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New Florida Law Restricts Drugs for Medicaid

Donna Young

Florida officials were slow to provide pharmacists and physicians with information about the state’s new drug formulary for Medicaid. The state was weeks late in implementing the mandatory preferred-drug list. And, when state officials did provide access to the list, it was flawed.

In addition, under the state’s new plan, Florida’s poor may be left paying for medically necessary drugs that are no longer covered by Medicaid.

In an attempt to curb Medicaid prescription costs, Florida enacted legislation that requires physicians and pharmacy providers to adhere to a restricted drug formulary for Medicaid beneficiaries.

The new law calls for the state’s Medicaid program to reduce drug spending by $214 million in fiscal year 2001–02, which began on July 1.

Florida’s Medicaid program spends over $1 billion a year on prescription drugs.

Problems from the start. Bob Sharpe, Florida’s Medicaid Director, said problems with restructuring the state’s Medicaid management information system caused delays in implementation.

The state did not make the formulary available to pharmacy providers or physicians until the second week in July, when it appeared on the state’s Web site—and then, some drugs were listed under the wrong category.

For instance, Ortho Dermatological’s Retin-A Micro, Galderma Laboratories’ Differin, and tretinoin—used to treat acne—were listed under the category "Antiperspirants."

Valerie Taylor, a pharmacist and clinical director for Provider Synergies LLC of Loveland, Ohio—the formulary management firm hired by the state to negotiate rebates with drug companies, administer the contracts, and make recommendations to the state about the formulary—said the category label was "clearly a mistake."

The state changed the "Antiperspirants" category to "Vitamin A Derivatives" after an American Journal of Health-System Pharmacy (AJHP) reporter contacted state officials and Provider Synergies with questions about the category.

The formulary also listed several yohimbine products, including Supina NR, Viril-LAM, Viritab, and Yohimar, under the category "Drugs to Treat Impotency."

Yohimbine, a plant-derived substance, is a prescription drug first sold in the United States before passage of the Food, Drug, and Cosmetic Act of 1938.

George Kitchens, Florida’s Medicaid Pharmacy Services chief, said the inclusion of the yohimbine products on the formulary was also a mistake.

Kitchens said Provider Synergies and the state used different codes and, in the sorting process, drugs not meant for the list "slipped through."

"We thought we had removed them all," he said.

But, Kitchens said, if FDA determines yohimbine to be an effective drug, the state may consider placing it on its formulary.

"We will remove it for the moment," he said.

The state was expected to implement the formulary by the end of July, Kitchens said.

Lack of communication. Pharmacists have expressed frustration about the confusion surrounding the formulary and the new rules.

Stephen George, a managed care services associate for Clinical Pharmacology Services of Tampa, Florida, said he hoped the state would work with pharmacy and medical societies to communicate information about the state’s new rules and the restricted-drugs list.

"So far, the state has lacked communication," he said. "We hoped the rules would be communicated to pharmacy providers through regional meetings or inservice sessions and not just by an immediate flip of the switch where we are left in the dark."

Kitchens said he made presentations in June to two Florida pharmacy associations.

He said the state plans to publish a pocket-sized reference for physicians. But, he said, it could take up to a month before physicians receive it.

"It will probably be out-of-date as soon as it is printed," he added.

Kitchens said "the best document for reference is the Web site."

The state also plans to conduct a direct-mail campaign to educate physicians, Kitchens said.

The old and the new. Before the law’s enactment, the state’s Medicaid program used a voluntary preferred-drug list that required prior authorization for relatively few specific drugs. Last year, the state enacted a limit of four brand-name drug products per month for Medicaid beneficiaries—except for nursing-home residents.

But in most instances, physicians were free to prescribe drugs without seeking prior authorization from the state.

The new law limits Medicaid to pay for about 1300 drugs without prior authorization.

The state now requires Medicaid to limit the number of name-brand prescription products to four per month for nursing-home residents. In addition, the state has put limits on Medicaid coverage for the Purdue Pharma painkiller OxyContin, containing oxycodone.

In a letter notifying pharmacy providers about the limitations, Kitchens said that Medicaid now covers one strength of OxyContin for a maximum of 120 tablets per month. Prior authorization is required for an increase in dose or strength.

Under Florida’s new law, the state does not consider a brand-name drug product for the formulary unless the company provides a rebate of 10% in addition to the 15% required by federal law.

As an alternative to drug companies paying for the supplemental rebates, the state allows the firms to fund or provide programs that offset Medicaid expenditures. The allowable programs include disease management, drug product donation, "drug utilization control," prescriber and beneficiary counseling and education, and fraud and abuse initiatives.

A drug company’s agreement to pay the minimum supplemental rebate percentage or provide an equivalent worth of programs guarantees that the state’s Medicaid Pharmaceutical and Therapeutics (P&T) Committee will consider a product for inclusion on the formulary.

But the law is clear that an agreement to pay the supplemental rebate or provide programs in-kind does not guarantee a drug product’s placement on the list:

"Agency decisions will be made on the clinical efficacy of a drug and recommendations of the Medicaid Pharmaceutical and Therapeutics Committee, as well as the price of competing products minus federal and state rebates."

Dan Kincaid, Provider Synergies vice president, said his company developed the initial formulary for the state.

"It is our charge to marry the clinical perspective to the financial and meet the state’s budget requirements," Kincaid said. "We are the interface between the state and the manufacturers."

One company’s agreement with the state. Pfizer Inc., of New York City, the first drug company to strike a deal with the state, is funding disease management services in lieu of paying the supplemental rebate.

A Florida newspaper reported in May that it had uncovered state documents confirming that state officials, including Governor Jeb Bush, had been negotiating in private with Pfizer for several months before the new law’s passage.

The Sun-Sentinel, of Fort Lauderdale, reported that Bush first discussed a deal with Pfizer last December at a Republican Governors Association conference.

Katie Baur, Bush’s director of communications, denied Bush had discussed a deal with Pfizer at the December conference.

"As far as I know, there is no such public record that documents the discussion," she said. "The media is just speculating."

But Florida’s St. Petersburg Times and the Wall Street Journal also reported that the governor had met several times with Pfizer before the bill’s passage.

Bush signed state bill 792, establishing the rules for the mandatory preferred-drug list, into law on May 31. The Florida legislature passed an accompanying bill, 904, amending the state’s public records law to keep negotiations with drug companies confidential. Bush signed that legislation on June 13.

The state’s Agency for Healthcare Administration, which administers Florida’s Medicaid program, announced it had reached an agreement with Pfizer on June 22. The state’s P&T committee endorsed the recommended restricted formulary on June 26.

Sharpe, the state’s Medicaid director, said Pfizer has "unconditionally" guaranteed to save the state $33 million under the company’s two-year contract with the state.

Pfizer has agreed to fully fund the development of hospital-based disease management programs in at least 10 hospitals in Florida. The programs will cover asthma, congestive heart failure, diabetes mellitus, and hypertension.

Sharpe said that although Pfizer will fund the programs, the hospitals have control of running the programs.

Pfizer will also pay for the hospitals to hire at least 60 full-time care managers for Medicaid beneficiaries in the disease management programs. In a news release, the company said the care managers would be nurses.

When asked if the state planned to hire pharmacists for the program, Kitchens indicated, in an e-mail response, that care managers typically are nurses.

Although the hospitals are responsible for hiring the care managers, Kitchens added that "Pfizer has not discussed anything otherwise at this time."

As part of the deal, Pfizer is also providing its Health Solutions disease management software and application training to the hospitals.

Under the two-year contract, Pfizer is providing its products free to Medicaid beneficiaries treated at 30 Florida community health centers.

Barbara DeBuono, a public-health physician with Pfizer, said the donation should save the state an estimated $3.4 million.

DeBuono said Pfizer is developing a health literacy program to help Florida’s Medicaid beneficiaries understand their conditions and treatments and the ways to use the available health benefits.

Pfizer plans to develop tools for teaching pharmacists "how to deal with low-literate" populations as part of the program, DeBuono said.

Discrepancies between the agreement and the formulary. The state said that, as part of the agreement with Pfizer, 23 of the company’s drug products are included on the formulary.

Sharpe said in an interview with AJHP that "all" of Pfizer’s drugs would be on the list.

The Wall Street Journal reported July 9 that "Pfizer got all of its drugs on the list—and without dropping prices a penny."

But when the state posted its formulary on its Web site, not all of Pfizer’s drug products appeared on the list.

Provider Synergies’ Taylor said some of Pfizer’s drugs were not on the initial formulary recommended by her company. But, she said, after the state signed its deal with Pfizer, the state told the company to add all of Pfizer’s drugs to the list before sending it to the P&T committee for approval.

Taylor said a possible reason not all of Pfizer’s drug products were among Provider Synergies’ initial recommendations was that the prices for some of the products may not have met the minimum 25% total rebate required to be considered for inclusion in the formulary.

"Some things, such as if a company did not offer the minimum level for the rebate, were out of our control," Taylor said. "We could only recommend drugs where the company had agreed to the minimum rebate."

Pfizer’s Dilantin, Procardia, and Feldene are not on the formulary. The corresponding generic drugs are listed instead. The company’s Trovan, a fluoroquinolone, is not on the list. Pfizer has warned that Trovan "has been associated with serious liver injury leading to liver transplantation and/or death."

Sharpe, later in an e-mail response, contradicted what he said earlier about the inclusion of all of Pfizer’s drugs on the formulary:

"Medicaid will only pay for the generic when it is available for a branded product. If the prescriber instructs the pharmacy that the brand is ‘medically necessary’ then they may dispense the brand but will only be reimbursed by Medicaid at the generic reimbursement. Therefore the formulary does not come into play when a generic is available at this time."

Kitchens said that if the physician insists that a name-brand product is medically necessary, pharmacy providers would "more than likely" expect Medicaid beneficiaries to pay the cost not covered by Medicaid.

An option for generics. Kitchens said the state’s new law also allows for the state to sign exclusive deals with generic-drug manufacturers.

"It’s an option we have," he said.