Overview

This summary is based on "Washington State: An Integrated Approach to Evidence-Based Drug Purchasing" in the Spring issue of the newsletter States in Action.

Washington State's Health Care Authority, which coordinates the Prescription Drug Program for the state's Medicaid, public employee, and worker compensation programs, is using an integrated approach to value-based pharmaceutical purchasing. The evidence-based drug review process involves a thorough analysis of quality and effectiveness before applying cost considerations. The process, which includes an evidence-based preferred drug list and supplemental rebates from pharmaceutical manufacturers, is producing savings of $22 million each year to the state—almost 5 percent of its Medicaid fee-for-service drug spending—and $38 million in combined state–federal spending.

The Issue: Cash-strapped Medicaid program are coping with rising prescription drugs, as well as the need to ensure that Medicaid prescription drugs lists are evidence-based and that the public is aware of safe and cost-effective drug use.

Target Population: Participants in Medicaid fee-for-service, self-insured, state public employee, and worker compensation programs.

The Intervention: In June 2003, the Washington State legislature created the Prescription Drug Program (PDP). The PDP is a joint effort of the Health Care Authority (HCA), the Department of Social and Health Services, and the Department of Labor and Industries. It is administered by HCA as a cross-agency entity that coordinates prescription drug purchasing for Medicaid fee-for-service, state public employee, and worker compensation programs.

A key component of the PDP is the evidence-based review process, which includes the following steps:

• As a participant in the Drug Effectiveness Review Project coordinated at the Oregon Health Science University, HCA receives reports summarizing evidence on drug effectiveness for 26 drug classes that cover about half of pharmaceutical spending by the state.
• A Pharmacy and Therapeutics (P&T) Committee made up of physicians, pharmacists, a registered nurse, and a physician's assistant reviews the reports and convenes about every two months to evaluate the evidence for a certain drug class. The committee makes recommendations on drugs that are "equally safe and effective," without considering their cost.
• After each P&T meeting, agency staff conduct an actuarial cost analysis of the drug or drugs recommended by the P&T committee for inclusion on the state's preferred drug list (PDL), using the supplemental rebate offers and other cost data to determine which drugs result in the lowest net cost to the state.
• Based on this cost analysis, the directors of each of the agencies make the final decision as to what drugs will be included on the PDL. HCA notifies stakeholders, the P&T Committee, and "endorsing practitioners" about PDL and rule changes. An "endorsing practitioner" is any provider who has reviewed the state PDL and agrees to allow pharmacists to automatically exchange a non-preferred drug with a therapeutically equivalent preferred drug, unless he or she has specified to "dispense as written." Those prescribers who are not endorsing practitioners may also request "dispense as written" for non-preferred drugs (that is, they are not bound by the PDL), but may be required to undergo a prior authorization process.
• The evidence-based pharmaceutical process has increased the market share of preferred drugs and reduced expenditures. For example, after adding ACE inhibitors to the PDL in April 2004, there was an approximate 60 percent reduction in claims for non-preferred drugs in this class. Adherence to the PDL varies across drug classes, with an average rate of compliance of 80 percent.
• Across all agencies using the PDL, the state estimates combined savings of $22 million per year—about a 5 percent reduction in drug spending across the three state programs, and a $38 million per-year reduction in combined state/federal funds.

HCA will continue to monitor the evidence-based drug program and learn as it moves forward. Steps it plans for the near future include:

• evaluating the impact on the PDL of changes related to the dual eligible population as Medicare Part D is fully implemented;
• tracking endorsing and non-endorsing practitioner prescription patterns and implementing interventions to promote adherence to the PDL; and
• promoting preferred drug use through continued education to consumers and providers about the cost-effectiveness and efficacy of PDL drugs.

For Further Information: Contact Duane Thurman, Director, Prescription Drug Program, Washington State Health Care Authority, duane.thurman@hca.wa.gov, (206) 521-2036, or visit the Washington State Health Care Authority Prescription Drug Program Web site at www.rx.wa.gov/.

March 2007