duke university benefit design s effect on adherence:  what s the real cost

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Agenda . The Healthcare LandscapeBenefit Design- What is the optimal cost sharing equation?Disease Management's Role- Quality Next Steps- Designing Benefits for the 21st century: Are you ready?. But what happens to those prescriptions? . 1 Cherry DK, Burt CW, Woodwell DA. National Ambulatory Medical Care Survey: 2001 Summary. Advance data from vital and health statistics; no 337. Hyattsville, Maryland; National Center for Health Statistics. 2003. 2 The Hidden Epidemic: Finding a Cure fo9447

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1. Duke UniversityBenefit Design’s Effect on Adherence: What’s the Real Cost? Terry M. Hommel MD MPH April 26th, 2005 For purposes of this economic argument, we have equated utilization with demand. NOTE: This presentation uses utilization or demand as a proxy for compliance/adherence --since we can only track sale of drugs (via pharm claims) vs. actual use (actual dosing, etc) For purposes of discussion, the following Internal GSK working definitions are provided. NOTE: these terms are sometimes used interchangeably – and may be used differently by individual authors cited here. Adherence: How well patients take their medicine Compliance: How closely a patient follows dosing instructions Persistence: How long a patient stays on the prescribed medication For purposes of this economic argument, we have equated utilization with demand. NOTE: This presentation uses utilization or demand as a proxy for compliance/adherence --since we can only track sale of drugs (via pharm claims) vs. actual use (actual dosing, etc) For purposes of discussion, the following Internal GSK working definitions are provided. NOTE: these terms are sometimes used interchangeably – and may be used differently by individual authors cited here. Adherence: How well patients take their medicine Compliance: How closely a patient follows dosing instructions Persistence: How long a patient stays on the prescribed medication

2. Agenda The Healthcare Landscape Benefit Design- What is the optimal cost sharing equation? Disease Management’s Role- Quality Next Steps- Designing Benefits for the 21st century: Are you ready?

3. But what happens to those prescriptions? HealthCare Landscape Many prescriptions are written… Emphasize that the outcome of 62% of physician visits are a prescription, while additional visits are used to monitor the effects of prescribed therapies - the overall costs of healthcare is then tightly linked to the role of prescription drugs (why pay for the physician visit if the solution is ignored). Yet compliance is poor: Harris Interactive conducted a survey (10,000 pts survey 2002) -- using Harris Interactive Chronic Illness Panel. BCG did the analysis, Number of respondents = 9,290 (persons aged 18 years and older for whom medication was prescribed in the past 12 months) Responses weighted to represent adults with specific chronic illnesses (more than 40 common chronic conditions).Many prescriptions are written… Emphasize that the outcome of 62% of physician visits are a prescription, while additional visits are used to monitor the effects of prescribed therapies - the overall costs of healthcare is then tightly linked to the role of prescription drugs (why pay for the physician visit if the solution is ignored). Yet compliance is poor: Harris Interactive conducted a survey (10,000 pts survey 2002) -- using Harris Interactive Chronic Illness Panel. BCG did the analysis, Number of respondents = 9,290 (persons aged 18 years and older for whom medication was prescribed in the past 12 months) Responses weighted to represent adults with specific chronic illnesses (more than 40 common chronic conditions).

4. Why Didn’t They Take Their Medication? Note: 27% gave reasons that could relate to benefit design…including cost, PA’s, step therapy, non-formulary items Hidden Epidemic.. Same study as last slide Harris Interactive conducted the survey (10,000 pts survey 2002 )-- using Harris Interactive Chronic Illness Panel. BCG did the analysis Number of respondents = 9,290 (persons aged 18 years and older for whom medication was prescribed in the past 12 months) Note: 27% gave reasons that could relate to benefit design…including cost, PA’s, step therapy, non-formulary items Hidden Epidemic.. Same study as last slide Harris Interactive conducted the survey (10,000 pts survey 2002 )-- using Harris Interactive Chronic Illness Panel. BCG did the analysis Number of respondents = 9,290 (persons aged 18 years and older for whom medication was prescribed in the past 12 months)

5. HealthCare LandscapeIncreasing Impact of Chronic Conditions

6. Why Address Adherence? “Increasing the effectiveness of adherence interventions may have a far greater impact on the health of the population than any improvement in specific medical treatments.”1,2

7. Goals of Pharmacy Benefit Design Promote cost-effective and appropriate medication use Limit inappropriate use of medications Non-essential medications Lifestyle therapies Excessive duration Manage drug spending Constrain escalating costs Ensure best ROI for health care dollars Others?

8. Cost Sharing Is Increasing Report prepared on behalf of Takeda Pharmaceuticals America, Inc, by the Pharmacy Benefit Management Institute Data collected from 535 employers representing 17.4 million beneficiaries. The following is the report’s detailed explanation of the co-insurance comments: “ The percentage of employers using co-insurance for second-tier retail cost sharing increased from22% in 2001 to 26% in 2002. The report explains that although most employers who use coinsurance apply it across all drug categories, some employers use coinsurance only for second- or third- tier drugs, with flat dollar first tier copayment amounts. This approach for the second- and third-tier drugs gives plans more flexibility to ensure that patients pay a consistent portion of the benefit cost while providing an additional incentive to use generic drugs (listed in the first tier).“Report prepared on behalf of Takeda Pharmaceuticals America, Inc, by the Pharmacy Benefit Management Institute Data collected from 535 employers representing 17.4 million beneficiaries. The following is the report’s detailed explanation of the co-insurance comments: “ The percentage of employers using co-insurance for second-tier retail cost sharing increased from22% in 2001 to 26% in 2002. The report explains that although most employers who use coinsurance apply it across all drug categories, some employers use coinsurance only for second- or third- tier drugs, with flat dollar first tier copayment amounts. This approach for the second- and third-tier drugs gives plans more flexibility to ensure that patients pay a consistent portion of the benefit cost while providing an additional incentive to use generic drugs (listed in the first tier).“

9. Data from National Employer Survey -- conducted and reported annually by the Kaiser Family Foundation and Health Research and Educational Trust. These data are from the 2004 Survey, Chart 16. This slide demonstrates how co-pays for non-generic drugs continue to escalate. In 2004, the differential between preferred and non-preferred brands averaged $12. Notice that even “preferred” brands cost, on average, over $20 in co-pay.Data from National Employer Survey -- conducted and reported annually by the Kaiser Family Foundation and Health Research and Educational Trust. These data are from the 2004 Survey, Chart 16. This slide demonstrates how co-pays for non-generic drugs continue to escalate. In 2004, the differential between preferred and non-preferred brands averaged $12. Notice that even “preferred” brands cost, on average, over $20 in co-pay.

10. (Joyce and Goldman) RAND study -- Retrospective analysis (1997-1999) linking claims data of 420,786 primary beneficiaries from 25 companies. Study population Employees only, with both medical benefits and prescription drug coverage; continuous enrollment (1, 2 or 3 yrs) Age Range: 18-64 yrs (46.6% were 45 years or younger) Gender: 63.9% male Chronic health conditions: more than 4 in 10 2. Fairman (Express Scripts): Retrospective, long-term follow-up study examined (“quasi-experiment, pre-post with comparison group”) the effects of a 3-teir co-pay on RX and Med utilization and costs for 30 months after implementation. Study Population: commercially insured, PPO (Mid –West). 1997-2000 Intervention group (n=3577) employer switched from 2-teir to 3-teir plan Comparison group (n=4132) employer retained 2-teir plan(Joyce and Goldman) RAND study -- Retrospective analysis (1997-1999) linking claims data of 420,786 primary beneficiaries from 25 companies. Study population Employees only, with both medical benefits and prescription drug coverage; continuous enrollment (1, 2 or 3 yrs) Age Range: 18-64 yrs (46.6% were 45 years or younger) Gender: 63.9% male Chronic health conditions: more than 4 in 10 2. Fairman (Express Scripts): Retrospective, long-term follow-up study examined (“quasi-experiment, pre-post with comparison group”) the effects of a 3-teir co-pay on RX and Med utilization and costs for 30 months after implementation. Study Population: commercially insured, PPO (Mid –West). 1997-2000 Intervention group (n=3577) employer switched from 2-teir to 3-teir plan Comparison group (n=4132) employer retained 2-teir plan

11. But Are Overall Healthcare Costs Reduced?

12. Benefit Design and Consumerism He found that increasing cost sharing levels decreased full compliance.

13. Impact of Benefit Design Dor (Case Western) conducts a retrospective analysis to assess the effects of a simulated response to increased cost-sharing on the distribution of compliance probabilities. analyzed data on privately insured adults (over 18 years) with Type 2 Diabetes. Over 27,000 people from 7 large companies and 65+ plan designs- ~20.5K in co-pay and 6.5K in co-insurance Increasing co-pays for 10M diabetics in the US from $6 t0 $10 would have the following cost impact:. This is a conservative estimate since the effect of non-compliance with filling an index prescription has not been included and no indirect cost components are considered. Annual net saving on pharmacy costs of $125M Increased medical cost of non-compliance of $320M per year ( the incidence and costs of diabetic complications such as blindness, amputations, etc.) Dor defined compliance as ”the adherence to refilling of prescriptions of preventive care drugs without interruption”. And “a person is compliant if he or she adheres to the anti-diabetic drug regimen prescribed by a physician.” He measures compliance in the 90-day timeframe on patients who previous had at least 1 purchase of a prescription with a 30-35 day supply (so these are results after the 1st prescription is filled). He defines full compliance as purchasing one or more refills within 90 days, after using all the pills supplied in the prescription, prescriptions to cover all 90 days. Data obtained (by MEDSTAT) from the MarketScan databases by linking 5 separate files: MarketScan Drug Benefit File - pharmacy claims of employees and annuitants of large employers Employer Benefit Plan Design (EBPD) - benefit design and co-payment information from 50+ large employers MarketScan Enrollment File – links individual employees to their health plan enrollment history MarketScan Hospital Inpatient File Outpatient Services File – information on patient’s chronic disease conditions and demographic characteristics Dor (Case Western) conducts a retrospective analysis to assess the effects of a simulated response to increased cost-sharing on the distribution of compliance probabilities. analyzed data on privately insured adults (over 18 years) with Type 2 Diabetes. Over 27,000 people from 7 large companies and 65+ plan designs- ~20.5K in co-pay and 6.5K in co-insurance Increasing co-pays for 10M diabetics in the US from $6 t0 $10 would have the following cost impact:. This is a conservative estimate since the effect of non-compliance with filling an index prescription has not been included and no indirect cost components are considered. Annual net saving on pharmacy costs of $125M Increased medical cost of non-compliance of $320M per year ( the incidence and costs of diabetic complications such as blindness, amputations, etc.) Dor defined compliance as ”the adherence to refilling of prescriptions of preventive care drugs without interruption”. And “a person is compliant if he or she adheres to the anti-diabetic drug regimen prescribed by a physician.” He measures compliance in the 90-day timeframe on patients who previous had at least 1 purchase of a prescription with a 30-35 day supply (so these are results after the 1st prescription is filled). He defines full compliance as purchasing one or more refills within 90 days, after using all the pills supplied in the prescription, prescriptions to cover all 90 days. Data obtained (by MEDSTAT) from the MarketScan databases by linking 5 separate files: MarketScan Drug Benefit File - pharmacy claims of employees and annuitants of large employers Employer Benefit Plan Design (EBPD) - benefit design and co-payment information from 50+ large employers MarketScan Enrollment File – links individual employees to their health plan enrollment history MarketScan Hospital Inpatient File Outpatient Services File – information on patient’s chronic disease conditions and demographic characteristics

14. Type of Cost Sharing Matters Dor further found that, for the same dollar amount, medication adherence under co-insurance is 10% lower than adherence under co-pays. He postulated that the uncertainty of the out-of-pocket contribution with co-insurance probably contributes to this behavior. Dor conducts a retrospective analysis to assess the effects of a simulated response to increased cost-sharing on the distribution of compliance probabilities. He measures compliance in the 90-day timeframe on patients who previous had at least 1 purchase of a prescription with a 30-35 day supply (so these are results after the 1st prescription is filled). He defines full compliance as purchasing one or more refills within 90 days, after using all the pills supplied in the prescription. Dor analyzed data on privately insured adults (over 18 years) with Type 2 Diabetes. Involved over 27,000 people from 7 large companies and 65+ plan designs- ~20.5K in co-pay and 6.5K in co-insurance Data obtained (by MEDSTAT) from the MarketScan databases by linking 5 separate files: MarketScan Drug Benefit File - pharmacy claims of employees and annuitants of large employers Employer Benefit Plan Design (EBPD) - benefit design and co-payment information from 50+ large employers MarketScan Enrollment File – links individual employees to their health plan enrollment history MarketScan Hospital Inpatient File Outpatient Services File – information on patient’s chronic disease conditions and demographic characteristics Dor conducts a retrospective analysis to assess the effects of a simulated response to increased cost-sharing on the distribution of compliance probabilities. He measures compliance in the 90-day timeframe on patients who previous had at least 1 purchase of a prescription with a 30-35 day supply (so these are results after the 1st prescription is filled). He defines full compliance as purchasing one or more refills within 90 days, after using all the pills supplied in the prescription. Dor analyzed data on privately insured adults (over 18 years) with Type 2 Diabetes. Involved over 27,000 people from 7 large companies and 65+ plan designs- ~20.5K in co-pay and 6.5K in co-insurance Data obtained (by MEDSTAT) from the MarketScan databases by linking 5 separate files: MarketScan Drug Benefit File - pharmacy claims of employees and annuitants of large employers Employer Benefit Plan Design (EBPD) - benefit design and co-payment information from 50+ large employers MarketScan Enrollment File – links individual employees to their health plan enrollment history MarketScan Hospital Inpatient File Outpatient Services File – information on patient’s chronic disease conditions and demographic characteristics

15. Goldman looked at the impact of benefit design, but in a broader population of 30 large employers. Retrospective analysis of utilization for entire population vs. those with chronic conditions. 8 chronic conditions (10 treatment classes) accounting for 51% of prescription drug spend Chronic condition = 2 or more Medical Claims plus at least one prescription in the defined treatment class Objective: To determine how changes in cost sharing affect medication utilization ( privately insured patients) Goldman Ccnducts a retrospective analysis of 30 large employers covering 528,969 beneficiaries continuously enrolled for up to 4 years. Medical and pharmacy claims. Data were provided by Ingenix Inc. (UHC). 8 chronic condition defined as: 2 or more Medical Claims plus at least one prescription in the defined tx class: Diabetes – anti-diabetics (includes sulfonylureas and metformin) Arthritis – NSAIDS (includes Cox 2 inhibitors) Asthma – anti-asthmatics (includes anticholinergics, anti-inflam agents, leukotrienes, oral steroids, inhaled steroids, sympathomimetics, xanthines) Gastric acid disorder – anti-ulcer agents (includes H2 receptor antagonists and PPI) and other GI meds Hypertension – antihypertensives (ACE, Bblockers, CA channel blockers, Diuretics , Angiotensin II receptor blockers) + other cardiac drugs Depression - antidepressants (SSRI and Tricyclics) Dyslipidemia (hypercholesterolemia) - antihyperlipidemics Allergic rhinitis – antihistamines For each disease class, they estimated 2 models – disease-specific drug use use of all other drugs Objective: To determine how changes in cost sharing affect medication utilization ( privately insured patients) Goldman Ccnducts a retrospective analysis of 30 large employers covering 528,969 beneficiaries continuously enrolled for up to 4 years. Medical and pharmacy claims. Data were provided by Ingenix Inc. (UHC). 8 chronic condition defined as: 2 or more Medical Claims plus at least one prescription in the defined tx class: Diabetes – anti-diabetics (includes sulfonylureas and metformin) Arthritis – NSAIDS (includes Cox 2 inhibitors) Asthma – anti-asthmatics (includes anticholinergics, anti-inflam agents, leukotrienes, oral steroids, inhaled steroids, sympathomimetics, xanthines) Gastric acid disorder – anti-ulcer agents (includes H2 receptor antagonists and PPI) and other GI meds Hypertension – antihypertensives (ACE, Bblockers, CA channel blockers, Diuretics , Angiotensin II receptor blockers) + other cardiac drugs Depression - antidepressants (SSRI and Tricyclics) Dyslipidemia (hypercholesterolemia) - antihyperlipidemics Allergic rhinitis – antihistamines For each disease class, they estimated 2 models – disease-specific drug use use of all other drugs

16. Goldman found that when out-of-pocket payments doubled, drug utilization was significantly reduced. People being treated for diabetes cut back on drugs to treat diabetes (except insulin) by 23% People being treated for asthma cut use of drugs to treat asthma by 22% Next Slides Antidepressants decreased by 26% (8% in those with 2 or more visits per year) Visits to hospital emergency rooms increased 17% Hospital stays rose by 10% People being treated for diabetes cut back on drugs to treat diabetes (except insulin) by 23% People being treated for asthma cut use of drugs to treat asthma by 22% Next Slides Antidepressants decreased by 26% (8% in those with 2 or more visits per year) Visits to hospital emergency rooms increased 17% Hospital stays rose by 10%

17. Additionally, when co-pays were doubled in patients with depression: antidepressant use decreased by 8% use of medications for all other conditions declined by 25%

18. Finally, Goldman found that among patients with asthma, diabetes and gastric acid diseases: as the use of prescription drugs dropped, their utilization of other services increased.

19. Demand is ElasticThe Level of Cost Sharing Drives Behavior Setting - mid-western university hospital (Univ Michigan) and MCO Study Design: retrospective analysis Non-Medicaid MCO enrollees, 18+ yrs; 2 or more statin prescriptions (Jan. 1998 -Nov. 2001). Subjects stratified into two analysis groups A) Secondary Prevention Group (n=2258): CHD or CHD risk equivalents (per NCEP panel on detection, evaluation and treatment of High Blood Cholesterol) or a cardiovascular event (per HEDIS 2002 Criteria). Age 63.2(SD=12.1) Male 59.5% Race: 82.7% white, 8.8% African-American Statin Naïve: 54.4% B) Primary Prevention Group (n=2544): all others Age 56.7(SD=12.9) Male 52.9% Race: 81% white, 5.8% African-American Statin Naïve: 54% Non-Adherence: Percent of Subjects Meeting Non-Adherence Definition CMG>10% CMG>20% CMG>30% Prevention Category Primary 56.4 37.8 28.0 Secondary 56.0 38.8 26.7 Co-pay Range <$10: 49.3 28.6 22.2 $20+: 76.2 59.4 45.1 Time to Discontinuation: Median times to discontinuation <$10 copay: ~1 year (both 1° and 2 ° prevention groups) $20+ copay: ~ 3.7 years (1 ° prevention) and ~3.4 years (2° prevention) see note Note – data was only collected for ~4 years -- (so we don’t know what the median times might have been with a longer collection window-- ? Could it have been more?) Setting - mid-western university hospital (Univ Michigan) and MCO Study Design: retrospective analysis Non-Medicaid MCO enrollees, 18+ yrs; 2 or more statin prescriptions (Jan. 1998 -Nov. 2001). Subjects stratified into two analysis groups A) Secondary Prevention Group (n=2258): CHD or CHD risk equivalents (per NCEP panel on detection, evaluation and treatment of High Blood Cholesterol) or a cardiovascular event (per HEDIS 2002 Criteria). Age 63.2(SD=12.1) Male 59.5% Race: 82.7% white, 8.8% African-American Statin Naïve: 54.4% B) Primary Prevention Group (n=2544): all others Age 56.7(SD=12.9) Male 52.9% Race: 81% white, 5.8% African-American Statin Naïve: 54% Non-Adherence: Percent of Subjects Meeting Non-Adherence Definition CMG>10% CMG>20% CMG>30% Prevention Category Primary 56.4 37.8 28.0 Secondary 56.0 38.8 26.7 Co-pay Range <$10: 49.3 28.6 22.2 $20+: 76.2 59.4 45.1 Time to Discontinuation: Median times to discontinuation <$10 copay: ~1 year (both 1° and 2 ° prevention groups) $20+ copay: ~ 3.7 years (1 ° prevention) and ~3.4 years (2° prevention) see note Note – data was only collected for ~4 years -- (so we don’t know what the median times might have been with a longer collection window-- ? Could it have been more?)

20. A Medicare Perspective Data from the 2000 Medical Expenditure Panel Survey (MEPS). MEPs is sponsored by the Agency for Healthcare Research and Quality (AHRQ) and the National Center for Health Statistics. MEPs provides nationally representative estimates of health care use and expenditures for Medicare populations (both fee-for-service and managed care). The 20% of Medicare beneficiaries who have the highest total health care costs (average $21,861 per year) had lower Rx expenditures (averaging $2,073 per year). The 20% of Medicare beneficiaries who have the highest Rx expenditures (average $3,195 per year), have lower total health care costs (average $12,353 per year). Average of 5 Rx per month, treating: -- 56% hypertension -- 24% joint disorder -- 32% diabetes -- 16% thyroid -- 28% lipid disorders Data from the 2000 Medical Expenditure Panel Survey (MEPS). MEPs is sponsored by the Agency for Healthcare Research and Quality (AHRQ) and the National Center for Health Statistics. MEPs provides nationally representative estimates of health care use and expenditures for Medicare populations (both fee-for-service and managed care). The 20% of Medicare beneficiaries who have the highest total health care costs (average $21,861 per year) had lower Rx expenditures (averaging $2,073 per year). The 20% of Medicare beneficiaries who have the highest Rx expenditures (average $3,195 per year), have lower total health care costs (average $12,353 per year). Average of 5 Rx per month, treating: -- 56% hypertension -- 24% joint disorder -- 32% diabetes -- 16% thyroid -- 28% lipid disorders

21. What Are Employers and MCO’s Experiencing?

22. Employers Verging On Payor Revolt Feeling impact of retirees and diverse populations at greater risk for costly chronic diseases (e.g. diabetes, heart disease, asthma) View Rx drugs as cost drivers (double-digit inflation) instead of overall cost, health and productivity enhancer Applying aggressive cost-control strategies More formulary management (more tiers, PA controls) Cost-shifting to employees (higher co-pays) More rapid access to generics without regard to adherence and efficacy considerations (e.g. increased doses per day, less combination products) In addition to bearing the burden of retiree benefits, employers are also feeling the impact of an increasing diverse population, at greater risk for costly, chronic diseases: Seniors (retirees) experience more costly chronic conditions Hispanics/Latinos 100% more likely to suffer from diabetes than whites (CDC) (Hispanic children 2.5x more likely to have asthma.. CHF 41% more prevalent in Hispanic population.) African Americans 70% higher rate of diabetes than whites (CDC) Cardiovascular disease: Death is 30% higher vs whites (CDC) Kids have a higher prevalence of asthma American Indians and Alaskan Indians Prevalence of diabetes is twice (CDC) In addition to bearing the burden of retiree benefits, employers are also feeling the impact of an increasing diverse population, at greater risk for costly, chronic diseases: Seniors (retirees) experience more costly chronic conditions Hispanics/Latinos 100% more likely to suffer from diabetes than whites (CDC) (Hispanic children 2.5x more likely to have asthma.. CHF 41% more prevalent in Hispanic population.) African Americans 70% higher rate of diabetes than whites (CDC) Cardiovascular disease: Death is 30% higher vs whites (CDC) Kids have a higher prevalence of asthma American Indians and Alaskan Indians Prevalence of diabetes is twice (CDC)

23. Influential Employers Changing The Paradigm: Pitney Bowes

24. Implemented a radical change in Pharmacy Benefit Design1, 2 Moved selected medications to 1st tier: 10% co-insurance and removed deductible (unadvertised) All asthma medications All diabetes medications All anti-hypertensives No mandatory generic or mail order No step therapy; limited prior authorization

25. Outcomes: 18 months post implementation1,2,3 Significant change in drug market share Migration to combination therapies Increased drug possession rates No significant impact to total drug spend Expecting 2:1 or better (at least $1M in 2004)

26. What About Disease Management? Report prepared on behalf of Takeda Pharmaceuticals America, Inc, by the Pharmacy Benefit Management Institute Data collected from 535 employers representing 17.4 million beneficiaries. Report prepared on behalf of Takeda Pharmaceuticals America, Inc, by the Pharmacy Benefit Management Institute Data collected from 535 employers representing 17.4 million beneficiaries.

27. CIGNA - Diabetes Disease Management Program (1998-2001) 43,500 members,10 major US geographic areas1 Pharmacy costs rose for the full participant group an expected result as members were encouraged to comply with medication regimens as part of the program2 Hospitalization costs decreased 22-30%1 full participants (n = 27,876) = enrolled in the study for at least 10 months comparison group (n = 27548) full participants (n = 27,876) = enrolled in the study for at least 10 months comparison group (n = 27548)

28. Asheville Project Patient Incentives and Care Model Community-based program Funded by employer (City of Asheville, NC) Coordinated by Mission St. Joseph Hospital and APHA Focus on patient education and support Waived co-pays, waived formulary Utilized RPh to provide ongoing support and monitoring Design: Quasi-experimental, longitudinal , pre-post cohort study. Set in Ashvillve, NC 1997-2001 Participants: Patients with diabetes covered by self-insured employer’s health plans. median age 48 yrs 49% male 83% Caucasian Community pharmacists trained in a diabetes certification program and reimbursed for PCS (Pharmaceutical Care Services). Design: Quasi-experimental, longitudinal , pre-post cohort study. Set in Ashvillve, NC 1997-2001 Participants: Patients with diabetes covered by self-insured employer’s health plans. median age 48 yrs 49% male 83% Caucasian Community pharmacists trained in a diabetes certification program and reimbursed for PCS (Pharmaceutical Care Services).

29. Asheville Project Health Care Costs

30. Asheville Project Reduction in Annual Sick Days Mean number of sick time used for group 1 decreased at every follow up year compared with baseline. Data were available for 36 patients for the years 1996 (baseline) thru 2001. Employer has estimated the value of increased productivity to be $18,000 per year. Mean number of sick time used for group 1 decreased at every follow up year compared with baseline. Data were available for 36 patients for the years 1996 (baseline) thru 2001. Employer has estimated the value of increased productivity to be $18,000 per year.

31. Health Plans and Employers- Changing the Paradigm BCBS of NC- August 2004 Benefit change offered to members with asthma who are enrolled in the Blue Care®, Blue Choice®, and Blue OptionsSM plans, with pharmacy benefits through BCBS Members opting to enroll in the Your Asthma CareSM1 disease management program will receive Tier 2 inhaled corticosteroids at a more affordable Tier 1 copayment

32. Health Plans and Employers- Changing the Paradigm Polk County School Board, FL1 (2002-present) 10,000 employees, nearly 17,000 covered lives, largest employer in the county Self-funded, uses BCBS of Fl as their medical ASO Identified diabetes as a primary driver in escalating medical costs Partnered with providers, pharmacists, and the PBM with the leadership of a dedicated Wellness Team Initiated a comprehensive Diabetes Disease Management Program that included screening, provider, patient, and caregiver education, disease management tools, and incentives to members diagnosed with diabetes based on their adherence to medication and other criteria. Incentives included a 50% reduction in established co-pays for diabetic medications, waived fees for selected interventions/visits, and “lottery prize drawings” for those members who maintain in the program. Works closely with their PBM to monitor results in terms of persistence The program has full support from the Director of Benefits and the School Board Initiated a comprehensive Diabetes Disease Management Program that included screening, provider, patient, and caregiver education, disease management tools, and incentives to members diagnosed with diabetes based on their adherence to medication and other criteria. Incentives included a 50% reduction in established co-pays for diabetic medications, waived fees for selected interventions/visits, and “lottery prize drawings” for those members who maintain in the program. Works closely with their PBM to monitor results in terms of persistence The program has full support from the Director of Benefits and the School Board

33. Health Plans and Employers- Changing the Paradigm Polk County School Board, FL1 (2002-present) Initiated a comprehensive Diabetes Disease Management Program participants must keep required appointments required medical and dietary education and self-monitoring Incentives for participation included a 50% reduction in established co-pays for diabetic medications and waived fees for selected interventions/visits. Initiated a comprehensive Diabetes Disease Management Program that included screening, provider, patient, and caregiver education, disease management tools, and incentives to members diagnosed with diabetes based on their adherence to medication and other criteria. Incentives included a 50% reduction in established co-pays for diabetic medications, waived fees for selected interventions/visits, and “lottery prize drawings” for those members who maintain in the program. Works closely with their PBM to monitor results in terms of persistence The program has full support from the Director of Benefits and the School Board Initiated a comprehensive Diabetes Disease Management Program that included screening, provider, patient, and caregiver education, disease management tools, and incentives to members diagnosed with diabetes based on their adherence to medication and other criteria. Incentives included a 50% reduction in established co-pays for diabetic medications, waived fees for selected interventions/visits, and “lottery prize drawings” for those members who maintain in the program. Works closely with their PBM to monitor results in terms of persistence The program has full support from the Director of Benefits and the School Board

34. Why Focus on Benefit Design? Patients cite increased out-of-pocket cost as a major reason for non-compliance Evidence is mounting that by reducing co-pays/coinsurance for selected therapeutic classes (e.g., asthma, diabetes, depression) we can… Strengthen the foundation for compliance Drive overall healthcare costs down and increase productivity Be a win/win for employees and employers

35. Next Steps - Designing Benefits for the 21st Century Remove financial and procedural barriers for adherence to recommended therapies when participants are active in their care. Set out-of-pocket costs for chronic disease management at levels that do not discourage care Integrate disease management programs with your corporate culture - incentives for participants

36. Presentation References Pg 1 Anderson G, Knickman J. Changing the chronic care system to meet people’s needs. Health Aff. 2001; 20 (6): 146-160. Anderson G, Horvath J. Chronic Conditions: Making the Case for Ongoing Care. John Hopkins University Partnership for Solutions; December 2002. 10TH Annual National Business Group on Health Watson Wyatt Survey Report 2005 Berman C. Pitney Bowes: Prescription Drug Value-Based Purchasing. Presented at National Business Coalition on Health; January 22, 2004; Las Vegas, NV. Cherry DK, Burt CW, Woodwell DA. National Ambulatory Medical Care Survey: 2001 Summary. Advance data from vital and health statistics; no 337. Hyattsville, Maryland; National Center for Health Statistics. 2003. Cranor CW, Bunting BA, Christensen DB. The Asheville Project: Long-term clinical and economic outcomes of a community pharmacy diabetes care program. J Am Pharm Assoc. 2003;43:173-84. Dor A, Encinosa WE. Does Cost Sharing Affect Compliance? The Case of Prescription Drugs. National Bureau of Economic Research. NBER Working Paper Series. No. 10738. August 2004.JEL No I11,L11

37. Presentation References Pg 2 Drug Benefit Trends 15(12):7-8, 2003 - Employers Embrace Cost Sharing. Available at: http://www.medscape.com/viewpublication/90_toc?vol=15&iss=12. Accessed August 16, 2004 Ellis JJ, Fendrick AM, et al. Suboptimal Statin Adherence and Discontinuation in Primary and Secondary Prevention Populations. Should We Target Patients with the Most to Gain? J Gen Intern Med 2004;19:638-645. Fairman KA, Motheral BR, Henderson RR. Retrospective, long-term follow-up study of the effect of a three-tier prescription drug copayment system on pharmaceutical and other medical utilization and costs. Clinical Therapeutics. 2003;25(12):3147-3161. Goldman DP, Joyce GF, Escarce JJ, Pace JE, Solomon MD, Laouri M, Landsman PB, Teutsch SM. Pharmacy Benefits and the Use of Drugs by the Chronically Ill. JAMA. 2004;291:2344-2350. Haynes RB et al. Interventions for helping patients follow prescriptions for medications. Cochrane Database of Systematic Reviews, 2001. Hoffman C, Rice D, Sung HY. Persons with chronic conditions: their prevalence and costs. JAMA. 1996; 276 (18): 1473-1479. Huskamp HA, Deverka PA, Epstein AM, et al. The Effect of Incentive-Based Formularies on Prescription –Drug Utilization and Spending. N ENGL J MED 2003;2224-32. Joyce GF, Escarce JJ, Solomon MD et al. Employer drug benefit plans and spending on prescription drugs. JAMA. 2002;288(14):1733-1739. Kaiser Family Foundation, Health Research and Educational Trust. Employer health benefits: 2004 Annual Survey, Chart 16. Available at: http://www.kff.org/insurance/7148/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=46206 Accessed September 13, 2004.

38. Presentation References Pg 3 Mahoney J. Pitney Bowes: Pharmacy Plan Design Innovations at Pitney Bowes. Presented to ORC. August 3, 2004. Pharmaceutical Research and Manufacturers of America. Focus on Health Policy, Winter 2004, pg 1-7. Medicare Beneficiaries Cared for with Prescription Medicines. Available at: http://www.phrma.org/publications/policy//2004-03-23.921.pdf . Accessed May 17, 2004 PRNewswire-FirstCall. July 7,2004. Bloomfield Connecticut. Newly Released National Study Shows Diabetes Disease Management Program Reduces Costs, Improves Quality. Rand Study Finds Patients with Chronic Conditions cut use of Preventive Drugs when Drug Co-Payments Double. Press Release May 18, 2004. Available at: http://www.rand.org/news/press.04/05.18.html. Accessed May 19,2004. Rundall T, et.al. As good as it gets? Chronic care management in nine leading U.S. physician organizations. Br. Med. J., 2002; 325:958-961. The Hidden Epidemic: Finding a Cure for Unfilled Prescriptions and Missed Doses. December, 2003. The Boston Consulting Group and Harris Interactive. Available at http://www.bcg.com/publications/files/TheHiddenEpidemic_Rpt_HCDec03.pdf. Accessed August 16, 2004.

39. Presentation References Pg 4 The Wall Street Journal, May 10, 2004: A Radical Prescription: While most companies look to slash health costs by shifting more expenses to employees, Pitney Bowes took a different tack; the results were surprising. Villagra VG, Ahmed T. Effectiveness of a Disease Management Program for Patients with Diabetes; Testing the impact on health care quality, use, and spending shows that disease management has many positive effects. Health Affairs July/August 2004. Vol.23 (4) 255-266. World Health Organization. Adherence to Long-Term Therapies: Evidence for Action. [World Health Organization Web site]. 2003. Available at: http://www.who.int/chronic_conditions/en/adherence_report.pdf. Accessed March 16, 2004 Wu S, Green A. Projection of Chronic Illness Prevalence and Cost Inflation. The RAND Corporation/RAND Health; October 2000, Document PM-1144. Wye River Group on Healthcare. An Employer’s Guide to Pharmaceutical Benefits. 2003. Available at: http://www.wrgh.org/docs/Book.pdf Accessed May 21, 2004.

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