSULTATION REPORT- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP MARCH 4, 2015 A FRAMEWORK OF VALUES FOR MANAGING THE VALUE FORMULARY Attendees Connie Barr (HPHC Board of Directors); Gerald Belastock (CGR Insurance) ; Jack Burke (HPHC); Christine Byrnes (HPHC); Dick Cannon (Management Consultant); Vin Capozzi (HPHC); Novelette DeMercado (HPHC); Shani Dowd (HPHC); Daniel Gebremedhin (HPHC); Charley Goheen (HPHC); Marilyn Hausamann (Harvard University); Maureen Henberg (HPHC); Barbara Henry ( HPHC); Michelle Hume (HPHC); Erica Hursey (HPHC); Gusti Kustyanto (HPHC); Christine Leopold (HPHC Institute); Matt Mancall (HPHC); Chris Mar (HPHC); Mimi McGrath (HPHC); Pranav Mehta (HPHC); Ann Naughton (HPHC); Tu Nygen (HPHC); Stephanie Orphan (HPHC); Laurie Pascal (Harvard School of Public Health); Cynthia Ring (HPHC); Jorge Rivera (HPHC); Mary Schultz (Tufts Consumer Representative ); Michael Sherman (HPHC); Bill Stewart (HPHC); Matt Veno (HPHC); and Mary Wallan (HPHC); Customer: The customer for the March 4 th EAG meeting was Michael Sherman, MD, HPHC s Chief Medical Officer. Background: A headline in the February 6 th edition of The Boston Globe reads: Health care costs forecast to rise 7%: workers likely to bear some of that burden. Yes, health care inflation is alive and well. Massachusetts has set a goal of keeping health care spending to 3.6%, a benchmark established in An important contributor to the 2015 forecast of a 7% increase reported at the annual conference of the New England Employee Benefits Council is the double-digit increase in the cost of prescription drugs. One notable example is hepatitis C medication with costs that range from $63,000 to $159,000 per patient. In response to these extraordinary costs, Harvard Pilgrim recently announced that it was the first regional health plan to successfully negotiate a discount by selecting Gilead s Harvoni as its preferred medication for treating Hepatitis C; the agreement is expected to result in millions of dollars in savings for HPHC s customers. An additional step by HPHC to find savings in the cost of the prescription drug benefit is the introduction of a Value Formulary aimed at providing more affordable coverage options without impacting quality. The Value Formulary will be the standard prescription drug benefit for most non-group contracts (individually enrolled members with no sponsoring employer), and most small accounts (with 50 eligible subscribers or less). Large employer groups will be able to choose the Premium ( open formulary ) or the Value Formulary. Page 1 of 7

2 The Value Formulary continues to provide all classes of drugs currently covered, but it compares drugs within classes that have multiple options and favors high value drugs while excluding certain high cost drugs. All drug categories are intended to include medications that have equal or better efficacy and safety profiles, and are more cost effective. Nearly all multi-source brands, i.e., branded drugs for which generic equivalents are available, are excluded from the Value Formulary. Below are examples of non-covered medications for recognizable uses (e.g., seizure disorders, antidepressants, antivirals, stimulants, etc.) and for which an alternative covered medication is in the Value Formulary: Depakote: valproic acid generic equivalent Cymbalta: duloxetine- generic equivalent Prozac: fluoxetine- generic equivalent Valtrex: valcyclovir generic equivalent Prilosec: omeprazole- generic equivalent Ambien: zolpidem- generic equivalent Nutropin AQ: Omnitrope- brand alternative Fortesta: testosterone 1% gel generic alternative In the spirit of Eating at one s own restaurant, HPHC has selected the Value Formulary as its drug benefit offering for enrolled employees and their dependents. The Value Formulary is offered as a four or five tier benefit. As an illustration of the copayment/coinsurance structure, tier pricing for HPHC employee members is as follows: Tier 1 Lower cost generics, $5 copay; Tier 2 Higher cost generics, $15 copay; Tier 3 Preferred brands (and some high cost generics), $ 30 copay; Tier 4 Non-preferred brands & Preferred specialty (some higher cost generics), $50 copay; Tier 5 Non-preferred specialty drugs (very high cost brand drugs & generic drugs) 20% coinsurance not to exceed $150 per prescription; (For non-hphc employers, the maximum coinsurance per prescription can be higher than $150)* * State Senate bill Oral Chemotherapy Bill- effective January 1, 2013 mandates no member cost sharing for orally administered anti-cancer medications for fully insured MA employer groups with prescription coverage. Page 2 of 7

3 New-to-market drugs will not be placed on the formulary until reviewed by HPHC Pharmacy Services and/or the HPHC s Pharmacy and Therapeutics Committee. The Committee consists of HPHC employees and external physician specialists, primary care physicians, pharmacy specialists and ad hoc consultants as needed. Traditional Utilization Management (prior authorization, step therapy and quantity limits) will still apply to some drugs. On average, 5% of members will initially be affected by the non-covered medications and less than 1% of members will be affected by a medication moving to Tier 5. These estimates are based on a sample of commercial membership utilization for 2014 compared to the Value Formulary. There are communication protocols in place and members may request coverage of a nonformulary drug with requests handled within 1-2 days. Discussion: The pressures on the prescription drug benefit are multiple: Utilization, i.e. prescriptions per member per year, has risen from 8.8 in 2000 to 11 in 2014 at HPHC Specialty drugs at HPHC accounted for 33% of commercial drug spend in 2014 Diminishing returns from generic substitution; during 2014, 84% of all HPHC prescriptions are for generic drugs, yet that accounts for only 20% of our total spend Ongoing price pressure expected from new specialty drugs including biologics and so called designer drugs tailored to individual patient s genetic profiles Lack of governmental price regulation and lack of competition in the case of many specialty drugs As health plans respond by excluding some drugs, or instituting tiering and greater patient cost sharing, concerns are expressed about equity, quality, and impacts on patient adherence to drug regimens, and losing focus on the total cost of care. In the health care press one finds discussion of the following: Are generics always therapeutically equivalent? Does pushing some specialty drugs to the 5 th tier punish patients who have conditions that are rare, complex and expensive and beyond their control, i.e. not a life style choice? And aren t these just the situations for which insurance is intended? Will tiered cost sharing lead patients to stop adhering to a drug regimen that might later cost more due to complications requiring hospitalization? Page 3 of 7

4 In the absence of government regulated pricing and limited competition, isn t it essential to have closed formularies and more patient responsibility for the cost of drugs? Should all specialty drugs be in the highest tier, or, is HPHC s approach to having a preferred specialty drug in a lower tier a better approach? Health plan tiering is being assumed to be discriminatory, based on the placement of drugs into higher tiers (this has received particular attention in Florida with HIV medications). Questions for the Ethics Advisory Group: As we manage this benefit going forward what values should receive our attention? In what way does the described approach balance concerns about patient choice, quality, value and cost containment? Should we be more or less aggressive in considering drugs to exclude or place in a higher tier? What are important considerations? Are per prescription out of pocket costs and aggregate individual and family maximum out of pocket cost protection at the right balance point of having access to high price drugs and reasonable member financial participation? (Note: for HPHC employees, out of pocket maximum costs are $3000 per individual and $6000 per family inclusive of medical and Rx costs.) When all drugs for a specific disease are very high cost, what is the appropriate lowest tier to place them in without appearing discriminatory? Should large groups be encouraged to adopt the Value Formulary? How should we address the threat from manufacturers as they directly offer to consumers refunds of copays for patients new to medication? This hook makes switching a more complex decision and discussion between prescriber and patients more stressed. It sabotages a health plan s efforts to lower costs while maintaining the same or higher quality. EAG DISCUSSION/RECOMMENDATIONS The main question the EAG was asked to address was: Given that: many drugs are very costly drugs have been screened and approved by the HPHC Pharmacy and Therapeutics Committee HPHC wants approved drugs to be available to members for their therapeutic value HPHC is under intense pressure to deliver benefits at affordable prices and that a Value Formulary has been introduced what is the best way to communicate to members and providers about the costs and benefits of drugs, the rationale for our chosen approach to placing drugs in particular tiers with increasing Page 4 of 7

5 levels of patient cost sharing and in light of market limitations on passing cost increases on through premium. What is the optimal balancing of these elements? First, Clear up Misconceptions The EAG was advised that some misconceptions have arisen that should be cleared up. For example, HPHC s main objective is to drive toward value with a focus on drug efficacy, safety and value for price; all classes of drugs are included in the Value Formulary; on average, only 5% of members with this benefit will be affected by the exclusion of some drugs and less than 1% of members with this benefit will see a drug move to Tier 5; there is process to consider and grant exceptions, and while HPHC will carefully review them, it is important that exceptions not be pro forma, lest we undermine the purpose of the Value Formulary. Relevant Precedents In its discussion of a Values Framework for New Technologies on November 9, 2005, the EAG endorsed maintaining a high standard of evidence for coverage of new interventions: The EAG felt that HPHC s standard that primary reliance will be placed upon data from published reports in authoritative medical and scientific publications that are subject to peer review by qualified medical and scientific experts prior to publication a high standard of evidence best promotes the values of improving member health, avoiding harm and stewarding resources in a responsible manner On March 7, 2012 the EAG explored the concept of paying for value in a session focused on Ethical Issues Associated with Value-based Insurance Design (VBID).It endorsed VBID for its potential to align the interests of multiple stakeholders: VBID is a relatively new concept in Massachusetts. For many patients the idea that their doctors might make recommendations that others see as low value, no value, or even positively harmful is counterintuitive. Done well, VBID has the potential to align consumers (who want good care and lower premiums), employers(who want healthy employees and reduced health care costs ), providers(who want to partner with their patients on care plans and to be compensated fairly), and Harvard Pilgrim (whose mission is to improve the quality and value of health care of the communities and people we serve). At this same meeting the group concluded: The EAG strongly supported the VBID principle that economic incentives should be designed to encourage use of high value, cost-effective health care and discourage use of low value, cost inefficient care Page 5 of 7

6 Comments on the Value Formulary Good Model/ Review Exception Requests Carefully There was a consensus that as the only regional plan without a restricted formulary, it was time to institute such an option. There was support for the approach of continuing to have the Pharmacy and Therapeutics Committee evaluate new drugs based on their efficacy, safety and added value and for the one-month transition fill for members who wish to eventually switch from a non-covered to a covered drug. There was support for an exception mechanism and understanding within the EAG that exceptions should be granted only for good cause, even if initially the approach might be a bit flexible, it should be increasingly strict over time. There was considerable discussion about how affected members are reacting to the new formulary and if there have been many complaints. While it is early in the process, some were surprised by the lack of negative feedback; others in the Pharmacy Department however, noted the volume of requests for exceptions is growing. Need for Education The EAG explored ways and means to educate members and providers about the significantly high cost of drugs, the growth in utilization and the need to have something like a Value Formulary to balance efficacy, patient safety and cost. It was noted that patients might find it daunting to comprehend the complexity of drug choices and prices. Others noted more concern for efficacy than cost and that many medical groups now have their own P&T committees and when in a risk contract, as many are, attention is being paid to these issues. Still there may be an opportunity for HPHC to lead the way in explaining to members how its value orientation is saving a lot of members money, perhaps by placing a list of the excluded and tiered drugs on the web site with an explanation of the why (costs, less effective, etc.) and which alternatives are included in the tiered value formulary instead. However, there was strong feeling that the burden of having to choose a Medicine should not be on the patient s shoulders. It would be desirable to explore whether the Now I Know tool, Consumer Reports or other new apps could be made available to members and providers to increase support for the HPHC value approach. Concern about the Price of Tiers 4 and 5 The EAG did not reach consensus about the 4 or 5 tier structure. Concern was expressed about a $150-$350 copay per prescription for high cost, non-preferred drugs being a financial burden to some, potentially having a negative effect on adherence to drug regimens and to actually filling a new Tier 5 prescription that has a very high coinsurance cost. It was noted that many employers have flexibility to keep copayments relatively low in exchange for a higher premium- some employers even limit out of pocket copayments to 3% of an employee s salary as a protection. The EAG was supportive of using this technique when possible. On the other hand in the case of any blockbuster drugs, even at $150 per prescription, members are paying a small percentage Page 6 of 7

7 of total cost of the drug when filling their prescription while the balance of the cost appears in premium Potential Impacts of the Value Formulary/Other Issues for the Future Medicare: at the moment the proportion of Medicare beneficiaries covered by HPHC is small, but it is slowly growing and those Medicare Advantage members were switched to a Closed Formulary that meets the Centers for Medicare and Medicaid requirements. Large Employers: large employers have the option of electing the Value Formulary. HPHC will encourage its adoption, particularly when the employer is seeking relief from current premium trends or future likely increases. Gain sharing and Save On Tools. The EAG was supportive of ways to share the savings from the Value Formulary by adapting the Save On tool or working with employers on other shared savings techniques. Need for Better Pricing Options: It was acknowledged it would be desirable for HPHC to benefit more from collective purchasing and potential movement toward therapeutic reference pricing as practiced in Europe in which all insurers pay a minimum price for a specific therapeutic group with options for members to acquire other drugs with higher out of pocket costs. But, of course this would require enabling legislation at the state and federal level in the US. Dick Cannon Page 7 of 7