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Medicare Part D -- Avoiding Restrictions and Reducing Costs (2 of 3)

When her doctor prescribed Byetta, a brand-name drug used to treat Type II diabetes, the patient ordered it from her prescription drug plan. But even though Byetta was on its formulary, the plan wanted the patient first to try Lantus, a less expensive drug that the plan preferred. Her doctor, however, said that Lantus was less effective, and he requested that the plan allow the patient to have her Byetta prescription filled. The doctor sent published studies to the plan that showed Byetta to be the best treatment in the patient’s case.

Still, the Part D plan denied the doctor’s request. It insisted that the patient first try one of the plan’s preferred drugs for Type II diabetes. That’s when the patient sought help from the Medicare Rights Center, which guided her through an appeals process that was eventually successful. Her story is one of several case examples in the Medicare Rights Center’s booklet (pages 17-18) explaining the Part D appeals process.

Could the patient have found out before she enrolled in the Part D plan that there were restrictions on the drug she needed? Probably not. If she was already enrolled in the plan when her doctor first prescribed the drug, there’s nothing she could have done differently. And even if she was taking Byetta before she enrolled in the plan, she could not have requested an exception until after she was enrolled.

Had she been taking Byetta before enrolling in the plan, she could have seen on Medicare’s Rx Drug Plan Finder that the plan required “step therapy” for the drug. Then she might have clarified with the plan what would be needed to bypass the restriction after she was enrolled.

The plan could have responded by saying, in effect, that she didn’t need to be concerned about the step therapy requirement for Byetta, which was indicated by a footnote in the plan’s benefit summary. Or, she might have discovered that she would ultimately have to request an exception and perhaps file an appeal unless she was willing first to try another drug. And at that point she might have decided to enroll in another plan where it appeared that getting the Byetta prescription filled would be easier.

The patient’s story is one example of Part D’s complex rules and the broad discretion that plans enjoy. There’s a whimsical truth to the saying that only ten people in the world completely understand Part D’s rules, all of them employed by plan sponsors. And the patient’s story is likewise an example of Plan D sponsors’ growing use of three utilization management tactics – step therapy, quantity limits, and prior authorization.

According to the Kaiser Family Foundation’s 2011 Medicare Prescription Drug Plans Data Spotlight, thirty-two percent of drugs are now subject to utilization management by one or more Part D plans, compared to only 18 percent in 2007 (page 15). The Kaiser analysis also reported that two-thirds of Part D stand-alone enrollees face utilization management restrictions on nine of the top ten brand-name drugs (page 5.

In addition, many plans grant waivers or exceptions only for the remainder of the plan year, so retirees may need to ask again the following year. That’s just one reason for people enrolled in Part D plans to re-assess their coverage during the annual open enrollment period, which started last week and goes through December 7.

Another reason to evaluate Part D coverage is that approximately four million people were in plans last year that will no longer exist in 2012, having been terminated or else consolidated with other plans (which may have different benefit designs). A third reason is that plans frequently change their formularies, and some retirees’ drugs may not be covered next year in their current plans.

As they evaluate their Part D coverage, particularly stand-alone plans, retirees should use the Medicare Rx Drug Plan Finder to examine plans’ costs and restrictions. They should also be alert for ways to lower their costs, including the following:

1. Look for the lowest-cost refill schedule. In most (but not all) cases, mail-order refills cost less, often by hundreds of dollars for someone taking several drugs. Competition between mail-order and retail pharmacies is intense, with plan sponsors and pharmacy benefit managers often steering plan members toward mail-order.

It makes sense that mail-order would be cheaper, even with the added shipping costs. Local pharmacies charge dispensing fees that average slightly more than $10 per prescription. The dispensing fee is to measure or count out the proper dosage, package and label it. For someone taking four medications, the annual dispensing fee for 48 retail refills is $480, which includes a small profit for the pharmacist.

Assuming the dispensing fees are the same for mail-order, then during the year there would be 16 refills at a cost of about $160 – a $320 savings compared to retail refills. The plan sponsor passes on part of this savings to encourage people to use mail order, with the remaining profits retained by the sponsor and/or pharmacy benefit manager.

2. Switch to lower-cost but equally effective drugs. For many expensive and widely prescribed brand-name drugs, less pricey substitutes are just as good. Some brand-name drugs are prescribed because they are heavily advertised. Others had no good substitutes when they were patented, but in recent years less costly alternatives have become available.

So, costs for many drugs are not related to their effectiveness, and it’s common that a less expensive (and less well known) drug works as well as a high-priced one. Nexium, for example, is the third most popular brand-name drug among seniors, and last year its manufacturer AstraZeneca spent $110 million on television ads promoting it. But studies have shown that Nexium is no better than less expensive drugs in treating gastro-intestinal reflux disease. A recent item in the New York Times’ health blog described Nexium’s cost-ineffectiveness compared to other proton pump inhibitors.

Retirees seeking less expensive alternatives for brand-name drugs can refer to Consumer Reports best buy drugs site. At this site, people can find out if there are less expensive substitutes for the drugs that they take. It also allows them to see the costs of several drugs used to treat specific conditions like hypertension and osteoporosis. Consumer Reports rates a few drugs as “best buys” based on their cost and value when compared to other drugs in the same class. The recommendations at the site are supported by clinical studies of the effectiveness of various drugs.

3. Verify that a particular pharmacy is a network pharmacy. Even people who use mail-order refills for their ongoing medications will use retail pharmacies for one-time prescriptions like antibiotics. They should verify that their local pharmacist is in the network of the Part D plan they will enroll in. While national chain pharmacies are in virtually all Part D networks, occasionally a neighborhood pharmacy will not be accepted by one or more plans. And retirees who use non-network pharmacies may have to pay the full retail costs for their drugs (costs that are not considered true out-of-pocket costs by Medicare in determining when people have reached the catastrophic level of spending).

4. Avoid plans with quality ratings lower than three stars. Although a plan’s quality ratings do not appear to relate directly to its costs, a poorly rated plan may be unresponsive as well as less willing to waive restrictions. Medicare’s five-star quality ratings are intended to identify those weaker plans. The ratings are based on 19 measures that focus on client experience and safety.

According to the Medicare Payment Advisory Commission’s annual Status Report on Part D, in 2010 there were no five-star rated Part D stand-alone plans (although there were five-star Medicare Advantage Part D plans). In 2011, the Kaiser Family Foundation’s Part D Data Spotlight reported that 84 percent of stand-alone enrollees are in plans that have quality ratings of three or three and one-half stars and another 15 percent are in plans that have ratings of four or more stars. Only one percent are in plans with fewer than three stars.

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