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Cost Containment Strategies. CDR Denise M. Graham, MSC, USN PEC Director of Clinical Operations. Objectives. Outline DoD cost containment strategies used during the last year to control MTF pharmaceutical costs.

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cost containment strategies

Cost Containment Strategies

CDR Denise M. Graham, MSC, USN

PEC Director of Clinical Operations

  • Outline DoD cost containment strategies used during the last year to control MTF pharmaceutical costs.
  • Outline methods used to determine what pharmaceutical cost containment strategies will get you the biggest bang for your buck.
analyzing the effectiveness of cost containment efforts
Analyzing the Effectiveness of Cost Containment Efforts
  • CAPT Don Nichols, MC: a providers perspective
  • LtCol Dave Bennett, BSC: 2nd Generation Antihistamines
  • Shana Trice, Pharm.D.: COX-2 inhibitors
  • Dave Bretzke, Pharm.D.: potential cost containment tips
rationale for publishing cost containment tips
Rationale for Publishing Cost Containment Tips
  • FY04 = tight budget situation for MTFs.
  • Opportunity to have MTFs “help themselves” by prescribing less expensive drugs that are essentially therapeutically equivalent to more expensive drugs…to the extent the therapeutically equivalent drug will meet the clinical needs of the patient
  • Pharmacy consultants requested assistance from the PEC in developing cost containment strategies.
cost containment tips published march 2004 by the dod pec
Cost Containment Tips Published March 2004 by the DoD PEC
  • Purchasing/logistics tips
    • Buy generic, buy generic, buy generic!!!
    • Buy contract drugs
  • Therapeutic Class Cost Containment Tips
    • Statins
    • Second Generation Antihistamines
    • Proton Pump Inhibitors
    • NSAIDs
    • SSRIs
cost containment tips published by the dod pec
Cost Containment Tips Published by the DoD PEC
  • Therapeutic Class Cost Containment Tips continued:
    • Bisphosphonates
    • Triptans
    • Thiazolidinediones
    • ACE Inhibitors vs. ARBs
    • Calcium Channel Blockers
    • LHRH Agonists for Prostrate Cancer
    • Oral Fluoroquinolones
pec strategy for identifying cost containment strategies
PEC Strategy for Identifying Cost Containment Strategies
  • MTF high use, high total cost
  • Procurement initiatives already in place for the therapeutic class
  • Generic equivalent available
  • MTF utilization data shows opportunity for savings while still meeting patients’ clinical needs
top 20 mtf expenditures fy03 by therapeutic class
Antihistamines - $88M


Lipotropics - $83M

SSRIs - $64M

PPIs - $61M

Bisphosphonates - $45M

CCBs - $45M

ACEs - $43M

Vaccines - $38M

Anticonvulsants - $37M

Total: $590M

Advair - $31M

TZDs - $30M

Quinolones - $28M

Antiplatelets - $27M

Penicillins - $24M

BG Strips - $24M

Contraceptives - $23M

Opiates - $22M

AQ Nasal Steroids - $22M

ARBs - $22M

Total: $253M

Top 20 MTF Expenditures FY03by Therapeutic Class

$843M represented 52% of MTF total expenditures

next top 20 mtf expenditures fy03 by therapeutic class
Antipsychotics - $15M

Toxoid Vac - $14M

Gram (-) Bacilli Vac- $13M

Norepi & Dopamine - $13M

Ophth Prostaglandins – $13M

Ophth Beta blockers - $12M

Insulins - $11M

ADHD Drugs - $10M

Antidepressants - $10M

Sedative-hypnotics - $10M

Total: $121M

21. Metformin - $22M

22. Leukotriene Ant. - $21M

23. Glucocorticoids - $20M

24. Macrolides - $19M

25. Antifungals - $19M

26. Antimalarials - $18M

Hematinics - $17M

Antimigraines - $17M

Beta Blockers - $16M

Estrogenics - $15M

Total: $184M

Next Top 20 MTF Expenditures FY03 by Therapeutic Class

$1,148M represented 70% of MTF total expenditures

top 40 mtf expenditures for fy04
Lipotropics - $101M


PPIs - $84M

SGAs - $81M

Anticonvulsants - $53M

CCBs - $51M

Biphosphonates - $44M

Beta Adrenergics - $43M

Vaccines - $39M

Antiplatelets - $38M

Total: $606M

TZDs - $34M

Leukotriene Ant. - $33M

ACE Inhibitors - $31M

ARBs - $29M

Penicillins - $28M

AQ Nasal Steroids - $24M

BG Strips - $23M

Antifungals - $23M

Narc Analgesics - $22M

Contraceptives - $22M

Total: $269M

Top 40 MTF Expenditures for FY04
top 40 mtf expenditures for fy041
21. Glucocorticoids - $19M

22. Macrolides - $19M

23. Beta Blockers - $18M

24. Norepi & Dopamine - $17M

25. Quinolones - $17M

26. Atypical Antipsych - $17M

Hematinics - $17M

Estrogenics - $16M

SSRIs - $16M

ADHD - $15M

Total: $171M

Gram (-) Bacilli - $15M

Beta Adrenergics - $15M

Insulins - $15M

Toxoid Vaccine – $14M

Anti-migraine - $14M

BPH - $14M

Sedative-hypnotics - $13M

Anti-inflam tumor - $13M

Ophth prostaglandins - $13M

Antispasmotics – $12M

Total: $138M

Top 40 MTF Expenditures for FY04
mtf strategy for identifying cost containment strategies
MTF Strategy for Identifying Cost Containment Strategies
  • Market Drivers
  • Generic equivalents available instead of more expensive brand name drugs
  • Current contracts in place for therapeutic classes
  • Other incentive agreements in place either DoD or local (will remain in place until reviewed by DoD P&T Committee for UF)
  • UF and BCF/ECF considerations
  • Review utilization data (MTF management opportunity = MTF utilization data shows opportunity for savings while still meeting patient’s clinical needs)
monitoring cost containment strategies
Monitoring Cost Containment Strategies
  • Requires monitoring and responding to changing environment
      • Modulating prices
      • Generic availability
      • Changes in Rx/OTC status
      • Scientific literature
      • Detailing/Counter detailing
      • Perceptions
  • Opportunity to educate existing patient and medical staff of changes in market

Cost Avoidance

Market Share Shift

Use of best price



measuring your success
Measuring your success
  • Single agent cost avoidance: delta between Big 4 FSS and current price for each drug
  • Overall class cost avoidance: measure the change of products within a class
  • PMPM
  • You’ll never know what your efforts are worth anything unless you measure them!
cost containment and the prescriber a provider s perspective

Cost Containment and the Prescriber – A Provider’s Perspective

CAPT Don Nichols, MC, USN

  • What influences provider prescribing behavior
  • Changing provider prescribing behavior
  • Obstacles/Failures/Barriers
  • Opportunities
factors for higher drug expenditures
Price increases*

Longer life spans

Rising prevalence of chronic diseases

Advent of “lifestyle medications”

Increased spending on drug promotion

Aging population

Improved diagnosis and treatment of diseases

Increased number of new drugs*

Direct to consumer advertising

“Shiny new toy” syndrome

FACTORS for higher drug expenditures

CA to AZ

what influences physician prescribing behavior
What Influences Physician Prescribing Behavior
  • Training and experience
  • Colleagues and opinion leaders
  • Pharmaceutical companies
  • Health plans and other payers
  • Patients
training and experience
Training and Experience
  • Medical education

(an internist made an impression)

  • Training
  • Specialization
  • Relative youth
colleagues and opinion leaders
Colleagues and Opinion Leaders
  • Input from colleagues
  • Local opinion leaders
  • Peer pressure
  • Professional leadership
  • Group styles of practice
pharmaceutical companies detailing
Pharmaceutical Companies Detailing
  • May be initial source of information about new drugs therapies
  • Rapid transition to new drugs
  • Decreased prescribing of generic drugs
health plans and other players
Health Plans and Other Players
  • Formulary management
  • Treatment protocols
  • Prescribing restrictions
  • Physician involvement is the key to success
  • Powerful and increasingly influential
  • DTC
  • Internet information
changing prescribing behavior
Changing Prescribing Behavior
  • Administrative interventions
  • Educational interventions
  • Feedback reporting and reminders
  • Financial incentives
administrative interventions
Administrative interventions
  • Formulary management
  • Prescribing restrictions
  • Therapeutic interchange, use of generic products, prior authorization, preferred status, restricted use and variable co-payment structures

(N of 6)

educational interventions
Educational Interventions
  • CME
  • Academic detailing


feedback reporting and reminders
Feedback Reporting and Reminders
  • Physician benchmarking reports
  • Drug utilization evaluations
financial incentives
Financial Incentives
  • Patient co-payments
  • Physician bonus incentives
  • At-risk drug contractual arrangements
obstacles in changing provider prescribing behavior real and perceived notions
Obstacles In Changing Provider Prescribing Behavior (real and perceived notions)
  • Physician attitudes

(the phone call)

  • External pressures
  • Lack of resources for making drug decisions

PDAs/Preferred Agents/Price Impact

barriers to cost effective medicine
Barriers To Cost Effective Medicine
  • Society unwilling to acknowledge limited resources
  • Patients unrealistic expectations of medicine
  • Physician unaware of the cost of medical interventions
  • Physicians unwilling to refuse patients’ demands
  • Little or no risk involvement
  • Primary care survey
  • Targets of opportunity
  • Cost containment bullets
  • Cost containment tips
2 nd generation antihistamines survey results rank based on cost
2nd Generation AntihistaminesSurvey Results (Rank Based on Cost)

Percent of prescribers who would use agent as their first choice under the following cost scenarios:

targets of opportunity
Targets Of Opportunity
  • Select drug classes
    • High cost; high utilization
  • Evidence Based Medicine
    • Demonstrates similar clinical effectiveness
      • i.e., therapeutic interchangeability
  • Cost benefit analysis
    • How much more are we willing to pay for an incremental benefit of a drug
  • Old drugs work too
provider effect
Provider Effect
  • Necessary influence – nothing happens without provider support “The DoD credit card”
  • Communicate targets of opportunity to providers
    • Clinical relevance
    • Economic relevance
  • Include patients in decision process
  • Maintain clinical discretion
  • Increases resources available to MTFs
  • Creates opportunities for improved price negotiation
    • Contract
    • Price tier benefit
  • To be a better model for cost-effective medical care
discussed cost or cost effectiveness with patients
Discussed Cost or Cost-Effectiveness With Patients
  • 30% Frequent or always
  • 21% Never do
  • 45% Patients get angry or upset if discussed
  • 49% Accept explanations that incorporate costs, once they understand that the intervention would waste resources
in summary
In Summary
  • ID targets of opportunity
  • It takes a team effort
  • Be good stewards of taxpayer dollars