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Medicare Compliance & Reimbursement

Health Plans:

Formulary Regs Open The Playing Field For Health Plans

Published on Fri Jan 28, 2005

New guidelines should be easier to swallow as plans gear up for Medicare Part D

If health plans want to offer a Medicare drug plan, it will need to include 146 types of prescription drugs.

That's the message sent by U.S. Pharmacopeia, which issued its final formulary guidelines Jan 3. The Centers for Medicare & Medicaid Services will use the guidelines in assessing plans' drug offerings, and any plan that uses USP's categories and classes will enjoy a statutory "safe harbor," preventing CMS from charging that the plan's formulary discriminates against certain beneficiaries on the basis of their medical conditions.

The good news: The final guidelines omitted the proposed rule's controversial "third column" of drug-type subdivisions. It instead created a separate listing, outside of the formulary guide, of "key drug types." USP said in a letter to CMS that although this list is not considered part of the statutory safe harbor, it hopes that CMS will find the list helpful in assessing whether a drug plan is offering the medications necessary to guarantee beneficiaries' access to needed medications.

What it means: USP's decision to separate out the key drug types rather than include them in the formulary guide allows plans more flexibility in designing their formularies.

In the end, the formulary guideline is a compromise: health plans and pharmacy benefit managers would have preferred a somewhat smaller number of drug types, so that they would have an easier time controlling costs, and drug makers wanted a much larger number, so that Part D sponsors would have to purchase more drugs.

But the compromise should be a workable one for health plans, sources say.

The Pharmaceutical Care Management Association, the lobbying group for pharmacy benefit managers, noted that the 146 drug categories are "more expansive than what is typically found in the commercial marketplace," but it still expressed confidence that the number was small enough to allow PBMs to control drug costs.

The new guidelines "provide flexibility, allow health plans to follow existing and customary formulary processes and can serve as a template for Part D formularies," says Dr. Joseph Addiego, chief medical officer of Prescription Solutions, the pharmacy benefit management subsidiary for PacifiCare Health Systems, one of the largest Medicare plans.

"We believe that, if there are any differences between the USP Model Guidelines and the Medicare Part D drug formulary that we develop, the clinical justification for those variances will meet with CMS approval," Addiego says.

Harvard Pilgrim Health Care in Boston, another prominent Medicare plan, doesn't expect the formulary guidelines to have much of an impact on its practices because it already has an open formulary, in which all medications are covered at some copay amount, explains spokesperson Sharon Torgeson.

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