Using the Pharmacy

1
Using the Pharmacy Therapeutics Process to
Develop Sound Business Strategies

• CDR Ted Briski, MSC, USN

2
PEC ActivitiesDoD PT Committee Support

• Role of the PEC
• Completing drug class reviews and developing of
  clinical criteria for procurement strategy
  decisions
• Evaluating drugs recently approved by the FDA
• Collecting and analyzing requests from DoD
  healthcare professionals for changes to the Basic
  Core Formulary
• Gathering input from providers regarding the
  acceptability of various formulary decisions
• Disseminating minutes and other Committee
  information to the field

3
Why bother with Pharmacy and Therapeutics?

• Keep people gainfully employed and it gets them
  out of clinic once in a while
• Provide good collateral duty bullets for FitReps
  and OERs
• Appease patients who spend way too much time
  reading on the internet
• Assure safe and efficacious pharmacotherapy
• Credentials process (MM, peer review, etc.)
• Provide a range of pharmacotherapy choices
• Then who needs a formulary

4
Business is not a dirty word

• Websters 9th defines business as..
• Activity concerned with the supplying and
  exchange of commodities
• Commodities
• Medicines sold to DoD by Pharmaceutical Companies
• Pharmacotherapy provided by DoD MTFs
• Outcomes are what patients are paying for
• DoD MTFs purchase the raw materials of medicines,
  cognitively transforms them to deliver
  pharmacotherapy, which results in a positive
  outcome that patients customers value

5
Strategy

• Websters 9th
• The science and art of military command
  exercised to meet the enemy in combat under
  advantageous conditions
• The art of devising or employing plans or
  stratagems toward a goal
• DoDs Primary Pharmacy and Therapeutic Goal
• Minimize the money spent on medicines
• Maximize the outcomes

6
Unique Users TRICARE Pharmacy Points of
ServiceAll Ages, FY02
5.7M Unique Users
7
DoD Drug Expenditures ProjectionsFY 95 FY 03
Mail
Millions
Retail
MTF
Percent Increase over Previous Fiscal Year Overall 7 15 13 17 22 28 47 21
Percent Increase over Previous Fiscal Year Mail Order 137 27 81 82 25
Percent Increase over Previous Fiscal Year Retail 7 27 16 21 33 50 88 27
Percent Increase over Previous Fiscal Year MTFs 7 12 8 10 18 13 19 15
MTF costs do not include dispensing costs.
Retail costs are contractor paid claims (HCSR
Data) do not include admin fees Mail order
costs are net costs to government
Note FY03 is Pharmacy Benefit Division cost
projections. These projections do not reflect
Pharmacy budget or funding per the POM.
8
DoD Strategic Managers of the PT Process

• CEO has primary responsibility for big strategic
  decisions
• TRICARE Management Activity
• Surgeons General
• General Managers have profit and loss
  responsibility for a unit and consequently a
  leadership role in formulating and implementing
  business-level strategy for that unit
• DoD Pharmacy and Therapeutics Executive Council
• Federal Pharmacy Executive Steering Committee
• Subcommittee for contracting
• Source Strategic Management Concepts and Cases
  by Thompson and Strickland

9
DoD Strategic Managers of the PT Process

• Functional area managers have direct authority
  over a major piece of the business and must
  support overall business strategies with
  strategic actions of their own
• MTF Pharmacy and Therapeutic Committees
• Managers of major operating departments who have
  frontline responsibility for the details of
  strategic effort in their areas
• MTF Department Heads, Department Chiefs or Flight
  Commanders
• Source Strategic Management Concepts and Cases
  by Thompson and Strickland

10
MTF PT StrategiesMinimizing the money spent

• We sell Marketshare
• Formulary Position Preferred Status
• Have-nots vs. haves
• What will the haves pay to keep their
  marketshare?
• What will the have-nots pay to get marketshare?
• Exclusivity pays the best
• Minimize expenditures
• Dont give away formulary status
• Form a consortium with other MTFs
• Use your corporate resources
• Opportunity (switching) cost can be worth paying
• Formulary status, alone, does not save any money

11
MTF PT StrategiesMaximizing Quality of Outcomes

• Maximize quality of outcomes
• Choose PT membership carefully
• Staff your PT Committee with dedicated resources
• Find MTF champions and change-agents
• Direct the message you want to send your staff
• Partner with industry
• Be the guest speaker for the noon lunch
• Demonstrate an ROI to the Command Suite
• Measure MTF outcomes
• Involve house staff as much as possible
• Consider collaborative practice models
• Demand the evidence

12
Pharmaceutical Procurement Challenges

• Products not built to specification
• Uncertainty inherent in biological systems
• Cross-functionality of products
• The provider patient relationship
• The result is you have to make choices and
  trade-offs to determine what offers the greatest
  value

13
What obligations do PTs face?

• Independently evaluate the evidence
• Independently draw conclusions about the
  strengths and weaknesses associated with
  comparable drugs.
• Make the tough decisions about trade-offs
• Formulate an appropriate procurement and business
  strategy
• Make the deal
• Abide by the deal (unless the world changes)
• Be a change-agent by following through

14
PECProcurement Strategy Analysis

• ESTOP analysis
• Efficacy / effectiveness
• Safety
• Tolerability
• Other Factors (may be non-clinical)
• Price / Cost
• Therapeutic interchangeability of medications
• Patient populations
• Clinical outcomes
• Indications
• Coverage of clinical needs
• Provider acceptance

15
PECProcurement Strategy Execution

• DoD PEC and VA PBM work jointly to develop and
  execute a rational business strategy, supported
  by comprehensive clinical analysis, to procure
  pharmaceutical products.
• DoD PEC currently negotiates best prices for the
  BCF and TMOP
• Uniform Formulary will add responsibility for
  Retail prices
• Determine optimum contract strategy and develop
  SOW
• Competitive process used to determine clear
  winners and losers
• Contracted agent(s) must be sufficiently
  efficacious, safe, and tolerable to meet clinical
  needs of at least 90 of patients

16
PEC ActivitiesProcurement Strategy Execution

• Determine appropriate use of Incentive Agreements
• Non-competitive process used to negotiate price
  agreements
• Leaves drug class open for MTFs to have
  additional products
• Monitor cost avoidance and contract compliance
• MHS centric- Is DoD upholding its end of the
  deal?
• Monitor contract/agreement performance
• Vendor centric- Is the Vendor upholding their end
  of the deal?

17
Procurement Program Results

• Over 100 current contracts or agreements in place
• 160 procurements over 3 years
• Saving DoD 500 Million and VA 1 Billion
• DoD Prices
• 27 less than Federal Ceiling Price (FCP)
• 51 less than Commercial Market Prices (WAC)
• Cost Avoidance (1st three quarters of FY03)
• 109 Million for agreements
• 250 Million additional due to market effect
• Contract Compliance (growth industry)
• 61 Million unrealized
• MTFs and Services are inconsistent
• Assisting MTFs improve compliance is a PEC
  priority for 2004

18
MTF PT CommitteesBeing a good corporate citizen

• Read the DoD PT Minutes
• Provide input when things first appear in the
  minutes, not after the contract is awarded
• Take ownership for your MTF compliance
• Provide education to providers
• Develop transition plans
• Provide MTF recommendations for DoD PT action
  items
• Each MTF is part of a bigger picture
• This is an 80/20 business

19
Barriers to Being a Good Corporate Citizen

• Commanders and Commanding Officers
• PT Membership
• Time and Resources
• Culture
• No one likes change
• Everybody is an expert in their own little world
• No one likes to feel they are being told what to
  do
• Victims of our own training
• Clinicians inherently think they provide the best
  care
• Discouraged to think of healthcare as a business
• Laws of economics cannot be ignored
• Egos

20
MTF Expenditures FY 2003

• Antihistamines - 88M
• NSAIDs - 86M
• 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 - 22 M
• Total 253M

843M represents 52 of MTF total expenditures
21
MTF Expenditures FY 2003 (Next Twenty)

• Metformin - 22M
• Leukotriene Ant. - 21M
• Glucocorticoids - 20M
• Macrolides - 19M
• Antifungals - 19M
• Antimalarials - 18M
• Hematinics - 17M
• Antimigraines - 17M
• Beta Blockers - 16M
• Estrogenics - 15M
• Total 184M

• Antipsychotics - 15M
• Toxoids - 14M
• Gram(-) Bacilli - 13M
• Norepi. Dopamine - 13M
• Introc. Pressure - 13M
• Beta Blockers - 12M
• Insulins - 11M
• ADHD Drugs - 10M
• Antidepressants - 10M
• Sedative-hypnotics - 10M
• Total 121M

1,148M represents 70 of MTF total expenditures
22
What have we done for you lately?

• Contracts
• Luteinizing Hormone Releasing Hormone (LHRH)
  Agonist
• HMG-CoA Reductase Inhibitors (Statins)
• 5HT1 Agonist (Triptans)
• Oral Fluoroquinolones

• Incentive Agreements
• Aqueous Nasal Steroids
• Proton Pump Inhibitors (PPIs)
• Thiazolidinediones (TZDs)
• Bisphosphonates
• 2nd Generation Antihistamines (NSAs)

23
Key Factors

• Degree of therapeutic interchangeability
• What is preferred for a new patient, if any
• How often do you need a back-up (failure rate)
• Amount of competition
• How many products are in the class
• Distribution of utilization
• What is the reason for the distribution
• External Factors
• Supply, political, Personal
• Avoid Formulary Creep
• Adding a new drug in the class should be assessed
  in relationship to the entire class of drugs

24
MonopolyPDE5-Inhibitor Usage 30 Day Eq Rx Fills
(All POS) July 01 to Oct 03
Sildenafil
30 Day Eq Rx Fills
Vardenafil
Source PDTS
25
New PDE5-Inhibitors

• Vardenafil (Levitra Bayer/GlaxoSmithKline)
• Summer 2003 (available now)
• Tadalafil (Cialis Icos/Lilly)
• Anticipated launch sometime in mid-2004
• Potential opportunity to reduce prices through
  formulary management or procurement strategies

26
OligopolyMTF LHRH Rxs for Males
Pre-Contract
Contract
27
Luteinizing Hormone Releasing Hormone (LHRH)
Agonist

• Goserelin Acetate Implant (AstraZeneca)
• Contract Effective on 17 Feb 03
• Terms Sole LHRH agonist on the BCF and VANF for
  the treatment of prostate cancer

28
MTF LHRH Cost/month of treatment
29
MTF Statin Utilization by Tabs
30
MTF Statin Cost/dose
31
High Potency Statin II

• Simvastatin (Merck and Co)
• Contract Effective on 1 May 03
• Terms
• Sole High-potency Statin on the BCF and VANF for
  the treatment of hyperlipidemia
• May have lovastatin and pravastatin or
  fluvastatin (deferred to MTFs)

32
MTF TZD Utilization by 30-day equivalent Rxs
33
Thiazolidinediones (TZDs)

• Rosiglitazone Incentive Agreement
  (GlaxoSmithKline)
• Agreement Effective on 1 July 2003
• Terms
• Sole TZD on the BCF
• Class remains open, MTFs can add additional
  agents through their local PT process

34
MTF TZD Cost/tab
35
Ophthalmic Prostaglandins MTF Rx Fills
Source PDTS
36
MTF Expenditures for Ophthalmic Prostaglandins
Reduction in cost attributable to BPA 280,296
700,000
600,000
LATANOPROST
500,000
BPA Initiated
400,000
300,000
200,000
100,000
BIMATOPROST
TRAVOPROST
0
Jul-03
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Sep-03
Aug-03
Source Prime Vendor Data
37
Open CompetitionMTF Triptan Utilization by Rxs
Contract
Pre-Contract
38
5HT1 Agonist (Triptans)

• Zolmitriptan (AstraZeneca)
• Contract Effective on 11 July 03
• Terms
• Certain placement on the BCF and one of up to two
  triptans available on MTF Formularies
• MTFs are currently free to select a second agent
  using their local PT process

39
MTF Triptan Cost/tab
40
MTF Nasal AQ Steroid Utilization by Rxs
41
Aqueous Nasal Corticosteroids

• Fluticasone Incentive Agreement (GlaxoSmithKline)
• Agreement Effective on 1 January 2003
• Terms
• Sole AQ Nasal Steroid on BCF
• Class remains open, MTFs can add additional
  agents through their local PT process

42
What happens when the world changes?

• Examples
• Products begin to go generic
• Dramatic price changes
• New competition
• New information
• Every PT decision has consequences
• How will the competition react
• How will you react
• Considerations
• Use the evidence
• Consider any external factors
• Cut you losses
• Renegotiate

43
MTF PPI Utilization by tabs/caps
44
Proton Pump Inhibitors

• Rabeprazole Incentive Agreement (Janssen)
• Lansoprazole Incentive Agreement (TAP)
• Agreements Effective on 1 April 2003
• Terms
• Both agents on the BCF
• Class remains open, MTFs can add additional
  agents through their local PT process

45
MTF PPI Cost/dose
46
Non-Sedating Antihistamine Issues

• Chronology
• Loratadine goes OTC at almost half the price
• DoD PT Committee publishes guidance, via the
  PEC, recommending use of Loratadine at MTFs
• Fexofenadine remains on BCF to allow transition
  and meet needs of non-MTF points of service
• Price of Fexofenadine rises 30
• Competitors are more than 2.3 times the expense
  of Loratadine
• MTFs not using Loratadine to any significant
  degree

47
MTF 30 Day Eq 2nd Gen Antihistamines Jul 01
Dec 03
30 Day Equiv Rxs
48
Fluoroquinolone MTF Rx Fills
Rx Fills
49
Post-Contract Actions and Reactions

• Response of competitors is very difficult to
  predict, but no obligation to maintain
  pre-contract pricing exists
• Gatifloxacin contract price is 1.35, available 1
  Jan 04
• contract effective date is 15 Jan 04
• Levofloxacin has been removed from the BCF and
  Gatifloxacin has been placed on the BCF
• BPA price for Levofloxacin expires 31 Jan 04
• Levofloxacin expected to be the Federal Supply
  Schedule price
• 5.26 per 250mg and 500mg tablet
• The expected levofloxacin price increase has
  great potential to harm MTF budgets unless 83 of
  levofloxacin utilization moves to Gatifloxacin by
  15 April 04, based on FY03 usage

50
NSAID Expenditures By POSJul 01 Sep 03
Millions
July 2001
April 2002
July 2002
April 2003
July 2003
May 2002
June 2002
May 2003
June 2003
August 2001
March 2002
August 2002
March 2003
August 2003
October 2001
January 2002
October 2002
January 2003
February 2002
February 2003
September 2001
November 2001
December 2001
September 2002
November 2002
December 2002
September 2003
Source PDTS
51
MTF 30 Day Eq NSAID RxsJul 01 Dec 03
52
MTF 30 Day Eq Rxs COX-2 Selective NSAIDs,
Meloxicam, EtodolacJul 01 Sep 03
60,000
CELECOXIB
50,000
40,000
ROFECOXIB
30 Day Eq Rx Fills
30,000
MELOXICAM
20,000
Aug 02Meloxicam added to BCF
VALDECOXIB
10,000
ETODOLAC
0
July 2001
April 2002
July 2002
April 2003
July 2003
May 2002
June 2002
May 2003
June 2003
August 2001
March 2002
August 2002
March 2003
August 2003
October 2001
January 2002
October 2002
January 2003
February 2002
February 2003
November 2001
December 2001
November 2002
December 2002
September 2001
September 2002
September 2003
Source PDTS
53
MTF Expenditures for Cholinesterase Inhibitors
Source Prime Vendor Data
54
MTF Prescription FillsCholinesterase Inhibitors
3,000
2,386 (84)
2,500
2,000
ARICEPT
Rx Fills
1,500
1,000
500
295 (10)
REMINYL
162 (6)
EXELON
0
Oct-02
Apr-03
Jul-03
Oct-03
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
May-03
Jun-03
Aug-03
Sep-03
Source PDTS
55
MTF SSRI Utilization by Caps/tab
56
Questions??

• Email Ted.Briski_at_amedd.army.mil
• www.pec.ha.osd.mil
• 1-866-ASK4PEC (1-866-275-4732)