This Study Committee is aware that the costs of drugs have risen and there is increased cost sharing and prior approval. Further, the prior approval process has delayed persons getting prescriptions.

Commissioner Gary Redding, from the Department of Community Health ("DCH" or "Department") which has oversight responsibility of the State’s health plans, made a presentation to the Study Committee. Additionally, Lori Garner, DCH’s Pharmacist, explained more about the Drug Utilization Review Board ("DURB") and the preferred drug list.

Georgia covers approximately 2,000,000 Georgians through one of its health plans. Through Express Scripts ("ESI"), which is the pharmacy benefit manager ("PBM"), the State addresses costs and trends. Georgia saw increases in drug expenditures as follows: 1) from 1999-2000, there was a 25% increase; 2) from 2000-2001, there was a 21% increase; and 3) from 2001-2002, there was an 18% increase. In Medicaid alone, it went from $440 to $791 million in drug expenditures.

In terms of numbers of prescriptions written for the Medicaid population, in 1999-2000, there was an increase of 9%. In 2000-2001, there was an increase of 10% seen. In 2001-2002, there was an increase of 12% in the number of prescriptions written.

In terms of costs per member per year in the Medicaid program for pharmaceuticals, the following were found:

1) In 2000, the costs were $548;

2) In 2001, the costs were $605; and

3) In 2002, the costs were $641.

In dealing with Medicaid, doctors and pharmacists are encouraged to use generic products. About 48% of the prescriptions written are for generics but these only comprise 19% of the pharmaceutical expenditures for Medicaid. This means that brand drug prescriptions are 81% of the State’s Medicaid drug costs.

Commissioner Redding explained that Georgia could not sustain the same growth in expenditures for pharmaceuticals. It is more than one billion dollars out of a $6.7 billion dollar budget.

Lori Garner discussed details about the Drug Utilization Review Board ("DURB"), which is composed of 20 members, primarily physicians and pharmacists. Responsibilities of the DURB are determined primarily by the federal requirements. The DURB makes clinical recommendations for all the health plans overseen by the Department of Community Health. In doing so, therapeutic criteria are applied. The DURB is provided clinical information, and it reviews utilization. In turn, the DURB establishes remedial strategies. The DURB also establishes what educational requirements must be imposed with each drug.

Ms. Garner explained the preferred drug list and how drugs were included on the list, which she described as an extensive process. Therapeutic categories of drugs are brought to the DURB. It looks at national information for safety and efficacy of drugs. Thirty days prior to a DURB meeting drugs, which will be discussed at the meeting, are posted. Financial considerations are also considered and taken under advisement. Opportunities to participate include: manufacturer forums at Express Scripts; DCH Board meetings which are posted; consumer comment meetings held 14 days after each DURB meeting; and participation at actual DURB meeting, as long as the Department of Community Health is notified 30 days in advance. The DURB has standards which it uses to review drugs – such as the drugs must be on the market for at least six months before being considered for the preferred drug list. The DURB evaluates all drugs in a therapeutic category.

There is also an appeal process which has two levels: 1) at PBM through the clinical pharmacist; and 2) at DCH’s medical director or individual health plan under SHBP or BORHP.

Express Scripts’ account manager for DCH was also present at this meeting. ESI, as the State’s PBM, does the following: adjudicates claims; administers the tiered co-payment system; conducts prior authorization; remits payments to providers; offers call support on a twenty-four hour, seven days per week availability; supports the DURB with data and recommendations, including information on new drugs in the "pipeline;" administers the drug rebate program; oversees the auditing process; administers the generic incentive; provides benefit design for each of the plans; and conducts reporting initiatives.

Rep. Henson asked Commissioner Redding if records were kept to show any offsets between numbers of prescriptions filled and uses of the hospitals’ emergency rooms or physicians visits paid and whether the State was saving dollars. Commissioner Redding explained that DCH was just beginning to evaluate data. There is no direct link on prescriptions and claims made.

Commissioner Redding stated that DCH is working on making enrollment programs better by educating folks. The State’s self-insured SHBP and BORHP do not necessarily indicate that an HMO will cover a benefit.

Under the Medicaid program, there are 28 individual classes of drugs on prior approval. The federal program requirements contain certain levels of participation in the rebate program, such as with injectables. Additionally SHBP and BORHP covered services differ such as growth hormone drugs require prior approval through BORHP but SHBP does not cover such drugs. There are also differences between the inpatient medical side and outpatient care costs. Formularies for HMOs and PPOs are available to SHBP enrollees prior to open enrollment.

Rep. Henson also inquired about the appeal process. Ms. Garner explained that appeals vary based on the product. Further, it may take up to one year for approval under an appeal. The request is submitted by the physician to ESI’s clinical pharmacists either by telephone or written submission. The second level appeal uses an independent party such as Unicare for the SHBP.

As far as rates for drugs, a co-payment cannot be accepted if the usual and customary cost of the drug is less. Additionally, it was noted that Medicaid has a three-tiered co-payment system ranging from $.50 to $3.00. The majority of the Medicaid population is exempted from these co-payments such as children, nursing home residents, and pregnant women. If a Medicaid recipient cannot afford the co-payment, the pharmacist still must fill the prescription.

Rep. Henson also inquired about the cash basis accounting method being used by the Department. Commissioner Redding stated that the Department has not fully determined its impact. Claims are adjudicated at the point of service.

There was also some discussion around the Federal Drug Administration’s approval of a drug and an additional six months of market exposure before the consideration may be conducted of the drug for the preferred drug list. Ms. Garner explained that there were some exceptions to the six-month requirement such as if drugs relate to HIV/AIDS or are oral anti-cancer drugs. In those instances, the drugs are covered immediately.

There was also some discussion on proton pump inhibitors and prior approval policies which were to into effect for SHBP and Medicaid as of July 1, 2002. These policies were not implemented. There are, however, two sets of criteria used for evaluation of children and adults when discussing proton pump inhibitors.

ESI receives additional monies for each prior approval it is required to perform. ESI is paid on a transaction basis. Fees for prior approval are paid at a negotiated rate, which is above the transaction rate. ESI also gets to share in the rebates on drugs which Georgia receives. ESI is responsible for making contacts with manufacturers in connection with a performance grid.

HMOs negotiate their own drug plans separately for SHBP and BORHP.

ESI explained that it can review a patient’s claims history to determine the quality of care of provided. Rep. Henson asked the Department of Community Health gather information on hospitalizations, etc. by the end of December.

The Department is also implementing disease state management programs. ESI has six programs. One is for persons with glaucoma. Standards are established and ESI reviews the various criteria and determines which agent(s) should be used.

The Study Committee also inquired whether DCH would make cuts to the Medicaid program like other states. Commissioner Redding stated that if the State’s revenues continue to decline, then there was no other way around the problem. However, his Department is reviewing care management and other alternatives to help address costs.

Commissioner Redding explained that the federal matching rates for Medicaid and PeachCare are 59% and 71% respectively. When the economy experiences a downturn, then more State funds are needed for Medicaid as more persons become eligible for services.

The Study Committee also inquired about the prescribing of a brand name drug when a release in the market is made of a generic product. The brand product is then moved to the non-preferred category. Ms. Garner also mentioned that some generics receive a six-month exclusive period for their drugs.

Future Study Committee meetings are tentatively scheduled as follows:

October 22, 2002; November 20, 2002; December 3, 2002; and a final meeting of

December 17, 2002. Others which will present at future meetings will include a former HCFA administrator and economist to discuss cost shifting; health insurers, including HMOs; physicians, including the Medical Association of Georgia on managing chronic diseases; Georgia Cancer Coalition; and Pharma.