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5/2/2002

HMOs' Drug Expenses in 2000 Stayed Level

Kate Traynor

Drug expenditures by health maintenance organizations (HMOs) during 2000 held steady at 13.4 percent of total operating expenses—the same proportion as in the previous year, according to the recently released HMO-PPO/Medicare-Medicaid Digest for 2001.

Although the proportion of funds spent on drugs was unchanged, HMOs dispensed about 5 percent more prescriptions in 2000 than in 1999, or about 7.1 prescriptions per member for 2000. Medicare beneficiaries enrolled in an HMO received an average of 19.1 prescriptions per member per year, up 1 percentage point from 1999.

HMOs that operated in-house pharmacies employed 27 pharmacists on average during 2000, a decrease of more than 11 percent from the previous year. The proportion of prescriptions filled at these in-house pharmacies during 2000 decreased to about 54 percent, a drop of 3 percent from 1999.

According to the survey, the share of HMOs that contracted with a pharmacy benefit manager (PBM) to handle prescription administration, dispensing, drug-use review, or claims processing dropped from 1999 to 2000. The biggest drop—nearly 12 percentage points, to about 63 percent—was in the use of a PBM for administrative services.

All HMOs with 100,000 or more enrollees used a drug formulary during 2000, up about 1 percentage point from 1999. At some 18 percent of these HMOs, their 2000 formulary was developed by a PBM, representing a 30-percent drop from 1999.

The proportion of HMOs that required the substitution of generic-drug products for brand-name ones during 2000 climbed to about 82 percent, up from about 77 percent in 1999. As in 1999, about 46 percent of the prescriptions dispensed to HMO members during 2000 were filled with a generic product.

The proportion of HMOs that used financial incentives to influence physicians' prescribing habits fell to 23 percent in 2000, a 41-percent drop from the previous year. The share of HMOs that used practice guidelines for prescribing fell about 2.5 percentage points, to 71 percent.

About 55 percent of HMOs surveyed during 2000 did not penalize physicians for overuse of hospitals, excessive referrals to specialists, or violating a plan's prescribing policy, a 6-percentage-point increase from 1999.

The digest series is sponsored by Aventis Pharmaceuticals Inc. and uses data collected by Chicago-based SMG Marketing Group Inc. Information contained in the report was collected through telephone and mail surveys conducted between February and June 2001. A total of 625 HMOs participated in the survey.