Managing Pharmacy in the Post-PPACA World

1
Managing Pharmacy in the Post-PPACA World
A Case Study

• Michael A. Rashid
• President and Chief Executive Officer
• AmeriHealth Mercy Family of Companies
• July 13, 2010

2
Background

• 50/50 partnership between Independence Blue Cross
  and Mercy Health System (Catholic Health East)
• One of the largest organizations serving Medicaid
  and publicly insured clients in the U.S,
  operating in 13 states with over 3.0 billion in
  combined revenues
• A mission and values driven company with five
  product lines
• Full risk managed care plans
• Management and administrative services (non-risk)
  
• Pharmacy benefit management program
• Care coordination programs
• Managed behavioral health services

3
Product Lines
Full Risk Contracts

111,795 Members
140,646 Members
196,910 Members
326,554 Members

TPA Subcontracts
631,611 members served in contracts with health
plan and provider organizations

Pharmacy Benefit Management
2.4 million members served nationwide

Care Management
Approximately 40,000 ABD members in Indiana
Medicaid Care Select FFS Program
Behavioral Health Managed Care

4,136,009 members served in 10 contracts
nationwide
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Current State Pre-PPACA Environment

• MCOs have full control
• Formulary structure and content
• Prior authorization criteria and process
• Rebate contracting and administration
• Resulted in rebates of approximately 9 to 10 of
  total drug spend or 5 to 6 PMPM
• Robust pharmacy utilization management activities
• Funded by rebate dollars
• Pharmacy trend always well below national trend
  for Medicaid FFS and most commercial health plans

5
Effect of PPACA on Medicaid Pharmacy Programs

• Before PPACA
• 5 year battle to fend off state pharmacy
  carve-out efforts
• Primary arguments against carve-out
• - More effective UM programs
• - Equal or lower overall pharmacy trend
• - More comprehensive coordination of care
  efforts
• Primary argument for carve-out
• Lower rebates than states
• After PPACA

• PPACA legislation effectively eliminates state
  benefit of MCO pharmacy carve-out strategy

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Capitated Managed Care Rx Carve-out by State
Source National Association of Medicaid State
Directors and other sources
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PostPPACA (Non Carve-Out States)
Possible Outcomes

• Best Case
• MCO retains formulary, utilization management
  (UM) and rebate contracting capabilities
• Improves quality of care and contains cost
• Worst Case
• States implement statewide Medicaid formulary/PDL
  and prior authorization requirements
• Undesirable since both clinical and financial
  outcomes will be negative

8
PostPPACA (Carve-Out States)
Possible Outcomes

• Best Case
• States continue with current carve-out strategy,
  effectively no change for MCOs or carve
  pharmacy in to MCOs with rebates
• Worst Case
• States reverse direction and carve-in pharmacy
  benefit while returning responsibility for
  operational and administrative functions to MCO
  without proper funding or ability to provide
  appropriate clinical management

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MCO Strategy Burning Platform

• In carve-in states oppose any statewide
  formulary/PDL structure and drug utilization
  management requirements.

• In carve-out states encourage Medicaid
  directors to shift administrative, operational
  and clinical responsibilities for the management
  of pharmaceutical product to MCOs with proper
  funding and appropriate clinical oversight.

• Ensure your PBM focuses on clinical management
  and controlling medical costs

10
QUESTIONS?