The cost of prescription drug benefits provided through the UT self-funded medical plans increased 20% per member from September 1997 to August 1998 and 27% from September 1998 to August 1999. The prescription benefit plan provided prescription services for 116,362 members at an annual cost of $37,919,422 (plan share $29,094,980 and member share $8,824,442) in 1997-98 and for 108,942 members at a cost of $43,627,066 (plan share $34,505,500 and member share $9,121,566) in 1998-99. In 1999 the cost of prescription services is approximately $31.53 per member per month.

A UT Pharmacy Benefit Plan Advisory Group consisting of physicians, pharmacists and plan administrators was established in July 1999 to determine the cause of these startling increases in the UT prescription drug costs and to recommend policies that might be utilized in altering the drug plan in the new contract that will become effective September 1, 2000.

This report 1) summarizes the causes for the increase in per member prescription drug spending, 2) identifies areas where improved policies would reduce unnecessary costs in the program, and 3) proposes strategies to achieve reductions of unnecessary costs.

It should be noted, however, that the University of Texas System is not alone in having significant increases in its prescription drug benefit, and it is doubtful that in the next few years an increase of less than 12% is achievable even with the full implementation of proposed strategies. Additionally, the Task Force is aware that in Texas and throughout the nation patients have become increasingly resentful of efforts to control health costs. Consequently, implemented strategies should be accompanied with efforts to improve patient education.

THE CAUSES OF INCREASED DRUG SPENDING IN THE UT PRESCRIPTION DRUG BENEFIT

Prescription drug spending per member has increased 20% in 1997-98 and 27% in 1998-99 in the University of Texas prescription drug benefit program. But the University of Texas is only representative of nation-wide prescription drug spending increases, for example the increase in prescription drug spending from 1997 to 1998 for all benefit plans has been estimated to be 16% and the increase for benefit plans with "rich" designs, i.e. little controls, ranged between 30-40%. Therefore, UT at 20% from 1997 to 1998 is only slightly above the average of 16%. It has been estimated that in 1999 prescription drug spending in benefit plans increased 15.2%. Based on existing trends, prescription drug claim expenses are expected to approach 15% of active employee health plan costs by the year 2001, and over 40% of retiree health care costs.

The UT increases in prescription drug spending are due to the convergence of several powerful forces in health care including:

1. Managed care's appropriate reliance on medications as a cost-effective alternative to expensive inpatient hospital care. This shift in policy is driving dramatic increases in outpatient prescription volume.

   Comment: Unfortunately, in the UT plan and almost all plans, there is currently no way to determine to what extent the increase in prescription drug benefit spending has resulted in larger savings of other health care costs. However, in the current year there has been a 7.7% increase in the number of prescriptions per member per month (PMPM) from 0.70 in 1997-98 to 0.75 in 1998-99, and a 26.7% increase in PMPM prescription costs from $24.88 in 1997-98 and $31.53 in 1998-99.

2. The "graying" of plan members with older plan members utilizing prescriptions more frequently

   Comment: The UT System Office of Employee Group Insurance has increasingly selected fully insured HMO's that include prescription drug benefits. Such plans allow adverse selection against self-funded plans that provide more choice of providers, e.g. POS plans and PPO's. As a result, in recent years the UT self-funded prescription plan has tended to retain older employees, while younger employees have selected insured HMO plans. This change in demographics has caused the UT plan to have a changing membership that tends toward higher prescription drug utilization. It may be that some insured HMO's purposefully use restrictive drug formularies as a disincentive to prospective members that require drug therapy. In this manner the HMO may bias their HMO patient group to be more healthy than the general population.

   Figure 1 summarizes the plan cost PMPM in the two most recent years for various age groups. Note that in 1998-99 the cost per member averaged about $40 at age 45, $55 at age 55, $73 at age 65 and $85 at age 70+.

   Figure 1

   

   Figure 2 dramatically illustrates the significant losses of plan membership for age groups less than 50, a relative no change for the age group between 50 and 69 and an increase in the 70+ age group. Thus, the "graying" of plan members as a group in recent years has been accentuated by the movement of younger, healthier employees to insured HMO plans.

   Figure 2

   
   
   
   
   
3. The development of powerful new drugs without therapeutic alternatives that are available from a single pharmaceutical company, i.e. sole source.

   Comment: Powerful new drugs that have unique therapeutic benefits are welcomed and reimbursed in the University of Texas prescription plan. Table 1 summarizes the utilization of selected sole source new drugs in the UT plan. Cost for these drugs increased 187% (from $1.6 million to $4.6 million) from 1997-98 to 1998-99. This increase alone added $2.30 to PMPM costs.

   Table 1

   University of Texas
   Effect of New Drugs on Utilization and Plan Cost

   New	1997-1998		1998-1999
   Drug Name	Plan Paid	Claims	Plan Paid	Claims
   ACTONEL	$0	0	$1,069	8
   AGRYLIN	$6,268	18	$9,814	18
   ALDARA	$8,745	107	$11,931	128
   ALREX	$76	3	$639	66
   AMERGE	$7,259	42	$56,896	257
   ANZEMET	$562	1	$4,119	8
   ARAVA	$0	0	$22,731	83
   ATACAND	$0	0	$6,267	159
   AVANDIA	$0	0	$1,367	15
   AVAPRO	$8,212	223	$41,413	872
   AZOPT	$54	2	$2,025	64
   BAYCOL	$1,410	39	$12,066	309
   CELEBREX	$0	0	$220,037	2,802
   CELEXA	$0	0	$73,795	1,233
   COMBIVIR	$35,519	63	$97,883	157
   DETROL	$4,169	72	$75,771	1,095
   DIOVAN	$29,323	713	$47,866	1,099
   DIOVAN HCT	$515	15	$10,275	278
   EMADINE	$32	2	$586	33
   ENBREL	$0	0	$163,992	131
   EVISTA	$18,390	266	$107,370	1,481
   FARESTON	$411	4	$3,190	23
   FEMARA	$754	5	$1,508	10
   FLOMAX	$10,163	268	$38,655	717
   GABITRIL	$1,412	9	$5,681	28
   INFERGEN	$0	0	$19,385	22
   LIPITOR	$520,027	6,432	$943,231	10,400
   LOTEMAX	$0	0	$1,151	87
   MAXALT	$0	0	$16,819	126
   MAXALT MLT	$0	0	$12,443	80
   MERIDIA	$24,761	368	$85,326	1,118
   MICARDIS	$0	0	$648	17
   MIRAPEX	$11,794	63	$18,104	116
   NASONEX	$23,638	661	$83,941	2,090
   NEUMEGA	$969	1	$29,393	11
   OMNICEF	$0	0	$5,130	138
   PLAVIX	$4,744	49	$77,010	833
   PRANDIN	$1,672	20	$19,517	268
   PROVIGIL	$0	0	$4,758	28
   RAXAR	$1,300	53	$982	40
   RAXAR RAX-PACK	$0	0	$491	18
   REBETRON 1000	$0	0	$71,732	78
   REBETRON 1200	$0	0	$222,301	198
   REBETRON 600	$0	0	$8,137	18
   REGRANEX	$3,228	5	$15,703	44
   REMICADE	$0	0	$8,081	5
   REQUIP	$5,333	52	$9,046	80
   RESCRIPTOR	$9,814	25	$4,844	10
   REZULIN	$230,149	1,478	$275,590	1,502
   SEROQUEL	$6,989	49	$20,353	164
   SINGULAIR	$9,698	154	$86,897	1,177
   SUSTIVA	$0	0	$43,557	96
   TASMAR	$1,110	7	$9,643	50
   TAZORAC	$6,494	57	$5,880	69
   THALOMID	$0	0	$15,755	17
   TROVAN	$6,767	116	$28,165	519
   VIAGRA	$129,568	1,504	$342,851	3,329
   VIOXX	$0	0	$4,040	57
   VIRACEPT	$117,625	163	$120,623	157
   XELODA	$612	1	$25,299	68
   XENICAL	$0	0	$21,009	246
   ZIAGEN	$0	0	$12,956	34
   ZOMIG	$24,066	140	$63,704	330
   ZYBAN	$50,814	905	$48,537	812
   Total for Period:	$1,324,446	14,155	$3,799,978	35,526
   Annualized:	$1,589,335	16,986	$4,559,974	42,631
   PMPM:	$1.15	0.0122	$3.50	0.0327

   
   
   
   
   
4. Sub-optimal use of generics when available for multi-source drug products

   Comment: Over 20 years ago hospitals began using generic drug products as less costly alternatives to the lead brand product after the patent had expired on the lead brand product. Similarly, federal programs, such as Medicaid, have long used policies that essentially mandated the use of generic drug products. However, the retail sector has been slow to fully utilize the cost saving potential of generics, since many patients and physicians inappropriately view generics as lower quality products than the lead brand. Currently, only about 35% of UT claims are generic, while similar plans have generic dispensing closer to 40%.

   The UT plan tends to use generics at a rate that is about 10% less than the national average even though the UT prescription plan only uses generic drugs approved by the United States Food and Drug Administration as therapeutically equivalent, and does not use generics for drugs that have narrow ranges between therapeutic doses and toxic side effects. Generic drugs can reasonably reduce drug costs, but in Texas too often prescriptions are written by physicians with the notation "dispense as written". Currently, about 50% of prescriptions for multi-source brands in the UT plan have the notation "dispense as written", while similar plans have only 20% to 30%.

   The composition of prescription claims significantly impacts on prescription drug spending. Table 2 shows this breakout, by percentage of claims and cost per claim, for each of these drug categories for the time periods 9/1997 - 6/1998 and 9/1998 - 6/1999. Also shown is The University of Texas System's generic substitution rate for the same time periods. It should be noted that the UT generic substitution rate is excellent when the prescription is written as a multi-source generic or when the prescription is written for a multi-source brand and the physician allows the use of a generic.

   Table 2

   

5. Sub-optimal use of therapeutic alternatives when available

   Comment: Although powerful new drug therapies that have unique therapeutic benefits are welcomed and reimbursed in the University of Texas prescription plan, the plan does not reasonably promote alternate prescription drug therapies that provide identical or very similar therapeutic outcomes at lower cost when available. This approach is standard practice in virtually all hospitals (and most outpatient prescription plans), since it creates price competition among sole source drugs at the manufacturer's level when different sole source drug products have identical or very similar therapeutic effects.

   Admittedly, it is only in recent years that prescription drug plans have tried to utilize a formulary approach similar to that used in hospitals. In the UT plan the formulary list is titled "A Preferred Drug List". For example, if the plan better utilized the preferred drug list, the price competition among manufacturers would lead to lower drug acquisition cost either directly or indirectly through rebates. One reason the formulary approach has not been successful in the UT plan (and in similar plans) is that a physician has difficulty sorting out the many different formularies he/she would need to follow on the basis of his/her patient population. The recent development of electronic prescribing systems for physicians should aid in this area. These electronic prescribing systems can screen clinical information such as drug interactions and inform the physician of formulary compliance at the time of prescribing, thereby reducing unnecessary communications between the physician, pharmacist and PBM.

   It has been estimated that new sole source products (defined as products introduced between 1997 and 2002) will account for 41% of total prescription sales by 2002. Thus, it appears that the rate of new product development is out-weighing the potential savings in patent expirations through the use of generics. Therefore, the use of therapeutic alternatives to moderate costs when available will become increasingly important in outpatient prescription drug plans.

6. The UT plan tends to under-utilize high technology, cost-efficient prescription dispensing facilities for maintenance drug therapies.

   Comment: The UT plan allows maintenance drugs to be refilled in 30-day supplies in local pharmacies, even though the efficiency of high-technology dispensing improves when automated technology can be utilized. Additionally, high volume facilities, such as mail order, have better discounted prices from manufacturers and can fill 90-day supplies of maintenance drugs reducing patient co-pays.

7. In recent years the threshold for prescription drug treatment for certain chronic diseases has been lowered causing more patients to utilize maintenance drug therapy. Additionally, new treatment options have become available for the treatment of such diseases as diabetes, ulcers, cholesterol and mental health.

   Comment: In recent years the American Diabetes Association lowered the blood glucose level treatment threshold from 140mg/dl to 126 mg/dl. In effect this reduced threshold added two million people nationally who could potentially receive treatment for diabetes including both monitoring and drug therapy.

   The effect of new treatment options and new therapeutic thresholds on key drug classes is shown in Table 3.

   
   

   Table 3

   Effect of New Treatment Options and New Therapeutic Thresholds on Key Drug Classes
   	1997-1998			1998-1999			% Increase
   Drug Class	Claims	Ingr. Cost	Avg Ingr Cost	Claims	Ingr. Cost	Avg Ingr Cost	Claims	Ingr.Cost
   Diabetes	19,662	$1,033,269	$52.55	21,103	$1,263,858	$59.89	7.33%	22.32%
   Ulcers	24,805	$2,858,079	$115.22	25,881	$3,360,843	$129.86	4.34%	17.59%
   Cholesterol	22,517	$2,256,326	$100.21	25,633	$2,737,540	$106.80	13.84%	21.33%
   Mental Health	45,331	$3,300,618	$72.81	45,883	$3,669,586	$79.98	1.22%	11.18%

   
   
8. The pharmaceutical industry has inflated prices about 10% per year over the last 2 years.

   Comment: Although there is an approximate manufacturer's price inflation for all drugs of 10% nationally, in the UT plan drug price inflation has been approximately 5%.

9. The drug industry has greatly increased its promotional activities to physicians.

   Comment: As new drugs have been developed by major pharmaceutical manufacturers, they have sought to optimize their utilization by increasing their contact with physicians.

   From 1995 to 1998 manufacturer sales forces increased 48% to over 57,000 sales representatives in the United States. These field sale forces target the Nation's highest prescribing physicians and concentrate on encouraging the prescribing of the newest - and usually most expensive - drugs.

10. Direct-to-consumer advertising has increased dramatically due to a 1997 change in FDA regulations which made it easier for manufacturers to place more effective advertisements on television, in newspapers, and in magazines.

    Comment: Manufacturers spent $1.3 billion on direct-to-consumer advertising in 1998 and the figure will greatly increase in 1999. Table 4 summarizes UT plan expenditures for a few drugs that are heavily advertised direct-to-consumer.

    
    

    Table 4

    Effect of Direct to Consumer Advertising on Utilization and Drug Spend
    	1997-1998			1998-1999			% Increase
    Drug Name	Claims	Ingr. Cost	Avg Ingr Cost	Claims	Ingr.Cost	Avg Ingr Cost	Claims	Ingr.Cost
    ALLEGRA	5,865	$299,541	$51.07	5,776	$338,452	$58.60	-1.52%	12.99%
    ALLEGRA-D	451	$18,956	$42.03	1,910	$92,952	$48.67	323.50%	390.36%
    CLARITIN	13,997	$1,000,505	$71.48	14,820	$1,118,064	$75.44	5.88%	11.75%
    CLARITIN-D 12 HOUR	5,317	$299,517	$56.33	4,488	$278,576	$62.07	-15.59%	-6.99%
    CLARITIN-D 24 HOUR	2,780	$189,228	$68.07	3,372	$254,069	$75.35	21.29%	34.27%
    PRAVACHOL	6,040	$727,861	$120.51	5,537	$726,455	$131.20	-8.33%	-0.19%
    PRILOSEC	8,502	$1,305,030	$153.50	10,260	$1,731,764	$168.79	20.68%	32.70%
    VALTREX	1,219	$113,175	$92.84	1,555	$147,504	$94.86	27.56%	30.33%

    
    
11. The increased development and availability of new sole source drugs that are termed lifestyle drugs, e.g. drugs to prevent pregnancy, to treat erectile dysfunction, to promote weight reduction, to promote smoking cessation, to grow hair, etc.

    Comment: Often lifestyle drugs are necessary for the good health of a patient, e.g. drugs that promote weight reduction and smoking cessation. But often these drugs require behavior modification along with the drug treatment. Thus, repeated use of drugs to treat weight reduction without altering behavior is an abuse of these drugs. Continued therapy should be monitored and limited.

    Also, lifestyle drugs tend to be the most heavily advertised direct-to-consumer.

Summary of Factors Causing Increased Drug Spending

In many ways the University of Texas prescription benefit plan increased in drug spending because of powerful forces in health care occurring nationally, e.g.

• managed care's influence increasing outpatient prescription drug volume,
• the "graying" of America,
• the development of powerful new drugs,
• sub-optimal use of generics and therapeutic alternatives,
• new drug treatment thresholds,
• the drug industry's increased promotional and advertising activities, and
• the development of new sole source lifestyle drugs that are heavily advertised.

However, the drug spending per member in the UT plan exceeds the national average for the following reasons:

• demographic changes that have caused plan membership to significantly shift towards older members that heavily utilize drugs,
• a use of generics and therapeutic alternatives at rates less than the national average,
• and under-utilization of high-tech, cost-efficient dispensing facilities for maintenance drug therapy. These facilities because of their volume and ability to increase a products market share often have access to discounted prices from manufacturers.

The influence of all the above factors caused PMPM prescription costs to increase 26.7% from 1997-98 to $31.53 in 1998-99. Table 5 illustrates the variation in amounts paid PMPM by components within the UT System. The plan paid PMPM varied from a low of $20.48 at UT Brownsville to a high of $57.32 at UT System Administration. However, both the high and low groups were relatively small in size. It is interesting to note that UT Austin, one of the larger groups, increased in plan paid PMPM by 41.7% to $38.00. This large increase in one of the larger UT groups can be explained in large part by a dramatic shift in membership between 1997-98 and 1998-99. In this period UT Austin membership decreased by 9,233 from 23,460 to 14,226. This decline in membership occurred mostly among younger employees who selected insured HMO plans causing the membership in 1998-99 to shift dramatically towards older employees.

It is likely that the factors cited in this section influenced each UT group a little differently, but on average the prescription drug benefit provided through the UT self-funded medical plan increased a startling 27% to $31.53 PMPM in 1999.

Table 5

UT System by Group

9/98 through 6/99

RECOMMENDATIONS TO REDUCE UNNECESSARY PRESCRIPTION DRUG SPENDING

As stated in the introduction to the report, the University of Texas System is not alone in having significant increases in its prescription drug benefit, and it is doubtful that in the next few years an increase of less than 12% is achievable even with the full implementation of proposed strategies. Additionally, the Task Force is aware that in Texas and, throughout the nation, patients have become increasingly resentful of efforts to control health costs. Consequently, implemented strategies should be accompanied with efforts to improve patient education.

THE FOLLOWING PROPOSED POLICIES AND STRATE G IES SHOULD BE EVALUATED IN THE 1999 CLAIMS ANALYSIS TO DETERMINE IF UNNECESSARY PRESCRIPTION DRUG SPENDING IS SIGNIFICANTLY REDUCED IN THE SELF-FUNDED UT PRESCRIPTION DRUG BENEFIT PROGRAM.

Proposed Policy 1
Optimize the use of reasonably priced generic drug products for multi-source brands.
(It is currently estimated that a savings of $898,000 might be possible.)

Proposed Strategy 1
Provide a co-pay incentive that would encourage members to use reasonably priced generic products.

Proposed Strategy 2
Implement a maximum allowable cost (MAC) program for generics that are AB rated by the FDA, except for those generics with narrow therapeutic indexes. In a MAC program the patient pays the difference between brand and generic price when the physician writes "dispense as written" (DAW) and there is an available generic.

Proposed Policy 2
Utilize therapeutic alternatives for sole source drugs when appropriate.

Proposed Strategy 1
Develop a 3-tier copay structure with a new upper tier for sole source brand drugs and "quality of life drugs" not included in the plan's preferred drug list. The first two copay tiers might be less than the present $10/$20 structure to provide a balance for member satisfaction. Preliminary estimates are that the savings generated by a 3-tier copay structure might be between $.5 - $6.1 million depending on co-pay amounts. The third tier can be overridden in the rare occasion of a medical necessity with the use of a PBM on line managed access system. It should be noted that this policy may cause negative reactions from patients and physicians since it provides a disincentive for the use of some prescription drugs that are heavily promoted and advertised. However, it should also be noted that the 3-tier copay approach allows patient access to almost all prescription drugs at a subsidized cost, and even those drugs with the highest copay are significantly subsidized. If a 3-tier copay is implemented, it is recommended that the preferred drug list include both branded therapeutic alternative drugs and branded sole source drugs without therapeutic alternatives that are required for quality care.

Proposed Policy 3
Better control the utilization of certain problematic sole source drugs and lifestyle drugs.

Proposed Strategy 1
Implement utilization management tools including standard protocols for special approval of certain drug use. These management tools might be designed to encourage proper drug use, resulting in lower drug and health care costs. If implemented, protocols should restrict duration and dosage of problematic drugs and enforce conformance to standard prescribing criteria for others. The preliminary estimate for savings in a drug utilization management program is $400,000. Some specific examples of drugs/drug classes where utilization management tools may be implemented include:

• Accutane (1,176 Rxs, $300,000 in cost, average cost per Rx of about $245.00).
• Celebrex / Vioxx (4,200 Rxs, and over $400,000 in cost for Celebrex alone).
• Enbrel (177 Rxs, $229,000 in cost, and an average cost per Rx of about $1,300.00).
• Growth Hormones (greater than $100,000 in drug cost for this category).
• Impotence Medications (4,000 Rxs, and almost $500,000 in drug cost for Viagra alone).
• Migraine agents (more than 1.3 million dollars spent on this category by UT).
• Sedative hypnotics like Ambien or Sonata (5,700 Rxs and over $300,000 in cost).
• Consider proactively placing a utilization limitation on the new flu products, Relenza and Tamiflu. There is currently no utilization data but there is a high potential for both misuse and overuse.
  *all utilization figures are for 9/1/98 through 8/31/99*

It should be noted that some members of the committee supported a fourth level of copayment for products that are clearly lifestyle products, eg. hair growth products.

Proposed Policy 4
Promote the utilization of highly automated, cost-efficient dispensing facilities.

This recommendation was not supported by all committee members because of concerns about fragmentation of patient drug profiles between retail and mail order pharmacies and because of concern about potential patient and retail pharmacy dissatisfaction.

Proposed Strategy 1
The UT plan might allow a 30 day supply and only 1 refill in retail pharmacies for maintenance drugs that are prescribed for long-term use. Presently, mail order accounts for 46.5% of total drug spending and 20% of all claims. It is currently estimated that the larger drug discounts available from mail order pharmacies or other high volume, cost-efficient facilities, and improved efforts for preferred list compliance will generate an estimated savings of $940,000.

Proposed Strategy 2
Except for generic drug products consider mail copays that are lesser than retail copays.

Proposed Policy 5
Address the demographic changes that have occurred in the UT plan, eliminating the future possibility of adverse selection.

Proposed Strategy 1
The UT plan should consider carving out the prescription drug program from the fully-insured HMO's. Placing the additional 36,000 members in one pool will allow UT to avoid adverse selection, create integrated reporting, make appropriate plan design recommendations and offer those HMO members the specialized skill set and experience of a PBM management team. However, it is likely that this proposed strategy will cause some member dissatification.

It should be noted that although this proposed policy will enhance the integration of prescription claims data, it may make it more difficult to integrate prescription claims data with other health care costs unless the data sets have a common link.

Although it is difficult to determine the exact savings that would be achieved from carving out the additional 36,000 members under the insured HMO prescription plans, some estimates can be made.

• These additional members would represent an estimated $874,440 of additional drug spending per month, or $10,493,280 per year*
• Savings associated with this group for a MAC program would be 3% to 9% off total ingredient cost paid ($314,798 to $944,395)**
• Savings associated with this group for tiered copays would be 3% to 20% off total amount paid ($314,798 to $2,098,656)**
  *Additional drug spending is based on 70% (estimated by E G I) of current PMPM for 3^rd quarter 1999 - $34.70 ($34.70 x .70 x 36,000 mbrs.)
  **Note: these savings depend on the range between the client's current and new benefit level.

An insured HMO should reduce its premiums proportionately to the current expense of its prescription drug plan. It may be that not all insured HMO's can carve out a drug plan effective September 2000, and, therefore, the carve out may be phased in over two years.

Proposed Policy 6
The plan might consider a contract in which rebates are passed through to UT System rather than relying solely on negotiated front-end discounts.

Proposed Strategy 1
Request bids on the basis of a pass through of rebates. This mechanism is more usual and it would provide performance based lowering of plan costs (rather than only estimated discounts), and it would eliminate concern that the use of generics and preferred lists benefit only the PBM.

Proposed Policy 7
Neutralize the effects of certain drug manufacturer promotional and advertising activities by way of educating physicians, plan members, UT staff and medical students.

Proposed Strategy 1
Work with PBM Clinical Specialists (face to face clinical detailing) in Texas to include the DTC advertising and promotional issues in their physician dialogue.

Proposed Strategy 2
Use PBM reports and educational mailings that address the promotional and DTC advertising issues to targeted physicians who prescribe extensively, to UT staff, and to medical students.

Proposed Policy 8
Encourage the appropriate use of drugs in compliance with prescribed instructions and protocols for those patients with certain disease states (i.e. Diabetic, Asthmatic, etc.), positively impacting quality of care and related medical expenditures.

Proposed Strategy 1
Patient Based Education Campaigns through the mail or by internet for patients with selected diseases.

Proposed Strategy 2
Implement case management interventions through the mail, by telephone, or in person for patients with selective diseases using protocols developed by the PBM and approved by the UT System advisory committee (see recommendation below).

Proposed Strategy 3
In conjunction with a UT System advisory committee (see recommendation below), coordinate health care claims for selected diseases and prescription benefit requests to identify opportunities for pilot studies that would improve interventions and outcomes. These pilot studies might also evaluate whether pharmacists should be compensated for cognitive services that improve patient care.

Proposed Policy 9
Explore integrated physician management systems that would streamline and enhance physician efforts towards quality and cost-efficient care for their patients who are UT members.

Proposed Strategy 1
Establish a demonstration project to evaluate the efficiency and effectiveness of implementing a physician electronic prescribing system that incorporates clinical and formulary information at the point of prescribing. These systems are already in use in Texas and have been shown to reduce PMPM while also reducing unnecessary communications between physicians, pharmacists and the PBM.

It should be noted that preliminary evaluations of Proposed Policies 1 - 5 suggest that significant reductions in excess of $5,000,000 may be possible through implementation of these policies. It should be noted that Proposed Policy 1 on generics is utilized at retail by the Teachers Retirement System (TRS) and that Proposed Policy 2 on a 3-tier copayment plan will very likely be implemented by the Employees Retirement System (ERS) on September 1, 2000. Both TRS and ERS have implemented Proposed Policy 3 on problematic drugs to some extent. Additionally, ERS and TRS utilize Proposed Policy 6 and receive rebates from the PBM rather than only up-front discounts. Implementing several or all of Proposed Policies 1 - 6 should significantly control and reduce unnecessary drug spending in the UT plan. Whether these policies should be implemented should be clarified by the testing of these proposed policies on the basis of calendar 1999 prescription claims as recommended above.

It is also recommended that:

• The UT System should develop an advisory committee to review and comment on the plan's preferred drug list proposed by the PBM. This advisory committee should also review and comment on the controls and protocols utilized for certain problematic sole source drugs and lifestyle drugs.
• Timely and informative reports should be required of the PBM. These reports should track program costs and the effectiveness of policies. Additionally, these reports should also aid UT System in evaluating the PBM's management of the program.

The above two recommendations are made to enhance UT's management of the PBM and to insure the PBM's responsiveness to UT System objectives.

The UT Pharmacy Benefit Plan Advisory Group has some reluctance in providing these recommendations. The recommendations will effect the prescribing practice of physicians and they will add new constraints on the options available to plan members.

However, it is clear that powerful forces are present and if these forces are left unchecked the UT prescription drug benefit could continue to increase at a 30% rate or more.

The Task Force gratefully acknowledges the excellent report prepared by PCS Health Systems on the University of Texas System Pharmacy Benefit Program. It should be noted that savings estimates cited in this report were provided by PCS Health Systems. The PCS study greatly aided the committee in understanding why drug spending has increased and what steps might be taken to moderate further increases in the future.