Managed care Q&A

April 1, 2000

Pharmaceutical Representative

Without a doubt, managed care has had a huge impact on the way physicians conduct their practices and the amount of time they have to spend with pharmaceutical reps. With these issues in mind, Pharmaceutical Representative asked Mark Callahan, director of outcomes-based research for the New York and Presbyterian Hospital Care Network, a few questions about where the managed care industry stands at the beginning of the 21st century and the issues taking shape there.

Without a doubt, managed care has had a huge impact on the way physicians conduct their practices and the amount of time they have to spend with pharmaceutical reps. With these issues in mind, Pharmaceutical Representative asked Mark Callahan, director of outcomes-based research for the New York and Presbyterian Hospital Care Network, a few questions about where the managed care industry stands at the beginning of the 21st century and the issues taking shape there.

We're seeing a series of trends where patients are being offered more choice within their health plans. These choices are mostly being seen in two ways. One is in a reduction of preauthorization requirements where patients no longer have to go through a gatekeeper primary care physician in order to get to a specialist. The other trend is that there is an increased use of out-of-network benefits where patients, if they stay within their authorized network of specialists, have a relatively low out-of-pocket cost to see that specialist. If they go out of the network, though, they will still have some kind of coverage through their insurance plan. In general, patients are clearly stating that they want more choice and flexibility in their healthcare benefits and the insurance marketplace is trying to respond to that.

What trends in the types of managed care contracts are evolving today?

In health plans where you don't have to go through a gatekeeper primary care physician, [that system] reduces the paperwork burden for the primary care doctors - a burden physicians are quite happy to have off their hands.

How does managed care in general influence a doctor's prescribing habits?

It does so in a couple of ways: One is through the use of restricted formularies that narrow the range of medications a physician has to prescribe for a particular patient depending on the patient's health plan. The other side of that is what has been happening in California, where some of the large physician organizations took full-risk capitation contracts that included pharmacy. Almost all of those organizations that took those contracts in the last couple of years are going broke because pharmacy costs have risen so rapidly. From a macro point of view, full-risk capitation that includes pharmacy has turned out to be a financial landmine for physician group practices because the costs have risen so much that the capitation contract didn't have enough funding to cover those pharmacy costs, which caused a number of large physician organizations to declare bankruptcy in the last 12 months.

How does managed care influence physician accessibility?

Because physicians are under increasing time pressure to see more patients and they're getting less money for each patient they see, the amount of free time they have for interacting with pharmaceutical reps has gone down significantly. Where pharmacy reps can gain access is when they can bring value-added programs into the physician's office. If reps can introduce doctors to the types of programs that actually help the physician manage his or her practice better or take care of the patients more efficiently, the reps are going to be well received, and the rest of their message will be listened to. But for a straight product discussion, it's going to be very difficult considering the time and financial pressure physicians are under these days. Also, a doctor may not be making the choices about whether a new medicine is included on formulary for a health plan, so the physician is going to have little influence on whether to use a medicine if it's notformulary approved.

How will the UnitedHealthcare decision to give control back to the doctors influence care?

That mostly covers referrals to specialists. I haven't seen anything coming out that says they're going to avoid having restricted formularies, so I don't know that the policy will change prescribing habits. It will change referral patterns and habits for physicians. Most physicians are skeptical of where United is eventually going to go with the decision and are waiting to see how it plays out over time. It will reduce some of the paperwork burden on physicians, for example in the case of patients who call up and say "I'm at the dermatologist's office now, fax over the referral," which is a complete waste of everybody's time. That type of stuff will be reduced to everybody's benefit and acceptance. But, it remains to be seen whether this is a trend. Everybody else in the managed care industry is going to wait and see what happens to UnitedHealthcare financially to see if they can manage utilization and cost by reducing preapprovals.

Several plans are adopting these sorts of policies. Patients like [them] because they have been very frustrated with the paperwork and phone calls. Physicians, of course, are frustrated for the same reasons, so there is likely going to be very good patient and provider acceptance of this, but it remains to be seen whether of not these plans can control utilization within that kind of a model.

What about formulary trends?

Formularies are becoming more and more restrictive. What that means is that insurance plans are getting large-scale contracts with a limited choice of options within a therapeutic class. So many brand names of particular medications will not be available on the improved formulary list. If a physician strongly feels a non-approved medication needs to be prescribed for a patient, oftentimes it will be very difficult for the physician to get it approved, and he or she will be required to write letters and make phone calls if they feel strongly about it. The other big trend is a tiered pricing structure for the patient, where the patient's co-pay is lowest for a generic medication and oftentimes has an intermediate cost for a formulary approved brand name drug and then a significantly higher cost for a non-approved non-formulary drug that a physician wants the patient to have anyway. So a prescription that might be $5 for the generic might require a $35 co-pay for a non-formulary medication. PR