Managing The Pharmacy Benefit In Medicare HMOs: What Do We Really Know?

PROLOGUE: If Congress enacts a new prescription drug benefit for Medicare, legislators will likely eschew their usual policy of setting prices for Medicare services. Since 1983, legislators have imposed national price controls on most of the medical products that Medicare pays for on behalf of its thirty-nine million beneficiaries. Drug companies, many legislators, and even the Clinton administration have announced their opposition to drug price controls. In their absence, Congress is contemplating offering prescription drug benefits through existing Medicare+Choice plans, retiree plans, Medigap plans, and competing pharmacy benefit management (PBM) companies. While this new strategy would seek to adapt best practices from the private sector, relatively little is known about how these benefits are managed and how effectively these entities control costs. In this ground-breaking paper Helene Lipton of the University of California, San Francisco (UCSF) and colleagues report findings gleaned from extensive interviews with executives from four large health plans. Lipton, who holds a doctorate in sociology, is a professor of pharmacy and health policy at UCSF. David Gross, an economist, is a senior policy adviser in AARP's Research Group and formerly worked for the General Accounting Office. Marilyn Stebbins is an associate clinical professor of pharmacy at UCSF, and Lori Syed is a pharmacy site manager at the Tuality Forest Grove Hospital Pharmacy in Forest Grove, Oregon. ABSTRACT: An estimated five million Medicare beneficiaries received out-patient prescription drug benefits through Medicare+Choice in 1999. However, little is known about how these benefits are managed or about their effects on costs and quality of care. This exploratory study applies a case-study methodology to four large Medicare health maintenance organizations (HMOs) to identify and assess drug-use management strategies. It also poses a number of important issues for consideration by both policymakers and health services researchers, as the debate rages on over the creation and administration of a Medicare outpatient drug benefit, especially in light of the predilection for the use of private pharmacy benefit managers (PBMs) in many of these proposals.