HHS OIG Examines The Inclusiveness Of Medicare PDP Formularies
Background and Method
With the transition of more than six million Medicare beneficiaries dually eligible for Medicaid coverage January 1, 2006, concerns exist over whether the Medicare prescription drug plan (PDP) formularies will be as inclusive as state Medicaid programs. To avoid disruption in service for this unique population, the Centers for Medicare and Medicaid Services (CMS) randomly assigned each dual eligible beneficiary to a PDP as required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Those individuals who had not selected a drug plan by December 31, 2005 were automatically enrolled in their preassigned plan. The PDPs have been given more flexibility than afforded to state Medicaid programs to set their own formularies and limit coverage, and have been prohibited from covering certain other categories of medications which previously were included in some state programs. Generally, Medicaid programs are required to cover all drugs except those specific excluded.
In a recent report, the Department of Health and Human Services Office of the Inspector General (OIG) set out to examine the extent to which PDP formularies include the drugs most commonly used under Medicaid. They identified 200 drugs most highly utilized by the dual eligible population based on 2005 data. The review included two prime components: determination of PDP formulary inclusion of commonly used drugs and review of state wraparound coverage policies.
Findings
To ensure formulary adequacy CMS began evaluating Medicare PDP formularies in the Fall of 2005 for compliance with plan requirements. The review compared PDP formularies with the U.S. Pharmacopeia (USP) "key drug types" and industry best practices (USP Medicare Prescription Drug Benefit Model Guidelines ). In addition, all drug plan sponsors were required to establish a transition process for new enrollees whose current medications may not be included on their drug plan's formulary. MMA Final Guidelines -- Formularies: Guidelines for Reviewing PDP Formularies and Procedures . CMS also designated six drug categories which plans are required to provide coverage for "all or substantially all" of the drugs. These six categories are antidepressants, antipsychotics, anticonvulsants, anticancer, immunosuppressants and HIV/AIDS drugs. Each beneficiary is also granted the right to request a formulary exception if a nonformulary drug is the most beneficial treatment for the individual according to the physician.
Of the 200 most commonly used drugs by the dual eligible population, 178 drugs were found to be covered by PDPs and 22 fell into categories excluded by law from Part D coverage. In 2006, the list of drugs excluded from coverage under Part D by the MMA include:
- Agents when used for anorexia, weight loss, or weight gain,
- Agents when used to promote fertility,
- Agents when used for cosmetic purposes or hair growth,
- Agents when used for the symptomatic relief of cough and colds,
- Prescription vitamins and mineral products, except prenatal vitamins and fluoride preparations,
- Nonprescription drugs,
- Barbiturates, and
- Benzodiazepines.
Beginning in 2007, this list will also include "agents when used for the treatment of sexual or erectile dysfunction, unless such agents are used to treat a condition, other than sexual or erectile dysfunction which has been approved by the Food and Drug Administration (FDA).
The OIG reviewed formularies of the 409 PDPs to which the dual eligibles were assigned. Among this group of PDPs 37 unique formularies are in use. State Medicaid representatives were also questioned regarding their Medicaid coverage policies for the 22 excluded medications. Eighteen percent of dual eligibles were assigned to plans that include all of the 178 commonly used drugs under review. They found that every PDP region had at least one plan using a formulary that includes all 178 commonly used drugs, leaving duals in each region the option to switch to these plans. The review of formulary inclusion breaks down as follows:
| Random Assignment of Dual Eligibles and Formulary Inclusion of Commonly Used Drugs |
| Random Assignment to Plans That Include: |
Number of Dual Eligibles* |
Percentage of Dual Eligibles |
100% of Common Drugs Reviewed
(178 Drugs) |
979,000 |
18% |
85% to 99% of Common Drugs Reviewed
(152 to 177 drugs) |
2,892,000 |
52% |
Less than 85% of Common Drugs Reviewed
(151 or fewer drugs) |
1,628,000 |
30% |
| Total |
5,499,000 |
100% | * Rounded to the nearest 1,000.
Source: OIG Analysis of Formulary Inclusion of Drugs Commonly Used by Dual Eligibles, 2005.
State Wraparound Coverage
State Medicaid programs will be permitted to claim federal matching funds for providing coverage of Part D excluded drugs for dual eligibles. If a state chooses to provide coverage for any excluded drug to its nondual eligible Medicaid population, they are required to provide equivalent coverage to its dual eligibles. States may also provide additional supplemental coverage through it's Medicaid programs or through a State Pharmaceutical Assistance Program (SPAP). The OIG contacted all 50 states and the District of Columbia to inquire about their intent to cover the 22 excluded drugs and their plans to use state-only funds to provide wraparound coverage to dual eligibles for Columbia toexcludedchoosesCommonPlansofNonprescriptionfluoridenonformulary drugs. Forty-six states responded. They also contacted 27 states with SPAPs and 23 of those states responded.
Other Resources
Estimates of Medicaid Total and Prescription Drug Expenditures and Recipients: FY 2003 through Fy 2005 by State - 2004 report by the National Pharmaceutical Council.
State Pharmacy Program Characteristics - 2004 report by the National Pharmaceutical Council.
For further information, please call NCSL staff Joy Johnson Wilson at 202-624-8689 or Rachel Morgan at 202-624-3569.
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