April 23, 2003 -- Drug makers using disease management in state Medicaid programs

Pharmaceutical companies are offering disease management programs to
state Medicaid agencies, in order to get around requirements for deep
discounts to keep their product on Medicaid formularies.


New York Times, April 23, 2003

Drug Makers Expand Their Medicaid Role

By MELODY PETERSEN

A growing number of pharmaceutical companies are offering to take on
prominent public health roles in helping to care for the sickest poor
patients in some states.

Under the agreements, the drug companies create guidelines for treating
Medicaid patients with chronic conditions like asthma and diabetes. The
companies then pay for case workers to help patients follow the guidelines -
for example, by phoning them to remind them of the importance of taking
their medicine regularly and eating properly. The case workers also talk to
the patients' doctors so that care focuses on managing disease rather than
treating an acute event like an asthma attack.

The drug companies say the programs save taxpayers millions of dollars by
keeping Medicaid patients out of the hospital. But critics of the programs
say the drug companies are sponsoring them to persuade state governments to
drop efforts to demand lower drug prices. The critics say there is no proof
that the programs save money, and that states could save far more by
demanding lower prices from the pharmaceutical companies.

For example, independent analysts for the Florida Legislature have told
lawmakers that the state could save $64 million next year if it scrapped its
own program and forced the participating companies to provide greater
discounts instead.

Critics also say that treatment guidelines devised by the drug companies may
rely too heavily on the use of medicines - especially those sold by the
sponsoring company - at the expense of alternatives like diet and exercise.

"This is a Medicaid program that is run the way the drug company wants it
run," said Bernard P. Horn, policy director at the Center for Policy
Alternatives, a nonprofit, nonpartisan group that specializes in state
government issues. "This is one more tactic that these companies are using
to avoid the states' attempts to pay a fair price for drugs."

Florida started the trend in 2001 when it allowed Pfizer to provide the
services and later negotiated similar deals with Bristol-Myers Squibb and
GlaxoSmithKline. More recently, Eli Lilly has set up similar programs at no
cost to taxpayers in Arkansas and Colorado. The drug companies say they are
now talking to many other states, including New York, New Jersey and
Connecticut.

By providing the programs in Florida, the three drug companies avoided the
state's recent requirement that pharmaceutical manufacturers give the state
greater discounts or have their medicines excluded from a new list of
preferred drugs for Medicaid patients.

More than 25 states have created such lists to try to rein in Medicaid drug
costs. Sales of drugs not included on the lists have been shown to swiftly
fall because doctors must get special approval before prescribing them. The
drug companies say that the lists hurt patients by limiting access to
medicines.

By offering the disease management programs, Pfizer got all its products
included on Florida's list, which has quickly paid off. Since the program
started in June 2001, Pfizer has been getting a greater share of the more
than $1.5 billion that Florida spends on Medicaid drugs each year. Last
year, the state's Medicaid program bought $122.4 million of Pfizer
products - a 22.6 percent increase, according to state figures, versus a
14.5 percent increase in Florida's Medicaid drug spending over all.

Those numbers have set off a debate as the program comes up for renewal.

In Florida, analysts at the Office of Program Policy Analysis and Government
Accountability calculated that the state could save $64 million next year by
ending the drug-company program and seeking greater discounts instead.

The analysts showed that in medicine categories where all manufacturers were
forced to provide greater discounts, the cost of medicines purchased had
fallen by more than 20 percent. They said the state could benefit from
similar savings in other categories if all companies were forced to provide
the discounts. The analysts also said that the methodologies the drug
companies were using to calculate savings from the disease management
programs were vague.

State Senator Walter Campbell Jr., a Democrat, said that he believed that
the programs were proving to be a boon to the pharmaceutical companies while
providing no benefit to Florida citizens. "It is just another way for the
state to give away taxpayer dollars," he said.

But the drug companies and Florida Medicaid officials say the programs are
working to save money and improve the health of some of the sickest
patients.

Bob Sharpe, director of Florida's Medicaid program, said he was already
negotiating with the drug makers to extend the programs for another year.
Mr. Sharpe said he believed that Pfizer would be able to show that it saved
the state $15 million in the first year as the company promised to do.
Pfizer and state officials plan to release a report on those savings in
coming weeks.

"These programs not only yield savings but they are an investment in
people," Mr. Sharpe said. "This is something that will save us money year
after year."

Many patients have lost weight, begun exercising or changed their diets, he
said, since Pfizer's program began. The programs are not designed as drug
marketing programs, he said, and do not recommend specific brands of
medicine.

If Pfizer does not meet the $15 million in savings it has guaranteed, the
company will pay the state the difference. But the company says it is
confident it will meet that goal.

"This is great for patients and is a great investment for the health plan,"
said John B. Sory, vice president of Pfizer Health Solutions.

In calculating the savings, Pfizer is allowed to include free medicines -
valued at about $1 million - it provides to clinics caring for Medicaid
patients. It can include the cost of paying for 60 case workers. Also
included will be millions of dollars the state got from the federal
government because of the creation of the disease management programs.

Still, Mr. Sory said, most of the calculation will consist of the health
costs avoided because of better patient care. In a hint of what those
savings may include, Pfizer said that a preliminary review had found that
emergency room visits among asthma patients had fallen 3 percent.

Pfizer executives say that the 22.6 percent increase in sales of the
company's products to Florida last year is similar to sales increases in
other states and is not tied to the disease management services it is
providing.

About 13,000 Florida Medicaid patients who suffer from asthma, diabetes,
hypertension or heart failure are participating in Pfizer's program. The
company reviewed past Medicaid claims to identify patients who were at the
highest risk of being hospitalized. A network of 60 case workers, who are
attached to local hospitals, contacted those patients, urging them to join
the program. The case workers then regularly talk to participants about how
to better manage their condition.

Larry J. Brown, a 44-year-old Gainesville resident who suffers from
diabetes, said he had lost about 80 pounds since beginning Pfizer's program
last year. "They'll make sure you get your medicine on time and everything,"
he said. "I feel a thousand times better."

Gov. Jeb Bush and Henry A. McKinnell, Pfizer's chief executive, agreed that
the drug maker could provide the program in private discussions that began
in 2000, according to Pfizer executives.

Pfizer has been a major supporter of the governor, contributing at least
$120,000 to the state Republican party during Governor Bush's recent
re-election campaign - an amount far greater than its contributions to the
state party in two earlier elections.

Pfizer says it is talking to other states, including New York, where Gov.
George E. Pataki has proposed the creation of a list of preferred Medicaid
drugs, similar to Florida's.

William Van Slyke, a spokesman for the New York State Department of Health,
said that several pharmaceutical companies had offered disease management
services to the state. "It is something we're looking into," he said.

Medicaid officials in New Jersey and Connecticut also said they were talking
to drug companies about the programs. "The manufacturers have all said that
we could control costs without a preferred drug list if we implemented an
intensive disease management program," said Michael P. Starkowski, deputy
commissioner at the Department of Social Services in Connecticut.

Eli Lilly and other drug companies are offering the services at no cost to
some states to show government officials just how much money they could
save.

"We want to be part of a solution," said Tarra D. Ryker, a spokeswoman for
Lilly.

Lilly, which is based in Indianapolis, is spending nearly $1 million in
Colorado for programs for patients with diabetes and schizophrenia, two
conditions that its products treat. The drug company is also paying for a
program for 200 diabetes patients in Arkansas. It says it will not disclose
the cost of that program until this fall when it plans to reveal how much
money it saved.

But some who have studied the programs are skeptical.

In a review of Florida's program by the Henry J. Kaiser Family Foundation,
analysts noted that the drug company programs created a potential conflict
of interest.

"If a competitor's product is proven to be more effective than that of the
manufacturer running the disease management program, will patients receive
the most effective product if it drives market share away from the disease
management sponsor's product?" the report asked.

And Dr. Thomas Bodenheimer, a professor at the University of California at
San Francisco, said the drug makers had so far not been able to prove that
their programs saved money. The companies have been offering the programs,
mostly to health insurers, since the mid-1990's.

Dr. Bodenheimer said that some well-designed disease management programs
offered by other sponsors had been shown to save money, especially for
patients with congestive heart failure or asthma. But so far, he said, the
drug companies have not been able to prove their savings by doing a
statistically valid analysis.

"It is like money down a rat hole," he said.