DLC | Model Initiatives | June 30, 2008 Restraining Prescription Drug Costs New Dem Play | Restrain prescription drug costs by enabling doctors to get the right drug to the right patient at the right price. Where It's Working | Arizona, New York, Florida, Connecticut, New Jersey, Ohio, Washington, and Maine Players | Governors and state legislators More Health Care Plays Prescription drug costs have been rising steeply since 1995. They now account for 10 percent of the nation's health care spending. While prescription drugs are often less expensive and more effective than older treatments for diseases like heart disease and cancer, there is much waste in the use of prescription drugs and many opportunities for savings. Too often, patients are prescribed the wrong drug or a dangerous combination of drugs. Studies show that for every dollar spent on prescription drugs, $1.50 is spent on curing ailments caused by erroneous prescriptions and other drug-related problems. Patients are too often exposed to unnecessary risks from mass-marketed drugs when safer, less expensive alternatives are equally effective. Many patients pay too much for drugs. Two of every five patients taking a brand name drug could be using a lower-priced generic drug. They continue to receive brand name drugs in part because a doctor's prescribing habits don't change when a generic alternative to a brand drug becomes available. Patients often pay too much at the pharmacy because retail prices vary widely and it is hard for patients to compare prices. "Consumers compare prices when they buy groceries or buy clothes. Yet for health care, a large share of a New Yorker's income, it is difficult if not impossible for consumers to do the same. This new website corrects this problem for prescription drugs, bringing overall health care costs down while saving New Yorkers money." -- Governor David Paterson, New York The abuse of prescription drugs drives up costs, too. One of every five people in the United States have used prescription drugs for non-medical reasons at least once in their lifetime. About one-half million hospital emergency room visits every year involve the abuse of prescription and non-prescription drugs. There is no magic bullet to stop the waste, abuse, and harm from prescription drugs. Instead, elected officials should pursue a multi-pronged strategy that seeks to get the right drug to the right person at the right price. Below are five measures that can cut costs without cutting access to prescription drugs: Increase Use of Generic Drugs. Physicians often prescribe brand name drugs out of habit long after a generic drug comes out as an alternative. Forty percent of U.S. patients taking a brand name drug could be using a lower-priced generic drug. The potential national savings from full generic use is $8.8 billion annually or 11 percent of all drug expenditures. Physicians will change their habits when they can see for themselves that their prescribing habits are out of line from their colleagues. That's how Arizona's Medicaid program has substantially increased the use of generics. It simply shows doctors the prescribing patterns for generic versus brand name drugs for themselves and their colleagues. Doctors readily change their prescribing habits once they see the data. Such programs have made Arizona the state with the lowest per-person spending on prescription drugs among all Medicaid programs in the country. Save Consumers Money at the Pharmacy. Retail prices for prescription drugs vary widely. Seven-fold variation in a single city is not uncommon. Many consumers with health care coverage are protected from such large price variations when their only cost is a co-payment for drugs. But people without coverage or who have poor insurance coverage can be at a major disadvantage unless they actively shop for the best price. The New York State Attorney's office has created a price comparison tool for prescription drugs. Consumers can compare the prices of 150 commonly used drugs through a website or a toll-free number. The service surveys pharmacies across the state with help from volunteers from AARP. A study of the website shows that consumers save $17 per prescription on average, and can save as much as $85. Several other states like Florida, Connecticut, and New Jersey have followed suit. Another way to give consumers lower retail prices is through prescription drug discount cards. Many states developed discount cards for seniors before passage of the Medicare prescription drug benefit. Arizona is one state that has extended eligibility for the card to people under age 65. To date more than 54,000 cards have been distributed, generating more than $15 million in discounts. Give Physicians Better Tools for Prescription Decisionmaking. About 100,000 patients die each year from drugs that doctors prescribed appropriately. The safety warnings required by the FDA for new drugs are simply inadequate to ensure safe and effective prescriptions from doctors. Doctors should carefully gather and weigh the evidence about the relative risks and benefits of varying drug therapies in order to help patients make sound choices. Instead, the combination of too little time for physicians to assess risks and benefits, poor oversight by the FDA once it approves a drug, and the pharmaceutical industry's heavy marketing of brand name drugs has been deadly for patients. One proven approach for preventing drug-related deaths is the kind of decisionmaking found in large, organized systems of care like Kaiser Permanente, an HMO based in California. Far fewer Kaiser patients were exposed to the risks of drugs like Vioxx because Kaiser doctors had opted to use less costly, proven alternatives for most patients and limited the newer, more expensive drugs to patients whom they believed would likely benefit. Follow-up research by Kaiser and others confirmed the safety concerns that emerged following FDA approval. Kaiser has also banned pharmaceutical companies from marketing their drugs directly to doctors. Kaiser believes the best decisions for patients cannot be made based on marketing materials and that the use of free gifts from pharmaceutical representatives can put undue influence on a doctor's decision. Although some doctors argue to contrary, studies of doctors' prescribing behaviors have concluded that doctors are indeed influenced by these gifts, even the smaller ones. States can constrain drug marketing in one of two ways. First, they can offer Medicaid beneficiaries or state employees enrollment in health plans like Kaiser. Such health plans have the resources and rules in place to support good prescription drug decisionmaking by doctors. Second, they can support the creation and use of decision-support tools and limits on drug marketing for doctors practicing independently. Regional or statewide purchasing alliances where the public and private sectors join forces -- like the Puget Sound Health Alliance and Gov. Gregoire's health care initiative in Washington state -- can create the critical mass for investing in decisionmaking tools that will benefit a great number of physicians. Use Computers to Prevent Medication Injuries. Doctors' handwriting is just one of the problems when it comes to dispensing drugs safely and accurately. Every year, patients suffer 2 million medication-related problems that could have been prevented by automated computer systems. For example, if doctors prescribed a drug using a computer system instead of a piece of paper, the computer could make sure that the drug fits the patient's condition and alert the doctor to any potential conflicts between the drug and the patient's health condition or other drugs being taken. Estimates for national savings from computerized prescribing range from $20 billion to $44 billion each year depending on the sophistication of the computer system. But getting doctors and hospitals to adopt a new system is a significant challenge. Despite mounting evidence of a quick payment for hospitals that invest in computerized prescribing, less than 10 percent of hospitals use it. Employer health care coalitions like the Leapfrog Healthcare Group and the Midwest Business Group on Health are encouraging computerized prescribing and other similar practices by publishing reports of which hospitals have adopted it. States can do the same as a health care purchaser for state employees, Medicaid, and the children's health insurance programs. They can help build a list of hospitals that have computerized prescribing and pay these hospitals extra for adopting computerized systems. States like Ohio, Maine, and New Jersey have joined the Leapfrog group to help push for adoption. Fight Abuse of Prescription Drugs. One-fourth of drug abuse cases that end up in the emergency room involve the non-medical use of prescription and non-prescription drugs, according to the U.S. Substance Abuse and Mental Health Services Administration. The problem has been getting worse, too. From 1994 to 2002, emergency room cases involving the painkiller oxycodone grew by 450 percent. Doctor shopping is a common way for people with addictions to seek drugs that can be abused. Abusers see multiple doctors and make the same complaint about pain in order to receive multiple prescriptions. It is a felony for a patient to obtain a prescription for controlled substances without disclosing to a doctor any other prescriptions for controlled substances received within the previous 30 days. Enforcing this law, however, is difficult because doctors have no way to check on a patient's complete prescription drug history. Fake identities can also foil prevention efforts. The federal government is providing funding for states to create large databases on prescriptions for controlled substances in order to monitor potential abuse. But this approach can have a chilling effect on legitimate uses of painkillers and other drugs, which many doctors underprescribe because they overestimate the potential for patients to become addicted. Doctors and patients may become even more cautious if they are worried about law enforcement officers peering over their shoulders. States should create a health information network that allows doctors to see a complete drug history for all patients, not just those with prescriptions for controlled substances. (See "Health Information Networks to Improve Safety and Reduce Costs Play.") Patient privacy should be protected by allowing patients to authorize who has access to their records. If a patient refuses to let a doctor see his or her prescription drug records, then the doctor has clear grounds for refusing to prescribe a controlled substance. Doctors who suspect abuse based on prescription patterns can help the patient seek treatment. According to the National Institute on Drug Abuse, research shows that an addiction to any drug is "a brain disease that, like other chronic diseases, can be treated effectively." The waste and abuse of prescription drugs hurts all Americans. By following the simple dictum of getting the right drug to the right person at the right price, states can cut through the complex set of issues that involve every aspect of health care delivery. Resources for Action "Analysis of Pharmacy Carve-Out Option for the Arizona Health Care Cost Containment System," Lewin Group, November 2003 www.lewin.com/SpotlightPages/Pharmacy+Carve-Out+Option.htm Prescription Drug Price Website, New York State Attorney's Office www.nyagrx.org Arizona Copper Rx Card, Office of the Governor http://azgovernor.gov/coppercard/ "Prescription Drugs Abuse and Addiction," National Institute on Drug Abuse, August, 2005 www.drugabuse.gov/ResearchReports/Prescription/Prescription.html "Health Information Networks to Improve Safety and Reduce Costs," DLC Playbook www.dlc.org/ndol_ci.cfm?kaid=139&subid=275&contentid=252620 Additional Reading "Potential Savings from Substituting Generic Drugs for Brand-name Drugs: Medical Expenditure Panel Survey, 1997-2000." Annals of Internal Medicine, June 5, 2005, pp.:891-7 www.annals.org/cgi/content/abstract/142/11/891 "Science Needed for Better Ethics in Medicine," PPI Health Policy Wire, February 16, 2006 www.ppionline.org/ppi_ci.cfm?knlgAreaID=111 &subsecID=900033&contentID=253751#item3 Drug Abuse Warning Network, U.S. Substance Abuse and Mental Health Services Administration http://dawninfo.samhsa.gov "How Much Savings from Prescription Drug Discounts Cards?" PPI E-newsletter, May 6, 2004: http://www.ppionline.org/ppi_ci.cfm?contentid=252588 &knlgAreaID=111&subsecid=900033 Contacts David Kendall Senior Fellow for Health Policy Progressive Policy Institute 4021 Heritage Way Missoula, MT 59802 (406) 543-2265 (772) 679-0652 (fax) dkendall@ppionline.org