Using the Pharmacy & Therapeutics Process to Develop Sound Business Strategies CDR Ted Briski, MSC,...

Using the Pharmacy & Therapeutics Process Using the Pharmacy & Therapeutics Process to Develop Sound Business Strategiesto Develop Sound Business Strategies

CDR Ted Briski, MSC, USN

PEC ActivitiesPEC Activities

DoD P&T Committee SupportDoD P&T Committee Support

• Role of the PEC: – Completing drug class reviews and developing of

clinical criteria for procurement strategy decisions

– Evaluating drugs recently approved by the FDA– Collecting and analyzing requests from DoD

healthcare professionals for changes to the Basic Core Formulary

– Gathering input from providers regarding the acceptability of various formulary decisions

– Disseminating minutes and other Committee information to the field

Why bother with Pharmacy and Why bother with Pharmacy and Therapeutics?Therapeutics?

• Keep people gainfully employed and it gets them out of clinic once in a while

• Provide good collateral duty bullets for FitReps and OERs

• Appease patients who spend way too much time reading on the internet

• Assure safe and efficacious pharmacotherapy– Credentials process (M&M, peer review, etc.)

• Provide a range of pharmacotherapy choices– Then who needs a formulary

““Business” is not a dirty wordBusiness” is not a dirty word

• Webster’s 9th defines business as…..– “Activity concerned with the supplying and exchange

of commodities”

• Commodities– Medicines sold to DoD by Pharmaceutical Companies– Pharmacotherapy provided by DoD MTFs– Outcomes are what patients are paying for

• DoD MTFs purchase the raw materials of medicines, cognitively transforms them to deliver pharmacotherapy, which results in a positive outcome that patients “customers” value

““Strategy”Strategy”

• Webster’s 9th

– “The science and art of military command exercised to meet the enemy in combat under advantageous conditions”

– “The art of devising or employing plans or stratagems toward a goal”

• DoD’s Primary Pharmacy and Therapeutic Goal– Minimize the money spent on medicines– Maximize the outcomes

Unique Users & TRICARE Unique Users & TRICARE Pharmacy Points of ServicePharmacy Points of Service

All Ages, FY02All Ages, FY02

Retail

60% 14%18%

Mail Order

5.7M Unique Users

DoD Drug Expenditures & ProjectionsDoD Drug Expenditures & ProjectionsFY 95 – FY 03FY 95 – FY 03

ns Mail

Retail

Percent Increase over Previous Fiscal Year

Overall 7% 15% 13% 17% 22% 28% 47% 21%

Mail Order 137% 27% 81% 82% 25%

Retail 7% 27% 16% 21% 33% 50% 88% 27%

MTFs 7% 12% 8% 10% 18% 13% 19% 15%

$617 $662 $741 $797 $878 $1,034 $1,170$1,420

$1,633$245 $283$342

$1,279

$1,627

$193$181

$35$83

1995 1996 1997 1998 1999 2000 2001 2002 2003 (projected)

TSRx Implementation 1 Apr 2001

* MTF costs do not include dispensing costs.

* Retail costs are contractor paid claims (HCSR Data); do not include admin fees

* Mail order costs are net costs to government

Note: FY03 is Pharmacy Benefit Division cost projections. These projections do not reflect Pharmacy budget or funding per the POM.

DoD Strategic Managers of the DoD Strategic Managers of the P&T ProcessP&T Process

• CEO has primary responsibility for big strategic decisions– TRICARE Management Activity– Surgeons General

• General Managers have profit and loss responsibility for a unit and consequently a leadership role in formulating and implementing business-level strategy for that unit– DoD Pharmacy and Therapeutics Executive Council– Federal Pharmacy Executive Steering Committee

• Subcommittee for contracting

• Source: “Strategic Management Concepts and Cases” by Thompson and Strickland

DoD Strategic Managers of the DoD Strategic Managers of the P&T ProcessP&T Process

• Functional area managers have direct authority over a major piece of the business and must support overall business strategies with strategic actions of their own– MTF Pharmacy and Therapeutic Committees

• Managers of major operating departments who have frontline responsibility for the details of strategic effort in their areas– MTF Department Heads, Department Chiefs or Flight

Commanders

• Source: “Strategic Management Concepts and Cases” by Thompson and Strickland

MTF P&T StrategiesMTF P&T StrategiesMinimizing the money spentMinimizing the money spent

• We sell Marketshare– Formulary Position = Preferred Status– “Have-nots” vs. “haves”

• What will the “haves” pay to keep their marketshare?• What will the “have-nots” pay to get marketshare?

– “Exclusivity” pays the best

• Minimize expenditures– Don’t give away formulary status– Form a consortium with other MTFs– Use your corporate resources– Opportunity (switching) cost can be worth paying– Formulary status, alone, does not save any money

MTF P&T StrategiesMTF P&T StrategiesMaximizing Quality of OutcomesMaximizing Quality of Outcomes

• Maximize quality of outcomes– Choose P&T membership carefully– Staff your P&T Committee with dedicated resources– Find MTF champions and change-agents– Direct the message you want to send your staff

• Partner with industry• Be the guest speaker for the noon lunch

– Demonstrate an ROI to the Command Suite• Measure MTF outcomes• Involve house staff as much as possible

– Consider collaborative practice models– Demand the evidence

Pharmaceutical Pharmaceutical Procurement Challenges Procurement Challenges

• Products not built to specification

• Uncertainty inherent in biological systems

• Cross-functionality of products

• The provider – patient relationship

• The result is you have to make choices and trade-offs to determine what offers the greatest value

What obligations do P&Ts face? What obligations do P&Ts face?

• Independently evaluate the evidence• Independently draw conclusions about the

strengths and weaknesses associated with comparable drugs.

• Make the tough decisions about trade-offs• Formulate an appropriate procurement and

business strategy• Make the deal• Abide by the deal (unless the world changes)• Be a change-agent by following through

PECPECProcurement Strategy AnalysisProcurement Strategy Analysis

• ESTOP analysis– Efficacy / effectiveness– Safety– Tolerability– Other Factors (may be non-clinical)– Price / Cost

• Therapeutic interchangeability of medications– Patient populations– Clinical outcomes– Indications

• Coverage of clinical needs • Provider acceptance

PECPECProcurement Strategy ExecutionProcurement Strategy Execution

• DoD PEC and VA PBM work jointly to develop and execute a rational business strategy, supported by comprehensive clinical analysis, to procure pharmaceutical products.

– DoD PEC currently negotiates best prices for the BCF and TMOP• Uniform Formulary will add responsibility for Retail prices

– Determine optimum contract strategy and develop SOW• Competitive process used to determine clear winners and losers

• Contracted agent(s) must be sufficiently efficacious, safe, and tolerable to meet clinical needs of at least 90% of patients

PEC ActivitiesPEC Activities

Procurement Strategy ExecutionProcurement Strategy Execution

– Determine appropriate use of Incentive Agreements• Non-competitive process used to negotiate price agreements• Leaves drug class open for MTFs to have additional products

– Monitor cost avoidance and contract compliance• MHS centric- Is DoD upholding its end of the deal?

– Monitor contract/agreement performance• Vendor centric- Is the Vendor upholding their end of the deal?

Procurement Program Results Procurement Program Results

• Over 100 current contracts or agreements in place– 160 procurements over 3 years– Saving DoD $500 Million and VA $1 Billion

• DoD Prices– 27% less than Federal Ceiling Price (FCP)– 51% less than Commercial Market Prices (WAC)

• Cost Avoidance (1st three quarters of FY03)– $109 Million for agreements– $250 Million additional due to “market” effect

• Contract Compliance (growth industry)– $61 Million unrealized– MTFs and Services are inconsistent– Assisting MTFs improve compliance is a PEC priority for 2004

MTF P&T CommitteesMTF P&T CommitteesBeing a good corporate citizenBeing a good corporate citizen

• Read the DoD P&T Minutes• Provide input when things first appear in the

minutes, not after the contract is awarded• Take ownership for your MTF compliance• Provide education to providers• Develop transition plans• Provide MTF recommendations for DoD P&T

action items• Each MTF is part of a bigger picture• This is an 80/20 business

Barriers to Being a Good Barriers to Being a Good Corporate CitizenCorporate Citizen

• Commanders and Commanding Officers– P&T Membership– Time and Resources

• Culture– No one likes change– Everybody is an expert in their own little world– No one likes to feel they are being told what to do

• Victims of our own training– Clinicians inherently think they provide the best care– Discouraged to think of healthcare as a business

• Laws of economics cannot be ignored

• Egos

MTF Expenditures FY 2003MTF Expenditures FY 2003

1. Antihistamines - $88M

2. NSAIDs - $86M

3. Lipotropics - $83M

4. SSRIs - $64M

5. PPIs - $61M

6. Bisphosphonates - $45M

7. CCBs - $45M

8. ACEs - $43M

9. Vaccines - $38M

10. Anticonvulsants - $37M

Total:$590M

11. Advair - $31M

12. TZDs - $30M

13. Quinolones - $28M

14. AntiPlatelets - $27M

15. Penicillins - $24M

16. BG Strips - $24M

17. Contraceptives - $23M

18. Opiates - $22M

19. AQ Nasal Steroids - $22M

20. ARBs - $22 M

Total:$253M

$843M represents 52% of MTF total expenditures

MTF Expenditures FY 2003MTF Expenditures FY 2003 (Next Twenty) (Next Twenty)

1. Metformin - $22M

2. Leukotriene Ant. - $21M

3. Glucocorticoids - $20M

4. Macrolides - $19M

5. Antifungals - $19M

6. Antimalarials - $18M

7. Hematinics - $17M

8. Antimigraines - $17M

9. Beta Blockers - $16M

10. Estrogenics - $15M

Total:$184M

11. Antipsychotics - $15M

12. Toxoids - $14M

13. Gram(-) Bacilli - $13M

14. Norepi. & Dopamine - $13M

15. Introc. Pressure - $13M

16. Beta Blockers - $12M

17. Insulins - $11M

18. ADHD Drugs - $10M

19. Antidepressants - $10M

20. Sedative-hypnotics - $10M

Total:$121M

$1,148M represents 70% of MTF total expenditures

What have we done for you lately?What have we done for you lately?

• Contracts

– Luteinizing Hormone Releasing Hormone (LHRH) Agonist

– HMG-CoA Reductase Inhibitors (Statins)

– 5HT1 Agonist (Triptans)

– Oral Fluoroquinolones

• Incentive Agreements

– Aqueous Nasal Steroids

– Proton Pump Inhibitors (PPIs)

– Thiazolidinediones (TZDs)

– Bisphosphonates

– 2nd Generation Antihistamines (NSAs)

Key FactorsKey Factors

• Degree of therapeutic interchangeability– What is preferred for a new patient, if any– How often do you need a back-up (failure rate)

• Amount of competition– How many products are in the class

• Distribution of utilization– What is the reason for the distribution

• External Factors– Supply, political, Personal

• Avoid Formulary Creep– Adding a new drug in the class should be assessed in

relationship to the entire class of drugs

MonopolyMonopolyPDE5-Inhibitor Usage PDE5-Inhibitor Usage 30 Day Eq Rx Fills30 Day Eq Rx Fills

(All POS) July 01 to Oct 03 (All POS) July 01 to Oct 03

10,000

15,000

20,000

25,000

30,000

35,000

40,000Ju

Sildenafil

Vardenafil

Source: PDTS

• Vardenafil (Levitra®; Bayer/GlaxoSmithKline)

• Summer 2003 (available now)

• Tadalafil (Cialis®; Icos/Lilly)• Anticipated launch sometime in mid-2004

• Potential opportunity to reduce prices through formulary management or procurement strategies

New PDE5-InhibitorsNew PDE5-Inhibitors

OligopolyOligopolyMTF LHRH Rxs for MalesMTF LHRH Rxs for Males

ContractPre-Contract

Goserelin 1 & 3 mo

Leuprolide 1& 3 mo

Leuprolide 4 mo

Luteinizing Hormone Releasing Luteinizing Hormone Releasing Hormone (LHRH) Agonist Hormone (LHRH) Agonist

• Goserelin Acetate Implant (AstraZeneca)

• Contract Effective on 17 Feb 03

• Terms: Sole LHRH agonist on the BCF and VANF for the treatment of prostate cancer

MTF LHRH Cost/month of MTF LHRH Cost/month of treatmenttreatment

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

1 & 3 MO KIT

4 MO KIT

Contract price: $90/mo

MTF Statin Utilization by TabsMTF Statin Utilization by Tabs

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000O

SIMVASTATIN

ATORVASTATIN

PRAVASTATIN

LOVASTATIN

FLUVASTATIN LOVASTATIN/NIACIN

MTF Statin Cost/doseMTF Statin Cost/dose

1st statin contract

2nd statin contract

High Potency Statin IIHigh Potency Statin II

• Simvastatin (Merck and Co)

• Contract Effective on 1 May 03

• Terms: – Sole High-potency Statin on the BCF and VANF

for the treatment of hyperlipidemia– May have lovastatin and pravastatin or

fluvastatin (deferred to MTFs)

MTF TZD Utilization by 30-day MTF TZD Utilization by 30-day equivalent Rxsequivalent Rxs

10,000

15,000

20,000

25,000

30,000

ROSIGLITAZONE

PIOGLITAZONE

Thiazolidinediones (TZDs)Thiazolidinediones (TZDs)

• Rosiglitazone Incentive Agreement (GlaxoSmithKline)

• Agreement Effective on 1 July 2003

• Terms: – Sole TZD on the BCF– Class remains open, MTFs can add additional

agents through their local P&T process

MTF TZD Cost/tabMTF TZD Cost/tab

Ophthalmic Prostaglandins Ophthalmic Prostaglandins MTF Rx Fills MTF Rx Fills

Source: PDTS

10,000

12,000

14,000O

BIMATOPROST.

TRAVOPROST

LATANOPROST

MTF Expenditures for MTF Expenditures for Ophthalmic ProstaglandinsOphthalmic Prostaglandins

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

BIMATOPROST

LATANOPROST

TRAVOPROST

BPA Initiated

Reduction in cost attributable to BPA: $280,296

Source: Prime Vendor Data

Open CompetitionOpen CompetitionMTF Triptan Utilization by RxsMTF Triptan Utilization by Rxs

10,000

SUMATRIPTAN

RIZATRIPTAN

ZOLMITRIPTANNARATRIPTAN

ELETRIPTAN FROVATRIPTAN

ALMOTRIPTAN

ContractPre-Contract

5HT1 Agonist (Triptans)5HT1 Agonist (Triptans)

• Zolmitriptan (AstraZeneca)

• Contract Effective on 11 July 03

• Terms: – Certain placement on the BCF and one of up to

two triptans available on MTF Formularies– MTFs are currently free to select a second

agent using their local P&T process

MTF Triptan Cost/tabMTF Triptan Cost/tab

Contract price for zolmitriptan - $3.20/tab

MTF Nasal AQ Steroid MTF Nasal AQ Steroid Utilization by RxsUtilization by Rxs

20,000

40,000

60,000

80,000

100,000

120,000

FLUTICASONE

MOMETASONE

TRIAMCINOLONE

BUDESONIDE

BECLOMETHASONE

FLUNISOLIDE

Aqueous Nasal CorticosteroidsAqueous Nasal Corticosteroids

• Fluticasone Incentive Agreement (GlaxoSmithKline)

• Agreement Effective on 1 January 2003

• Terms: – Sole AQ Nasal Steroid on BCF– Class remains open, MTFs can add additional

agents through their local P&T process

What happens when the world What happens when the world changes?changes?

• Examples– Products begin to go generic– Dramatic price changes– New competition– New information

• Every P&T decision has consequences– How will the competition react– How will you react

• Considerations– Use the evidence– Consider any external factors– Cut you losses– Renegotiate

MTF PPI Utilization by tabs/capsMTF PPI Utilization by tabs/caps

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000J

RABEPRAZOLE

LANSOPRAZOLE

OMEPRAZOLE

PANTOPRAZOLE

ESOMEPRAZOLE

Proton Pump InhibitorsProton Pump Inhibitors

• Rabeprazole Incentive Agreement (Janssen)

• Lansoprazole Incentive Agreement (TAP)

• Agreements Effective on 1 April 2003

• Terms: – Both agents on the BCF– Class remains open, MTFs can add additional agents

through their local P&T process

MTF PPI Cost/doseMTF PPI Cost/dose

Non-Sedating Antihistamine Non-Sedating Antihistamine IssuesIssues

• Chronology– Loratadine goes OTC at almost half the price– DoD P&T Committee publishes guidance, via the

PEC, recommending use of Loratadine at MTFs– Fexofenadine remains on BCF to allow transition and

meet needs of non-MTF points of service– Price of Fexofenadine rises 30%– Competitors are more than 2.3 times the expense of

Loratadine– MTFs not using Loratadine to any significant degree

MTF 30 Day Eq MTF 30 Day Eq 22ndnd Gen Antihistamines Gen Antihistamines

Jul 01 – Dec 03 Jul 01 – Dec 03

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

ril 200

CETIRIZINE

DESLORATADINE

FEXOFENADINE HCL

LORATADINE

Fluoroquinolone MTF Rx FillsFluoroquinolone MTF Rx Fills

10,000

15,000

20,000

25,000

30,000

GATIFLOXACIN

LEVOFLOXACIN

MOXIFLOXACIN

Post-Contract Actions and Post-Contract Actions and ReactionsReactions

• Response of competitors is very difficult to predict, but no obligation to maintain pre-contract pricing exists– Gatifloxacin contract price is $1.35, available 1 Jan 04

• contract effective date is 15 Jan 04

– Levofloxacin has been removed from the BCF and Gatifloxacin has been placed on the BCF

– BPA price for Levofloxacin expires 31 Jan 04– Levofloxacin expected to be the Federal Supply Schedule price

• $5.26 per 250mg and 500mg tablet

• The expected levofloxacin price increase has great potential to harm MTF budgets unless 83% of levofloxacin utilization moves to Gatifloxacin by 15 April 04, based on FY03 usage

NSAID Expenditures By POSNSAID Expenditures By POSJul 01 – Sep 03 Jul 01 – Sep 03

Mail Order

Retail

Source: PDTS

MTF 30 Day Eq NSAID RxsMTF 30 Day Eq NSAID RxsJul 01 – Dec 03Jul 01 – Dec 03

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

July 2001

st 2001

er 2001

ber 2001

er 2001

ber 2001

ary 2002

ruary 2002

ril 2002

May 2002

e 2002

July 2002

st 2002

er 2002

ber 2002

er 2002

ber 2002

ary 2003

ruary 2003

ril 2003

May 2003

e 2003

st 2003

July 2003

er 2003

ber 2003

er 2003

ber 2003

CELECOXIB

IBUPROFEN

INDOMETHACIN

MELOXICAM

NAPROXEN

PIROXICAM

ROFECOXIB VALDECOXIB

MTF 30 Day Eq Rxs: COX-2 Selective MTF 30 Day Eq Rxs: COX-2 Selective NSAIDs, Meloxicam, EtodolacNSAIDs, Meloxicam, Etodolac

Jul 01 – Sep 03 Jul 01 – Sep 03

CELECOXIB

MELOXICAM

VALDECOXIB

10,000

20,000

30,000

40,000

50,000

60,000

ETODOLAC

ROFECOXIB

Aug 02Meloxicam

added to BCF

Source: PDTS

MTF Expenditures for MTF Expenditures for Cholinesterase InhibitorsCholinesterase Inhibitors

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000O

ARICEPT

EXELON

REMINYL

Source: Prime Vendor Data

MTF Prescription FillsMTF Prescription FillsCholinesterase InhibitorsCholinesterase Inhibitors

Source: PDTS

ARICEPT

EXELON

REMINYL

162 (6%)

2,386 (84%)

295 (10%)

MTF SSRI Utilization by Caps/tabMTF SSRI Utilization by Caps/tab

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

FLUOXETINE SERTRALINE

PAROXETINE

CITALOPRAM

ESCITALOPRAM

Questions??Questions??

Email: Ted.Briski@amedd.army.mil

www.pec.ha.osd.mil1-866-ASK4PEC (1-866-275-4732)

Using the Pharmacy & Therapeutics Process to Develop Sound Business Strategies CDR Ted Briski, MSC,...

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