Innovative Solutions in a Complex Marketplace

Essentials of Managed CareAN INDISPENSABLE RESOURCE FOR PHARMACEUTICAL SALES SUCCESS

Gary Branning, Rich Schaars and Martha Vater

Ninth Edition

Copyright ©2014 Managed Market Resources LLC

This material is provided by Managed Market Resources LLC to its customers and is for internal use only. No portion of this material may be reproduced in any form, or distributed by any means, without prior written permission from Managed Market Resources.

This is not a transfer of title, and is subject to the following restrictions: customer may not: (a) modify the material or use it for any commercial purpose, any public display, performance, sale or distribution; (b) remove any copyright or other proprietary notices from the material; (c) transfer the materials to another organization. Further, the customer agrees to prevent any unauthorized copying of the material and agrees that any copy of this material which the customer makes for internal purposes shall retain all copyright and other proprietary notices in the same form and manner as the original.

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CONTENTS

AN OVERVIEW OF MANAGED CARE

Objectives .............................................................................................................................................. 8

An Overview of Managed Care ............................................................................................................ 8

Managed Care Business Models ...................................................................................................10

Progress Check ....................................................................................................................................13

Answers ...............................................................................................................................................14

MANAGED CARE COST MANAGEMENT

Objectives ............................................................................................................................................15

Managed Care Cost Management ......................................................................................................15

Spending Caps ................................................................................................................................15

Deductibles .....................................................................................................................................15

The Pharmacy & Therapeutics (P&T) Committee .........................................................................16

Formularies & Benefit Designs ......................................................................................................16

Copayment .....................................................................................................................................19

Coinsurance ....................................................................................................................................20

Restrictions .....................................................................................................................................20

In Network Providers .....................................................................................................................20

Prior Authorizations .......................................................................................................................21

Step Therapy or Step Edit ..............................................................................................................21

Generic Substitution ......................................................................................................................22

Therapeutic Interchange ...............................................................................................................23

Drug Utilization Review or Drug Utilization Evaluation ...............................................................23

National Drug Code (NDC Block) ...................................................................................................24

Mail Order and 90-Day Retail Prescriptions .................................................................................24

Progress Check ....................................................................................................................................25

Answers ...............................................................................................................................................27

THE PLAYERS IN MANAGED CARE

Objectives ............................................................................................................................................28

Managed Care Customers ...................................................................................................................28

The Government ............................................................................................................................29

Medicare .........................................................................................................................................29

Medicare Part D Standard Benefit Design ..............................................................................31

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The Medicare Donut Hole ........................................................................................................31

Medicare Part D Enrollment .....................................................................................................33

Medicare Low Income Subsidy (LIS) .......................................................................................33

Medicare and Medicaid Dual Eligibility ...................................................................................33

Medicaid .........................................................................................................................................35

Managed Medicaid ...................................................................................................................36

Medicaid Expansion ..................................................................................................................38

Medicaid Drug Rebate Program ..............................................................................................38

Individual Consumers and State Health Insurance Exchanges ....................................................39

Health Insurance Companies.........................................................................................................41

Employers .......................................................................................................................................43

Consumer Directed Health Plans ..................................................................................................44

Health and Wellness Programs .....................................................................................................44

Declining Prevalence of Employer Sponsored Insurance ............................................................45

Private Insurance Exchanges .........................................................................................................46

Self-Insured Employers ..................................................................................................................46

Pharmacy Benefit Management Companies (PBMs) ..................................................................48

Specialty Pharmacy .......................................................................................................................50

Specialty Pharmaceuticals .......................................................................................................50

Progress Check ....................................................................................................................................54

Answers ...............................................................................................................................................55

EVOLVING HEALTHCARE DELIVERY & REIMBURSEMENT

Objectives ............................................................................................................................................57

Impact on Providers ............................................................................................................................57

Physicians .......................................................................................................................................57

Narrow Networks...........................................................................................................................58

Electronic Health Records ..............................................................................................................60

ePrescribing ....................................................................................................................................62

Impact on Retail Pharmacies ..............................................................................................................64

Impact on Hospitals .............................................................................................................................66

Integrated Delivery Networks (IDNs) ...........................................................................................68

Organized Providers .......................................................................................................................69

Patient Centered Medical Homes (PCMH) ..............................................................................70

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Accountable Care Organizations (ACOs) .................................................................................72

Long Term Care ..............................................................................................................................74

Reimbursement for Healthcare Services ...........................................................................................75

Fee for Service ...............................................................................................................................75

Discounted Fee for Service ............................................................................................................76

Salary ..............................................................................................................................................77

Capitation .......................................................................................................................................78

Pay for Performance ......................................................................................................................79

Bundled Payments.........................................................................................................................80

Buy and Bill ....................................................................................................................................81

Progress Check ....................................................................................................................................83

Answers ...............................................................................................................................................84

MANAGED CARE SELLING STRATEGIES

Objectives ............................................................................................................................................86

Managed Markets Strategic Selling ....................................................................................................86

Managed Markets is Local ..................................................................................................................86

The Hassle Factor .................................................................................................................................87

Capitation .............................................................................................................................................87

The Total Office Call .............................................................................................................................89

Receptionist (Gatekeeper) ............................................................................................................90

The Office Manager .......................................................................................................................91

The Nurse .......................................................................................................................................91

Mid-level Practitioners: Nurse Practitioner & Physician Assistants ............................................92

Reimbursement Manager .............................................................................................................93

Knowing the Payer Mix .......................................................................................................................94

Managed Markets Selling Environment .............................................................................................94

Selling in an Advantaged Environment ........................................................................................95

Selling in a Neutral Environment ..................................................................................................96

Selling in a Disadvantaged Environment .....................................................................................97

Organized Provider Sales Call ...........................................................................................................100

The Retail Pharmacy Sales Call .........................................................................................................101

Retail Pharmacy Business Types .................................................................................................101

The Pharmacy Call .......................................................................................................................101

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Key Stakeholders in the Retail Pharmacy ........................................................................................102

Pharmacy Manager ......................................................................................................................102

Dispensing Pharmacists ...............................................................................................................102

Pharmacy Technician ...................................................................................................................103

Institutional Market Sales Call ..........................................................................................................103

Hospitals .......................................................................................................................................103

Long Term Care (Senior Care) ...........................................................................................................104

Nursing Home ..............................................................................................................................104

Progress Check ..................................................................................................................................107

Answers .............................................................................................................................................109

GLOSSARY OF TERMS

Managed Market Acronyms..............................................................................................................111

Managed Markets Glossary ..............................................................................................................115

MAN

AGED CARE SELLIN

G STRATEGIES

MANAGED CARE SELLING STRATEGIES

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Objectives

n Recognize that healthcare is local and selling strategies should reflect each individual marketn Optimize your time spent in providers' offices by planning strategicallyn Generate additional prescriptions by confidently addressing the "hassle factor"n Respond effectively to additional challenges posed by organized providers as a result of their

management structuresn Identify selling opportunities in the institutional, long term care, and retail pharmacy segments

Managed Markets Strategic Selling

The pharmaceuticals prescribed by healthcare providers may affect their reimbursement and the level of financial risk for the patient. As a sales representative, you should be familiar with the controlling dynamics that may influence physicians’ prescribing decisions as well as the coverage of your products and competitive products. Prior to each sales call, review your sales reports and prepare to address questions that may concern that particular office. The various players in managed markets discussed in previous chapters, including pharmacy benefit managers (PBMs), accountable care organizations (ACOs), and government payers, will each affect physicians’ prescribing habits differently. You should be prepared to execute a total office call that addresses the varied influences of managed care on your business.

Managed Markets is Local

Each state has an insurance commission that establishes standards and best practices, conducts peer reviews, and coordinates regulatory oversight. Although large health plans like United Healthcare, Aetna, and Cigna are often called “national” health plans, they operate at a state level in order to abide by regulations established by

each state’s insurance commission. Large national health plans may have a dominant national presence, but their influence varies state by state. Often, a smaller, regional plan will dominate a local geography even when competing against large national health plans.

For example, Blue Cross and Blue Shield of Alabama (BCBS AL) has a majority of the total health insurance enrollment in the state, while United Healthcare, Aetna, and Cigna have relatively low enrollment in Alabama. In this market, most of the healthcare providers you call on will most likely be part of the BCBS AL network.

In the state of New Jersey, on the other hand, there are four dominant health plans: Aetna, Horizon Blue Cross Blue Shield, United Healthcare,

TAKE NOTE

Blue Cross Blue Shield health plans are not part of one national account. Most are independent health plans operating within a state and some are owned by a larger corporation like Wellpoint.

TAKE NOTE

When a health plan is dominant in a particular geography, physicians in that area may be keenly aware of your product's coverage if the volume is high.

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and Cigna. All four vie for membership within the state so the healthcare providers you call on in the New Jersey market may have joined several health plan networks. In other states like Pennsylvania, certain health plans may have established dominance in a particular region. Independence Blue Cross and Aetna, for example, are dominant in the Philadelphia market while Highmark Blue Cross Blue Shield and the University of Pittsburgh Medical Center (UPMC) are dominant in Pittsburgh.

As a sales representative, it will be important for you to identify the dominant health plans that influence the physicians you call on. The payer mix can significantly impact your product’s formulary coverage, including copay amounts and restrictions.

The Hassle Factor

Healthcare providers seek to prescribe the most appropriate drug for each patient based on their own knowledge and previous clinical experience. In some cases, the physician's prescribing autonomy is limited by managed care organizations that place restrictions on certain products. Those restrictions are based upon the managed care organization’s clinical evaluation of the drug and are designed to minimize the economic impact to the pharmacy budget. Restrictions implemented by managed care create a “hassle factor” for physicians who must now take additional steps to obtain a particular drug for their patient. When restrictions inhibit the physician’s ability to prescribe the drug, often he or she will select an alternative product for all patients, even those whose access is not restricted. This is commonly known as "spillover." When coverage is good and "hassle free," physicians tend to prescribe more freely across all benefit plans.

If any of the physicians you call on expresses frustration with restrictions related to your product, which could include calls from the pharmacy, complaints from patients about high out of pocket costs, additional paperwork, and other concerns, you should ask questions to identify the specific issue. Engage the physician or select members of the office staff to find out:

n Which health plans have instituted a restriction and what is the restriction?n Are the affected patients covered by commercial insurance or Medicare?

It is always important to qualify and quantify the information you receive. Once you have identified the specific restriction affecting this physician, you can deliver the appropriate messaging to alleviate the physician’s concerns. Sometimes, physicians may perceive restrictions as insurmountable. For example, some physicians enter into capitation agreements with managed care that they believe restricts them from using certain products.

Capitation

By definition, Capitation is an arrangement where a managed care organization pays a physician for defined services or a fixed amount of money per member per month (PMPM) in advance of delivery of healthcare services. A physician may indicate to you that his or her office is capitated and that your

TAKE NOTE

Quantity will help guide future discussions. The provider will have many patients with different benefit designs and the "hassle factor" may be associated with only a few patients.

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drug cannot be written. In this situation, you should ask clarifying questions to fully understand what the physician means when he or she uses the term “capitated.” The following example is a questioning process for capitation that may be used to uncover issues or concerns the physician may have.

As you discuss capitation with the physician, keep in mind the following:

n Capitation does not necessarily affect drugs. If drugs are not incorporated in the capitation agreement, the physician can prescribe the drugs he or she chooses.

n If the capitation agreement does include drugs, it may only involve certain managed care organizations and a defined patient population. Unless the capitation agreement is with a dominant managed care organization, it will only affect a fraction of the physician’s patients.

Is the physician/medical group capitated?

YES

NO

NO

YES

Are drugs capitated?

Within each population, who are the payers?

What population?... Commercial? Medicare? Medicaid?

Why are you not writing my product?

Execute total office call

How does the drug capitation effect affect

prescribing my products?

How does capitation affect other products?

What is the restriction?

Figure 34.

GLOSSARY OF TERMS

GLOSSARY OF TERMS

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AAC actual acquisition cost

AMCP Academy of Managed Care Pharmacy

AMP average manufacturer price

APC ambulatory payment classification

ASC Administrative Services Contract

ASC ambulatory surgical center

ASO Administrative Services Only

ASP average sales price

AWP average wholesale price

BP best price

CAP (OR RxCAP) Competitive Acquisition Program (for drugs and biologicals)

CARE Comprehensive AIDS Resource Emergency

CBO Congressional Budget Office

CDHC consumer directed healthcare

CMP competitive medical plan

CMS Centers for Medicare & Medicaid Services

CPT current procedural terminology

CRS Congressional Research Service

DHHS Department of Health and Human Services

DME durable medical equipment

DoD Department of Defense

DOJ Department of Justice

DP direct price

Managed Markets Acronyms

Innovative Solutions in a Complex Marketplace

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