Will Formularies Under the Medicare Part D Drug Program Assure Fair Access to Required Prescription Drugs?

The Medicare Act of 2003 authorized the United States Pharmacopeia (USP), a non-profit, non-governmental organization, to develop model guidelines listing categories and classes of therapeutic drugs that Prescription Drug Plans (PDPs) can use in developing their formulary, or list of covered drugs. The model guidelines will not be binding on plans. However, a plan formulary that follows the guidelines will be deemed not to be discriminatory, and will not be reviewed by the Centers for Medicare & Medicaid Services (CMS). Formularies that are not based on the model guidelines will be screened to assure that they do not discriminate against any disease or condition.

The USP published its draft model guidelines on August 19, 2004. The model guidelines start with therapeutic categories that are reflective of the ICD-9 diagnostic codes (Standard International Classification of Diseases). Categories may also be based on an organ system, such as cardiovascular medications. Of the 43 large therapeutic categories in the guidelines, 35 are further divided into pharmacologic classes. Classes are based either on the chemical structure of the drug or on its "mechanism of action," i.e., how it works to achieve its results. PDPs that adopt the guidelines will be required to include at least two drugs for each class in a category. If a category is not broken into classes, the PDP must include at least two drugs from the category. For some therapeutic categories, the USP recommends further subdivision, breaking the drug classifications down again by adding another level of specificity. According to the USP, drug plans would only have to provide one drug in this third subdivision, not two drugs as they must in the other levels. In other words, they could satisfy their obligation by providing two drugs in a class and only one drug in each recommended subdivision of a class. If the USP makes a "recommended subdivision" into a binding sub-class of drugs, plans wishing to avoid review by CMS would be required to offer more drugs on their formularies.

Overall, the draft model includes 138 classes and 8 categories that have no classes, for a total of 146 unique therapeutic categories and pharmacologic classes. This number represents a reduction from the 209 categories and classes used in developing formularies for the Medicare-endorsed prescription drug discount card. The Veterans Administration has only 34 primary therapeutic categories, but these are broken down further into 540 secondary classes. The larger the number of categories and classes, the more drugs that would be included in a formulary.

A tension exists between consumer advocates, doctors, and drug manufacturers who want the USP to expand the number of categories and classes in the final model, and potential drug plan sponsors and pharmacy benefit managers (PBMs), who want the number reduced. At a public meeting to discuss the draft model guidance held on August 27, 2004, PBM and health plan representatives argued that the number of classes should be kept small. They testified that they should be required to offer fewer drugs. They maintain that it becomes harder for the plans and PBMs to negotiate reduced drug prices if they are required to offer too many drugs. Health plan representatives pressed instead for an "exceptions process" along with few drug requirements to allow beneficiaries to seek coverage for non-formulary drugs.

Representatives of the medical community and consumers, on the other hand, pointed out the inadequacy of the draft model to assure access to many of the drugs most frequently used by older people and people with disabilities. For example, as drafted, the model would allow a plan to exclude some of the drugs most commonly used in the treatment of heart disease, depression, multiple sclerosis, and diabetes. Many witnesses explained how drugs that could be offered in the same class under the draft model in fact work differently to treat a disease or condition, and how different drugs are more effective during the course of an illness or for different people. Medical and consumer advocates argued that an exceptions process is burdensome and lengthy, and is not a substitute for ready access to medically necessary medication.

The USP must submit its final model guidance to CMS by December 31, 2004. The organization is accepting comments on the draft until September 17, 2004. The draft model guidance is available for review on the USP website www.usp.org.

For further information, contact attorney Vicki Gottlich in the Center for Medicare Advocacy’s Washington, DC office, at (202) 293-5760 or vgottlich@medicareadvocacy.org.

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