(see Appendix B and Table 2.1). This survey covered two small MCOs and six PBMs serving 176 million covered lives. The committee also relied on information from the personal and institutional experiences of committee members in the managed care and pharmacy benefits management industry (E. Dichter; J. Jones; O. Wolke; and A. Zimmerman, personal communications, 2000).

MCOs or PBMs may know what effect prior authorization, therapeutic interchange or generic substitution, or copayments and other cost controls that are commonly used have on choice of drugs for their patients. The committee found no national quantitative quality or cost data in the peer-reviewed literature, however, and therefore could not compare these restrictions to the VA National Formulary effects on utilization (examples of which are displayed * in the figures in Chapter 3 and Chapter 4 of this report and discussed in both chapters). Clearly, these controls are intended to restrict choice and direct prescribing. It is well known that copayment size is inversely related to utilization of health care services (Brook et al., 1983), including prescription drugs (Leibowitz et al., 1985; Smith, 1993), and may possibly affect health outcomes (Johnson et al., 1997).

Most MCOs/HMOs offer prescription drug benefits (98.1%, although only about 90 to 92% of enrollees buy these benefits). They usually have formularies (92.9%, but 97.8% of all HMO enrollees are covered by plans that have formularies), and 92% of HMOs contract with PBMs to handle part or all of their pharmacy programs. This most often involves claims processing (Hoechst Marion Roussel, 1998), but PBMs carry out formulary management for 46% of MCOs and 63.2% of employer plans according to Novartis (1998). Most formularies are closed (26.9%) or partially closed (45.4%) (Novartis, 1999). Similar results—35% closed, 24% partially closed—were reported by Luce et al. (1996). Kreling and Mucha (1992) reported 60% restricted or restricted with exceptions. These figures document the increase in restrictive formularies in managed care (72.2%); most hospital formularies have been restrictive for some time.

Only 17.5% of MCOs provide brand name drugs without a penalty when generics are available, which occasionally (17%) amounts to the entire cost of the brand drug, but usually (66.4% [or 44.4%; Novartis, 1998]) to the difference in cost (Hoechst Marion Roussel, 1998). Employer plans are more generous, but 20% require dispensing generics when available; otherwise the enrollee must pay either the entire prescription cost or, more often, the difference in cost between the brand and the generic drug (Wyeth-Ayerst, 1998). MCO and PBM coverage of members of major drug classes is usually more extensive than the VA National Formulary, but financial penalties for nonformulary drugs, non-preferred drugs, or brand name drugs when generics are available are more and more common. This cost control was applied by 86.4% of HMO pharmacy benefit programs estimated in 1999, but less frequently by PBMs (Lipton et al., 1999). MCO copayments on formulary genetic prescriptions average $6.17, and on formulary brands $9.65. Nonformulary genetic copayments average $7.32, and nonformulary brands $13.77. About 80 to 90% of MCOs require prior authorization for some drugs (Novartis, 1998, 1999).



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement