Health Plan Prescription for Drug Savings

Much has been made about the high price of the Viagra impotence pill, but concerns about the rising cost of prescription drugs didn’t start there.

Health insurers and employers have been struggling with drug price inflation for the last several years as many costly--and, in some cases, highly effective--new therapies have come onto the market.

To hold the line on costs, many health plans have imposed tighter restrictions on the drugs doctors can prescribe from an approved list. Known as formularies, these lists encourage doctors to prescribe generic drugs and emphasize prescribing lower-cost brand-name products for therapeutically equivalent drugs.

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The most restrictive lists can be unpopular with doctors who say the lists restrict their freedom to prescribe the most medically appropriate drugs. And patients don’t like the lists if it means they can’t get, for example, the cholesterol-lowering drug of their choice.

One Silicon Valley HMO, Lifeguard Inc., has taken a different tack by adopting an “open” formulary that doesn’t exclude members from getting prescribed drugs but requires them to pay more for those not on the approved list. Some health plans require members to pay the full price of drugs not on the formulary.

Lifeguard’s plan provides “access and choice for members, and our physicians like it because it’s not so black and white,” says Jennifer Svec, the firm’s pharmacy director.

Even with a wider choice of drugs, about 87% of Lifeguard’s prescriptions adhere to its formulary, Svec says. She credits the plan’s efforts to educate both doctors and patients about the drug benefit program. For example, Lifeguard sends a copy of its formulary list to members.

Other health plans, however, have treated their drug lists as if they were top-secret documents.

Two bills, recently signed into law by Gov. Pete Wilson will require HMOs to divulge more to members and the public about their drug lists, beginning in January.

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Lifeguard mails its drug list to members once a year and includes that information with its enrollment packets for prospective members, says Dr. Joseph Aita, Lifeguard’s medical director.

While other health plans report that their prescription drug budgets have risen from 10% to 15% in the last several years, Aita says Lifeguard has been able to hold increases to slightly less than 10%, on average, the last three years.

Even so, Lifeguard is hardly immune to the cost pressures from new drugs such as Viagra. While some health plans have excluded Viagra from coverage or said they were still evaluating whether to pay for the drug, Lifeguard began paying for it after it was introduced in April. The HMO pays for six pills a month if the patient’s impotence is caused by an underlying medical condition.

So far, covering Viagra is costing each Lifeguard member an extra 10 cents per month on average, says Svec. That’s an additional 10 cents on top of the $12 to $15 per month that Lifeguard members pay for their prescription drug benefit, she says.

Recently, Lifeguard started several new programs that allow members to get non-formulary drugs by paying a higher co-payment. A member would pay $5 per prescription for any generic drug, $10 for a brand-name drug on the list or $25 for a branded drug not on the list.

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Times staff writer David Olmos can be reached by e-mail at david.olmos@latimes.com or by fax at (213) 473-2481.

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Preventive Measures

Some key provisions of AB 974 and SB 625, recently signed into law:

* AB 974 requires HMOs to provide information to members about what a formulary is, how the plan selects drugs for the formulary and how often changes are made in the list.

* Both laws require an HMO to provide a copy of its list of approved drugs upon request.

* Under AB 974, patients with chronic illnesses could continue the prescription if the HMO decides to drop those drugs from its approved list.