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18 - Tab 9 PDL

VIEWS: 8 PAGES: 68

									                                IFMC Response to the Iowa Department of Human Services
                            Medical Services with Preferred Drug List - RFP #MED-04-034

Preferred Drug List (PDL) and Supplemental Rebate Program

A. Introduction

   The objective of the Preferred Drug List (PDL) and Supplemental Rebate (SR) Program is
   to obtain the highest quality health care drug-related outcomes for the least amount of
   money. There are several factors to consider in determining success. The after-rebates
   adjusted per member per month (PMPM) cost relative to the drug budget baseline is the
   primary measure. If it declines significantly, some degree of reassurance is warranted, but
   only if the total benefit PMPM cost also declines correspondingly. This is the most
   immediate metric for measuring the consequences of a PDL. However, the behavior of the
   non-drug PMPM cost is a proxy for the quality of healthcare outcomes. A PDL that
   reduces drug costs and results in higher non-drug costs is a failure.

   A PDL based on clinical efficacy should improve or at least maintain the current quality of
   health care. If this is the standard, then DHS acquires an implied obligation to
   subsequently study and report on the effects of the PDL. It is better to plan for this at the
   start rather than reacting to unanticipated adverse effects after the fact.

   A qualified, motivated, and clinically objective P&T committee significantly enhances the
   probability of surpassing expectations. Only an exceptional collection of physicians and
   pharmacists will achieve an optimal outcome.

   We propose to use the federally administered 340B Program as a pricing point of reference
   from which to negotiate SRs. This program requires drug manufacturers to make their
   products available at a substantial discount to qualified entities. On average, these prices
   are usually 35 to 40 percent below average wholesale price and can be discounted 70 to 85
   percent on selected drugs. Finally, we would like to note that generic drugs should not be
   considered immune from SRs. Many generics are quite expensive even after the first six
   months of their exclusivity has expired.

   We believe it is important to summarize our overall philosophy on PDL creation and
   operation. It addresses many questions not specifically posed in the RFP that we feel are
   important for DHS to know about our approach.

   There are many aspects to the creation of a PDL that are worth emphasizing:
    There is no point re-creating the PDL wheel.
    Other states have already gone through the process. We can learn from them. Is there
      any valid reason to repeat subjecting drugs to an intensive consideration process?
    Concentrate on drug categories where states vary widely on preferred choices. Spend
      time with the P&T Committee evaluating why other states reached different
      conclusions.



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                              IFMC Response to the Iowa Department of Human Services
                          Medical Services with Preferred Drug List - RFP #MED-04-034

   Invest time on expensive categories where drugs possess very similar efficacy and
    costs. Drugs that become preferred are ones whose companies offer SRs. If no
    company offers a significant SR then subject the drug with the largest market share to
    PA. These drug companies have the most to lose.
   As DHS discerns the balance between the targeted savings and level of acceptable
    disruption for providers and members (more savings mean more changes), the political
    challenges lying ahead will be more clearly understood. The State of Iowa needs to be
    prepared to withstand the political pressures and headaches that come with
    implementing PDLs in Medicaid Programs. For example, some doctors will threaten
    to quit the Program unless the PDL is abandoned and a few will actually stop
    participating. Iowa‘s PDL will likely be more restrictive in some areas and less in
    others; however, any medically necessary, non-preferred medication will be available
    by means of PA. As long as there are reasonable choices, the PDL/PA programs will
    succeed.
   There is a big difference between treating a member and treating a population. The
    power to predict individual results is modest at best; the capacity to do so at the
    population level of a state Medicaid program is excellent. Two to three choices in
    most (not all) drug categories will adequately treat 70 to 90 percent of all members.
    Subtle differences between drugs only come into play after the initial preferred choices
    have failed.
   At the most basic level of understanding, PDLs and PAs are about exerting influence
    on therapeutic choices. In any given member, if certain criteria are not present, there is
    a pre-defined order commencing on the preferred drug side of the list and proceeding
    into and through the non-preferred region. In other words, if medical necessity does
    not dictate a specific choice, then the order of therapy is predictable. There is a
    considerable amount of savings with maximizing Step Care approaches to therapy.

The effort it takes to create a PDL often tempts its creators to become attached to their
solution; it is easy to think that ―our‖ solution is the best. Although every PDL is different
and in fact unique, there are enough similarities for states to be able to discuss common
characteristics.

The challenge is performing the complicated, integrated medical-pharmacy claims analysis
that proves that the combination of drugs on the preferred list produces not only the most
optimal drug budget, but also the ideal cost/total benefit structure. Various parties have
accomplished these analyses for individual drugs and certain drug categories but no one
has gone through them all.

Although one drug may be 5 to 10 percent relatively more effective than another, the more
important consideration is that any of the available choices works 70 to 80 percent of the
time. When this is true, and it often is, then it makes sense to have as many people as
possible initiate therapy with the most cost-effective agent. The marginally more effective



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                                 IFMC Response to the Iowa Department of Human Services
                             Medical Services with Preferred Drug List - RFP #MED-04-034

   drug is reserved for people failing to respond to the preferred first choice. The vast
   majority of members are satisfied and well controlled on preferred drugs without venturing
   into prior authorized products.

   There are a few important concepts to keep in mind with designing a PDL:
    Many drug categories are stuffed with “me too” drugs, distinguished by minor or
      negligible differences. Choosing on the basis of price is rational. There is a lot of
      subjectivity in establishing the cut-off point between the preferred and non-preferred
      drugs. This is the largest cause of variation in PDLs.
    Generics are almost always preferred. There are exceptions, especially during the first
      six months that a new generic comes onto the market. Several generic manufacturers
      have given supplemental rebates during this time period in exchange for being on the
      PDL.
    Look ahead. A state should never lock itself into an agreement that precludes it from
      directing market share onto the most cost-effective product. Insist on including a
      clause that either allows the state to accept a superior offer in the future or at least one
      that first allows the manufacturer the option to meet or beat it. This work includes
      anticipating the introduction of generics and significant new products before they show
      up on the weekly claims paid report. Knowing what drugs are coming will give
      valuable leverage in dealing with manufacturers for supplemental rebates as
      manufacturers dread losing market share. The quickest way for them to lose market
      share and the corresponding revenue is through preferred drugs list changes. De-listed
      drugs can lose 70 to 90 percent of their market share overnight. Manufacturers will pay
      attention and respond to these changes, especially if the state has an agreement that
      allows for flexibility.
    The state should strategize for the long run. A long-term view is needed to overcome
      some of the big companies that resist offering supplemental rebates. As more and
      more states create PDLs and negotiate supplemental rebates, these companies will lose
      more and more market share. At some point they will negotiate a rebate. Until then,
      maintain a firm position and prior authorize their products to the greatest extent
      possible while preserving access to their drugs when true medical necessity exists.

B. Contractor Responsibilities

   Preferred Drug List and Supplemental Rebate Program

   IFMC is responding to RFP requirements by restating the number and text of the
   requirement in sequence and writing a response immediately after the restated text. The
   restated RFP number and text is displayed in italics and enclosed in a text frame.




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                                  IFMC Response to the Iowa Department of Human Services
                              Medical Services with Preferred Drug List - RFP #MED-04-034


The contractor responsibilities for the Preferred Drug List and Supplemental Rebate program are:
1.   Provide the following services for design, development, implementation and maintenance of the
     Preferred Drug List (PDL). The contractor shall:
        Provide the DHS with a detailed project work plan and timeline within five (5) business days of
         signing the contract. The project work plan shall include the methodology for savings calculations
         including assumptions, associated with the PDL and supplemental rebates.

         The following is a general outline of our PDL work plan and includes discussion
         on how we would arrive at a recommended list of ―preferred‖ drugs. A detailed
         work plan will be available within five business days of signing a contract.

         The cornerstone of the plan is the methodology for calculating savings. We use
         several complementary methods that mutually validate each other. The first
         approach evaluates the per user per month (or quarter, year) cost. This is expressed
         first without rebate considerations. The second level subtracts CMS rebates and
         the third level subtracts supplemental rebates. Next, each PDL category is
         compared to the baseline period adopted prior to the PDL onset. Straight
         difference in savings are then calculated. In the next version, the savings are
         expressed relative to the agreed upon trend line. This is best done at the aggregate
         drug budget level. The projected trend without the PDL needs to account for any
         reimbursement rate changes, average manufacturer price increases, utilization
         trends and product drift. Upcoming products scheduled for release in the next
         twelve months are valuable. Eligibility data does not affect the per user cost
         projections unless there is a shift in the mix of members entering the program.
         Once the projected trend without intervention is agreed upon, the savings model
         can work efficiently. We have included an example of how this report works in
         several key PDL drug categories (see a sample PPI drug category PDL savings
         report at the end of this section in PDL Attachment 01).

         The model used for estimating PDL savings and monitoring progress within
         categories is significantly different than the methodology described above for
         retrospectively calculating net aggregate savings. The forecasting/early results
         model watches two key indicators- percent preferred prescribing and average script
         cost. If the percentage of preferred prescribing does not increase then the PDL is
         doomed. Many of the savings are due to switches to less expensive drugs even
         prior to supplemental rebates. For most drug categories the average script cost
         must go down or likewise the PDL is not effective. For PDL categories affected by
         SRs, the volume of such preferred scripts is monitored, especially the distribution
         of market share between preferred drugs with different levels of rebates in the same
         class since this affects ultimate savings (see the monthly PDL compliance reports
         by drug category at the end of this section in PDL Attachment 02).




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                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    The initial forecasting of savings is done at a script level. Assumptions are
    plugged in and the resulting changes in market share and average unit cost result in
    estimates of approximate dollar savings for each category.

    Cost-effectiveness analyses allow for informed P&T decisions; they do not
    determine them. In a world faced with limited resources there will always be a
    tension between favoring the therapy with the lowest cost-effectiveness ratio and
    adopting the most effective therapy. It is vital that DHS be involved in
    determining whether implicit or explicit decision rules are used in attempting to
    control the drug budget.

   Perform an analysis and clinical review of one year of the Medicaid program's pharmacy claims
    data and drug members within each therapeutic class (including safety and efficacy guidelines as
    compared to others within the class), and use pharmaco-economic modeling to formulate
    recommendations for preferred drug(s) in each class to DHS.

    We have already performed a preliminary analysis of Iowa‘s pharmacy claims
    utilization for the past two years. We did this because we are acutely aware of the
    State‘s pressing needs and tight timelines. We obtained your pharmacy data for
    CY 2002 and CY 2003 (Q1-Q3) by going to the www.cms.gov web site and
    downloading the publicly available state pharmacy data files.

    In prior public statements by State officials, we noted that $7.5 million in savings
    is sought by DHS in SFY 2005. Obviously this figure is subject to change and
    perhaps already has been modified but we did utilize it as the basis for determining
    an initial strategy. Considering your FFP match, we assumed that the state wishes
    to save at least $21 million in total dollars. We have also assumed that you have
    calculated your savings target after subtracting the costs of operating the pharmacy
    PDL and prior authorization. For the sake of this projection, we will call this cost
    $2.5 million annually but of course you will get some Federal matching money.
    Therefore, it will be necessary to save approximately $23.5 million to comfortably
    achieve the objective. For estimation purposes, we have rounded up to allow some
    room for less than expected results in various drug categories, making the savings
    goal $25 million in SFY 05.

    Iowa‘s pre-rebate expenditures through the first three quarters of 2003 was $254
    million, which annualizes to $339 million. However, supplemental materials to the
    RFP released by DHS indicate an expenditure level of $325 million annually (SFY
    04). Assuming this is a pre-rebate figure, we need to save 7.7 percent of that year‘s
    budget to meet the overall savings goal. We have also reasoned that other
    pharmacy interventions such as reimbursement changes represent separate line
    item savings in the budget and that the savings model needs to accommodate these
    recent alterations.



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                                                                                    March 26, 2004
                     IFMC Response to the Iowa Department of Human Services
                 Medical Services with Preferred Drug List - RFP #MED-04-034

The potential PDL savings calculated from analyzing the CY 03 data needs to be
adjusted for the different reimbursement rates occurring in CY 04. After a careful
examination of the utilization data, we have concluded that a savings target
representing approximately 8 percent of a recent year‘s expenditures is quite
realistic even though handicapped with several large dollar, drug category
exclusions. We will complete a formal analysis following contract award.

We retrieved Iowa‘s pharmacy claims data from the CMS website. We used the
first three (3) quarters of 2003 and averaged them to arrive at full year projection.
Potential savings, at this first pass of analysis using Maine drug prices (also from
the CMS website) are approximately $27 million, net of PDL/PA administrative
costs. Please see the next section for more discussion and details on how we
arrived at this projection. Our estimated savings based on our first round of
analysis on Iowa data is displayed at the end of this section in PDL Attachment 03.

There are many factors to consider in arriving at recommendations for preferred
drugs. These include:
· Top dollar drug categories and drugs
· Drug categories with:
   - The greatest number of choices (competition)
   - The greatest variation in price
   - Likely reference drugs also priced the lowest
   - Whose reference drugs are also priced among the highest
   - Most susceptible to fears that new (―better‖) drugs are about to enter the
       market
   - Most affected (at a huge premium) by convenience promotions
· Drugs/drug categories with pre-existing PA criteria readily available (Kaiser
   Permanente—a very successful Cox-2 PA)
· Drugs currently affected by PAs on the Medicaid HMO side
· Drugs/drug categories with PAs operating in the state but not presently
   affecting the Medicaid population (manufacturers fear these while doctors are
   familiar with them)
· Categories most amenable to generic (especially state MAC generics) reference
   drug designation such as enalapril and lisinipril, ACE inhibitors
· Technical requirements for potential PAs
· The number of affected members
· The likelihood of a successful switch

The P&T Committee needs a consolidated way to review the entire drug list in a
reasonable amount of time. They then need to implement their decision ―rules‖ on
the claims processing system.




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                                                                     March 26, 2004
                             IFMC Response to the Iowa Department of Human Services
                         Medical Services with Preferred Drug List - RFP #MED-04-034

    DHS can use P&T Committee recommendations as leverage one final time with
    the drug manufacturers before actually implementing them. Ideally, we prefer to
    receive the final SR offers prior to P&T Committee deliberations. In the end,
    members and physicians will appreciate having the greatest possible degree of
    choices.

    The timeline is only of importance if, by necessity, the review process must occur
    over months to a year. Several states have taken this approach and it works. It is a
    concession to the fact that committee and state have other pressing responsibilities
    and obligations. A drawback to this approach is that potential savings are
    sometimes lost. In some cases the SRs can be tentatively accepted by DHS prior to
    P&T Committee involvement and contingent upon P&T Committee agreement in
    the near or distant future. This enables DHS to bill for SRs retroactive to the initial
    acceptance date as long as the products eventually receive preferred status.
    However, this tack is problematic as it jeopardizes the rebates and further delays
    decision-making, which then magnifies the risk of successfully reducing
    pharmaceutical costs.

   Based on the results of the analyses and by no later than ten (10) business days after the effective
    date of the contract, the contractor shall develop a proposed phase-in schedule for the specific
    therapeutic classes for both an initial PDL, then for adding additional therapeutic classes to the
    PDL that is clinically sound, cost-effective and minimally disruptive to Iowa Medicaid members.

    We will develop a proposed phase-in process for PDL implementation. The
    proposed schedule will be presented to DHS within ten (10) business days of the
    effective contract date.

    The preferred approach is a swift, direct, and intensive one. It includes the
    following steps:
    · Analyze and review each drug relative to other same class medications and
        dissected pertinent peer-review clinical studies.
    · Use Medicaid rebate-adjusted data to compare and contrast relative efficacies,
        cost-effectiveness, adverse events, and adherence rates.
    · Rank practically every class with its constituents, top to bottom, along these
        axes.
    · Determine the clinical superiority, inferiority or equivalence of each agent and
        define specific niches.
    · Watch for new studies that have the potential to shift assessments, to research
        new products, and to determine their impact before they enter the market. In
        the meantime, DHS moves toward a strong position; ready to solicit, analyze,
        negotiate, and decide on SRs.




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                     IFMC Response to the Iowa Department of Human Services
                 Medical Services with Preferred Drug List - RFP #MED-04-034

·   Incorporate SRs into tentative PDL rankings. The summary arguments for
    recommending inclusion or exclusion from the PDL can be conveyed to DHS
    days later. The PDL construction can begin several days after this point.
·   Convene the P&T committee and immediately proceed through all of the drug
    classes in as few closely placed workdays as possible. DHS can then publish a
    solid PDL draft and begin collecting SRs.

Physicians and members would benefit from a swift approach because they have
more time to become familiar with the PDL design and voluntarily comply with the
usage of preferred products on a schedule synchronous with planned visits. This
will earn significant amounts of good will in the provider community. An
unrelenting, intensive approach will also help to reduce negative, outside
influences. There will be time for the Committee to reconvene in order to revise
and expand upon the PA approval/denial criteria.

Prior authorizing some popular brand drugs may be painful in the short term. Over
the long run, however, the state may reap significantly larger SRs. DHS must be
willing to demonstrate its resolve and capacity to persevere despite painful political
pressures. PAs belong to either of two fundamental categories:
· Those designed to restrict non-preferred product usage (use drug A rather than
    drug B)
· Those planned to improve the quality of care by ensuring appropriate member
    selection, dosage level or duration of therapy (use drug A correctly/optimally)

DHS should endeavor to attain a proper balance between these forms of PAs. We
suggest not waiting for high-risk members to initiate contact with the PA program.
First, analyze population data using regression models to arrive at predictors of
impending high-cost members. Second, develop algorithms to identify these
members in the Medicaid population for the purpose of intervention. Third,
research members at high risk of adverse drug events. Finally, single out members
and their providers for attention.

As stated in previous sections, there is a direct relationship between achieving
savings and disruption to members. A higher savings target will mean more
changes to member‘s drug accessibility. However, there are strategies available to
predict what the effect will be on the members for a particular PDL strategy. We
will consult with the P&T committee and DHS to discern this impact.

There are many factors relevant and instrumental to the financial, clinical and
political success of the PDL. Most drug budgets have ample areas of opportunity.
As long as the desired magnitude of savings is less than the sum of all the savings
opportunities available by way of well-studied interventions, then it will be
possible to design a successful PDL. Reasonable savings goals allow the optimal


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                      IFMC Response to the Iowa Department of Human Services
                  Medical Services with Preferred Drug List - RFP #MED-04-034

blend of PDL design and operational factors such as those mentioned above. This
allows DHS to continue building on early successful stages and realize greater
degrees of savings in the future.

Grand-Fathering

―Grand-fathering‖, both as a concept and a readily available tool, is desirable to
minimize potentially dangerous interruptions in drug regimens. At the same time,
its actual application must be severely limited or the readily available savings will
never be fully realized.

Prior experiences in other states have repeatedly demonstrated resistance from a
variety of strong lobbies. Advocates include representatives for the Native
Americans, children, institutionalized, HIV, and the mentally ill.

Most states have considered and in some cases granted exclusions or exemptions to
established users of the following drug classes:
· Antiretrovirals
· Oral contraceptives
· Antineoplastics
· Antipsychotics
· Antidepressants

From a different perspective, other states have considered granting exemptions by
demographic characteristics such as:
· Children
· Elderly
· Institutionalized setting
· Ethnic status

Across most states, 0 to 18 year olds comprise nearly 50 percent of the member
base but use only 10 to 15 percent of the drug budget. Therefore, most states can
be very liberal about granting most prior authorization exemptions to children and
risk a small loss of savings. On the other hand, the aged (older than 60 years of
age), comprise approximately 10 to 15 percent of all members and account for
nearly 30 percent of the drug budget. The nursing home, SSI and SOBRA aged
and disabled members represent 25 to 30 percent of the average State Medicaid
Program but tax resources by consuming 60 to 65 percent of the funding. This is
where the most savings must be extracted. Grand-fathering must be limited as
much as possible while remaining consistent with standards of appropriate clinical
care.




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                                                                      March 26, 2004
                      IFMC Response to the Iowa Department of Human Services
                  Medical Services with Preferred Drug List - RFP #MED-04-034

In other states, including Maine, the institutionalized elderly are exempted from
several prior authorizations. For example, the elderly are more susceptible to the
sedative side effects of antihistamines. The Beer‘s List recommends that elderly
avoid these drugs; therefore, this group is exempt from needing prior authorization
to access non-sedating antihistamines. Another example is Oxycontin. Abuse is
much less of an issue in institutional settings, so prior authorization is not required.
Members being treated for cancer are also exempted by means of a diagnostic code
and Pro-DUR edit process. Another common type of grand-fathering concerns the
Cox-2 agents. Many states and HMO‘s have exempted the over 60 year-old
population from PA requirements for this drug class because studies have shown
that they are at sufficiently high risk by virtue of their age.

In order to help reduce the PA burden on members and physicians, the pharmacy
claims processing system can be programmed to recognize other high-risk groups
on the basis of specific concurrent drugs such as warfarin and steroids in
medication profiles and permit adjudication without prior approval. This is an
extremely important point since it is crucial to operating a cost-effective PDL/PA
program. We will establish a positive working relationship with the new IME
MMIS and POS vendors to implement overrides such as these.

The greatest potential savings are with the members who use drugs for long spans
of time. The longer they are on a preferred product the more the savings. If the
member successfully makes the switch to a preferred product, the state collects the
―residuals‖(savings) for years. Therefore, it is preferable to restrict the use of
grand-fathering to only the situations that are clinically warranted.

One alternative method to grand-fathering involves utilizing variable
implementation dates for different populations. While it may be arguable whether
or not switching from one non-preferred to a preferred drug involves significant
risk, the state would not appreciate having to defend the tenuous practice of
requiring members to change 3 to 5 drugs simultaneously. In order to avoid or at
least minimize this situation, the prior authorizations could be implemented on a
slower schedule for the populations most severely affected. For example the start
date for a Proton Pump Inhibitor PA could begin on July 1, 2004, for members less
than 65 years of age and October 1, 2004, for those over 65 years of age. This
would allow the affected members and their physicians more time for equilibration
from the required drug substitutions.

Another variable implementation date possibility, dependent upon the
programming capability of the claims processor, allows the member to avoid being
subject to a second prior authorization drug until at least thirty (30) (or any
specified number of) days has elapsed. This type of edit would search for a prior
authorization number within the specified time frame and if found, allow a prior


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                     IFMC Response to the Iowa Department of Human Services
                 Medical Services with Preferred Drug List - RFP #MED-04-034

authorization override for a one month prescription. The next fill/refill will re-
encounter the PA edit and not allow an override unless the member obtained a PA
approval for another drug in the interim.

Phasing in All Classes of Drugs

The key components to successfully phasing in a PDL with its attendant prior
authorizations require time and educational efforts. Members, prescribers,
pharmacists, and the claims processor will need to learn how to accommodate the
new PDLs and associated PAs.

Members need to be notified that their pharmacy benefit is being modified.

Prescribers and pharmacists need to be educated in great detail. They have to be
instructed in what the PDL is and how to go about obtaining non-preferred
products through the PA process. They need to be taught the PA criteria and which
populations or physicians are exempted or excluded. Everyone needs to know
about seventy-two (72)-hour emergency fills, especially the pharmacies that will
have to use the correct overrides. There has to be a process to collect, review and
respond to comments from affected and interested parties. Frequent updates must
be sent to prescribers and stores by letter, facsimile, email and especially by
posting on a devoted website. Special attention must be paid to nursing home
pharmacies and IV therapy companies.

The drug claims processor must test the PA and assorted edits beforehand. They
must be able to accommodate titration overrides. Step care algorithms must be
clearly communicated to minimize PA volume.

We recommend a successful PDL transition strategy we have used previously:
After creating a PDL, generate a selected prescribers report that highlights which
members are on non-preferred drugs categorizing those that appear to need a
switch to preferred choices and those that appear to need PAs. Prescribers can use
the information to switch members ahead of time or as preparation for a planned
office visit in the next three months. We can supply a nursing facility version to
the members‘ pharmacy provider. Pharmacies are especially proficient at
conversions if given two months notice.

Before arriving at an actual implementation timeline we need to research what the
P&T Committee recently attempted and plan in tandem with them and DHS, a new
implementation strategy. The following suggested PDL timeline represents a
typical phasing process and starts primarily with classes already reviewed since
they will require the least rework after SRs are obtained. These timelines are very
malleable and can be adjusted to accommodate a more urgent plan.


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                 Medical Services with Preferred Drug List - RFP #MED-04-034

The first mailing to members, prescribers, and pharmacies will include:
· Effective date of first wave
· PDL pocket reference guide
· Information regarding substations to preferred drugs or PA

In addition to the mailing we will post information on the website and arrange
several open meetings to provide information and solicit comments. During the
first wave we recommend the PDL be available via e-Pocrates palm device.

Mailing 1: Mail a complete PDL to members, prescribers, and pharmacies. The
First Wave takes effect in two to three months. For this initial set of preferred
drugs, those affected will need to take preferred drugs or obtain PAs within this
time period. Begin planning on other substitutions or PAs for the other four PDL
waves. Solicit comments to aid in revising criteria. Post information on the
website. Mail a pocket reference PDL guide. We strongly recommend making the
PDL available via the e-Pocrates palm device. Arrange several open meetings.
Implement the PAs on a staggered schedule to avoid overwhelming the stores.

                  First Wave Implementation Timeline
        Day        Drug Type
                   Antifungals
                   ACE Inhibitors/ARB‘s/hypotensives
                   Beta adrenergics
                   Beta Blockers
        1-60
                   Calcium Channel Blockers
                   Diuretics
                   Gastric secretion reducers/Proton Pump Inhibitors
                   Lipotropics
                   Brand NSAIDs/Cox-2 agents
                   Cephalosporins
                   Narcotics
       61-90       Botox
                   Low/nonsedating antihistamines
                   Sympathomimetics
                   HMG coA Reductase inhibitors

The second mailing will emphasize the Second Wave implementation schedule.
The PDL team will use lessons learned during the First Wave to enlist
interventions for the Second Wave’s successful implementation.




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                     IFMC Response to the Iowa Department of Human Services
                 Medical Services with Preferred Drug List - RFP #MED-04-034



               Second Wave Implementation Timeline
        Day      Drug Type
                 Antidiabetics
                 Inhaled steroids
                 Nasal steroids
                 Leukotriene inhibitors
                 Antianginals
      91 – 120   Contraceptives
                 Hematopoietic Agents (EPO)
                 Platelet aggregation inhibitors
                 Migraine drugs
                 Sedative-hypnotics
                 Hormone Replacement Therapies

The third mailing will include information regarding:
· Effective dates for Third, Fourth, and Fifth Waves
· Third, Fourth, and Fifth Wave drug types
· Previous revisions

During each wave we will solicit comments to ensure a successful PDL
implementation.

               Third Wave Implementation Timeline
        Day      Drug Type
                 Other Antibiotics
                 Antivirals
                 Miscellaneous Narcotics
     121 – 150   Osteoporosis drugs
                 5-HT3 Receptor Antagonists
                 Smoking deterrents
                 Urinary antispasmodics




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                    Fourth Wave Implementation Timeline
              Day     Drug Type
                      Antidementia
                      Anticonvulsants-Off-label use
                      Hepatitis B and C drugs
                      Hemophilia
          151 – 180
                      Anticoagulants (Lovenox and others)
                      Multiple Sclerosis
                      RA drugs (Enbrel, Arava, etc…)
                      Other Endocrine drugs- GH, thyroid

                    Fifth Wave Implementation Timeline
              Day     Drug Type
                      Antiarrhythmics
                      Other Analgesics
                      Assorted GI agents- enzymes, Crohns disease
                      Parkinson drugs
          181 – 210   Musculoskeletal drugs
                      Immunosuppresives
                      Ophthalmics
                      Topicals
                      Miscellaneous drugs

   With DHS approval incorporate the review of these therapeutic classes at subsequent
    Pharmaceutical and Therapeutics (P&T) Committee meetings and respond to questions from the
    Committee. The contractor shall include documentation of monographs, supplemental rebate
    negotiations, and savings information for each therapeutic class. The contractor shall provide
    supplemental rebate information in a format agreed to DHS. In addition, the contractor shall
    perform and include documentation of benchmark analyses for financial and clinical outcomes to
    monitor trends, and shall provide program recommendations to improve clinical and financial
    outcomes.

    Rather than be overly repetitive, we direct you to our discussion provided later in
    this section for a description of what will be provided in the way of cost and
    clinical data to the P&T committee. The materials provided shall be thoroughly
    documented and in the format sought by DHS. There are many worthwhile
    baseline and benchmark analyses that may serve to guide both DHS‘ and the
    committee‘s decision making.

    As discussed later, it is wise and proactive to choose a set of financial and clinical
    outcomes, prior to the onset of the PDL, that will attest to the both the success and
    safety of the program. At the very least, office visits, emergency department visits,
    and hospitalization rate trends should be followed closely, at both the aggregate


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    level and at the diagnosis level. The diagnosis level is important to deal with major
    PDL categories like the Cox-2 agents. If fewer people will be taking these drugs
    then it will be necessary to prove that Upper GI bleeding rates do not increase. If
    fewer members are taking a brand name ACE inhibitor, it will be useful to show
    that hospitalizations do not increase for CHF, hypertensive urgency or related side
    effects. Other potential outcomes relate to using the PDL as a platform to increase
    the utilization of drugs in specific categories for specific conditions in order to
    reduce hospitalizations and non-drug related health expenditures. This valuable
    PDL information may be usable for defending challenges to PDL decisions.

    GHS regularly performs studies to assist in its ability of predicting the effect PDL
    decisions will have on the member population, with the goal to confirm that a PA
    will not have an adverse effect on health outcomes. One such study in particular, a
    generic substitution analyses between Cox-2 and NSAIDs, was very helpful in
    assuring physicians that the PA approach selected by the P&T Committee would
    actually benefit the population. See PDL Attachment 04 for additional
    information.

   When two or more drugs within a therapeutic class have equal effectiveness and therapeutic value,
    review the drugs on a cost basis to formulate recommendations to DHS.

    When two or more drugs within a drug class are felt to have equal effectiveness
    and clinical value, they shall be evaluated on a cost basis as specified in the RFP.
    Since the definition of equal effectiveness and therapeutic value requires some
    clinical interpretation, the process we follow will be briefly described. This also
    appears to be the best section to address how to handle drugs that are not equally
    effective and vary considerably in cost. This is very important to the success of the
    PDL. Physicians will always prefer even a marginally superior drug if there is no
    cost consequence. If they are aware of the price differences prior to the clinical
    PDL decision, they will make a clinical recommendation tempered by its relative
    value.

    Reference Drugs

    As we discuss throughout our proposal, there are several different strategies to
    establishing a PDL. Florida and Michigan‘s methods and the advantages and
    disadvantages of each are briefly discussed in this section as well as our
    suggestions for incorporating them into Iowa‘s program.

    Florida‘s PDL was primarily a cost based model. PDL status was assured if a
    predetermined fixed percent supplemental rebate was offered. It was not a
    clinically driven model. An advantage of a model such as this is its simplicity.




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Disadvantages included not being clinically based and rebates that were not aligned
with therapeutic values. Many higher rebate opportunities were ignored.

The Michigan model is built on the ―reference drug‖ (RD) concept. In this model,
the ―best‖ drug in the class is identified and the supplemental rebates are primarily
derived from the products priced higher than this ―best‖ RD. This leads to superior
but variable rebates on products priced higher than the RD but correspondingly
lower rebates on those priced lower than the RD.

Besides not receiving rebates on some drugs, another disadvantage quickly became
apparent. Several prominent, large manufacturers declined to participate. Many
companies feel less threatened by the simpler, fixed percentage rebates. The
reason is simple—everyone is treated alike, so no one competitor gains any
advantage. If everyone participates, everyone‘s market share remains the same.
The Michigan model, on the other hand, drastically changes the rules of the game.
It attempts to pay everyone the same price for a unit of product. Some companies
are winners—their products maintain the same profit margin. Other companies
would see theirs slashed. Adding to the volatility of this exercise is the risk of
losing market share at the same time that they reduce their profit margins.

There are two critical elements determining the success and magnitude of savings
with the RD approach:
· The market share of the RD
· The number of significant market share drugs priced above or below the RD

The state will collect most of its savings from the drugs priced higher than the RD.
RDs that coincidentally are also ―best priced‖ will maximize supplemental rebates
because there are only higher priced drugs, which will all get discounted with
rebates. Reference drug designation is the most significant determinant of the
extent of savings. If the RDs are skewed toward the higher price ends of their drug
classes then it would have been wiser to pursue fixed percentage rebates.

The other major problem is collecting a supplemental rebate on the RD. If the RD
is on the expensive side and it already has a large market share, then the state
concedes a huge source of revenue. Recall the variability in PDLs across the
country. Your RD is someone else‘s non-reference drug. Other states and HMO‘s
are collecting good-sized supplemental rebates on the RDs that you consider well-
priced.

Despite the limitations imposed by an RD framework, it remains the soundest
approach. The RD methodology will best serve the state if it is used as a flexible
guideline rather than a dogmatic requirement. We propose a hybrid of the cost-
and clinical-based models. If there is an unequivocal ―best‖ drug in a class then it


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    will be designated as the RD. If there is no clear consensus then the most cost-
    effective choice or choices will be used as the baseline instead. Supplemental
    rebates are calculated using the drug‘s price difference from the RD or the baseline
    drug(s). This reconciliation of two successful but somewhat flawed strategies
    should maximize the state‘s supplemental rebates and resultant savings.

    The following summarizes the our proposed RD model:

                                     Reference Drug Model
    ·    Wherever possible choose a RD in each drug class
    ·    If not possible choose the most cost-effective drug(s) as the baseline drug (BD)
    ·    If neither of the above is possible (i.e. there is no RD and all the choices are
         tightly priced together) then seek fixed percentage rebates on all drugs in the
         class
    ·    At the very least, collect a lesser fixed percent rebate on all the RDs and insert
         a clause entitling the state to a higher supplemental rebate contingent upon
         volume increases

    GHS recently performed a reference drug comparison in the statin class. We took
    advantage of a published cholesterol reduction study to incorporate rebates and
    negotiate for rebates. We were able to establish how much Medicaid programs
    spend for the same amount of clinical result, finding less expensive drugs that
    provide the same clinical outcomes. We would be able to provide this study or
    perform others for DHS. (See PDL Attachment 05 for additional information.)

   Develop a strategy to merge current prior authorization guidelines into the PDL program.

    We are aware of all the pharmacy prior authorizations and guidelines listed in
    Human Services Chapter 78 and have reviewed them thoroughly. They are
    extremely detailed and comprehensive. A strategy has been developed to update,
    modify and merge these guidelines into the PDL including the following thoughts:
    · Since weight-loss medicines are minimally effective over the long term and
        optional, this may be suitable for non-coverage again
    · Supplemental rebates obtained on stimulants will still require the same PA
        criteria
    · Stimulants being sought for non-mental illness indications are potentially
        subject to new criteria on the PDL
    · Restrictions on some currently prior authorized drugs may be suitable for
        removal since the prices are quite low, are getting lower due to the MAC
        formula adjustment and the cost/benefit ratio for PA is becoming unfavorable
        (example-H2-receptor antagonists)




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·   The requirement to fail on H2-blockers before proceeding to the proton pump
    inhibitors has been very successful and should be continued. Many states have
    no such requirement and consequently have many more members on expensive
    PPI‘s than cheap H2-blockers. Iowa has more people on H2-blockers than
    PPI‘s and has been saving millions of dollars annually with this strategy.
·   The NSAID criteria are similarly well designed and effective
·   The growth hormone criteria need to reflect some recent literature. This PA
    category usually draws SR bids (like EPO products) and when you collect SRs
    on prior authorized drugs you generally need to accommodate all of the FDA-
    approved indications as a starting point.
·   Although there was a tentative P&T meeting January 8 to address the
    low/nonsedating antihistamines we are unaware of any published
    recommendations on this class. The OTC versions of Claritin available are
    quite inexpensive and becoming more so. The current PA criteria need to be
    revisited as part of the PDL process. The end result may be requiring failure
    on traditional antihistamines and the OTC loratidines before proceeding to
    other single source low/nonsedating brands. This provides a good example to
    discuss transition from PA with the current vendor and PA with the winning
    PDL/PA contractor. If the OTC product was to become preferred, then the new
    criteria would be developed, published with an implementation date and the old
    form would be pulled back from the existing vendor and the new form and
    criteria would instead be available on the new contractors web site (or via
    facsimile/mailings etc…). A version of the PDL would be published on the
    web and mailed that would provide all the most common criteria necessary for
    prior authorization requests. Since many non-preferred drugs can be handled
    with a generic PA form it is important to provide a complete yet concise listing
    of the PDL that describes the pertinent criteria for as many of the drugs as
    possible.
·   Erectile dysfunction drugs—other states are dropping the covered quantity
    down to one or two per month
·   Oral antifungals—would recommend considering adding laboratory proof of
    fungal infection since clinical exam can be wrong 50 percent of the time with
    respect to onychomycosis and not allowing any non-prior authorized use for
    any time period for Lamisil or Sporanox.
·   5-HT1 receptor agonists—consider reducing allowed thresholds to 10 to 12
    units per month and in parallel aggressively promote the wider use of first line
    prophylactic medications for anyone having more than two (2) treated
    headaches per week.




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    ·   Palivizumab—this drug in particular is susceptible to hazy interpretation by the
        PA pharmacists. Submitting doctors push the envelope on trying to use this
        drug in populations not really meeting the criteria. For example, our audits in
        this area showed many inappropriate approvals for infants with physiologically
        insignificant cardiac defects (like a small VSD or ASD). Iowa spent $2.7
        million on this drug which is significantly more than would be expected.

   Consider expanding coverage of nonprescription drugs and including on the PDL as preferred
    agents when they are determined to be cost-effective. This includes establishing the reimbursement
    rate as set forth in state law.

    The selective coverage of nonprescription drugs is a wonderful tool for the PDL.
    This has already been discussed elsewhere so only a brief review is needed. The
    P&T Committee already saw the value of OTC Prilosec. It is of immense value
    because any brand Prilosec or generic omeprazole users that switch over save
    several dollars per member per day and because it serves as leverage in inducing
    superior rebates on the remaining preferred PPI choice(s). A similar opportunity is
    also present with OTC Claritin. Hopefully these opportunities will continue to
    surface and be seized.

    Our OTC management practice is to monitor the market and present pertinent
    information to DHS and the Committee and then develop a strategy for
    incorporating cost-effective OTC medications in the formulary. We have had very
    positive results through this practice. Our clinical staff continually researches and
    monitors the market for appropriate OTC inclusion. We would always recommend
    covering OTC‘s that are cost effective, thereby reducing the utilization of more
    expensive products. The biggest problem usually relates to covering the most cost-
    effective package sizes and accommodating the larger day supplies. The
    reimbursement rates will be factored in and established according to state law.

   Include on the PDL those "preferred drugs" recommended by the P&T Committee and confirmed by
    DHS.

    This is a very important activity. We will include preferred drugs on the PDL
    which have been recommended by the P&T Committee and confirmed by DHS.
    This implies that DHS may at some time exercise its authority to not accept
    specific recommendations. This is an important right to reserve because it is
    essential to be able to protect the viability of the Medicaid Program. Committees
    are comprised of people with areas of expertise that are strong in some parts of the
    PDL and weak in others. Attendance at P&T Committee meetings may also affect
    key votes depending on whether the leader in that area is present. Less than ideal
    results can and do happen and DHS needs a way to rectify any problem that may
    occur.



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   Subject to DHS approval, establish written criteria and a prior authorization process for obtaining
    the "non-preferred" drugs.

    We know that the PA process is changing. The prescriber is becoming involved at
    the onset and is the party responsible for submitting the PA. DHS will need to
    approve the criteria for approval and the precise process for obtaining non-
    preferred drugs. Other states have required the submission of paper PA forms
    either by mail or facsimile, preferably by facsimile in order to speed access to
    decisions and medicines. In urgent situations telephone requests are honored.
    Since a successful PDL requires a higher standard of evidence for approvals,
    written PA forms with explicit criteria, including needed chart documentation, is
    the norm. Requests for additional information can be expressed by telephone the
    same day if the prescriber is available or by written/facsimile response if not
    available by telephone.

    As described throughout these PDL sections, we will develop written PA criteria
    and PA processes for obtaining non-preferred drugs. We understand that DHS
    must approve these processes.

   Ensure that the PDL program includes provisions for:
    a) The dispensing of a 72-hour emergency supply and/or a 30 day supply of the prescribed drug
        and a dispensing fee to be paid to the pharmacy for such a supply, in accordance with policies
        established by DHS.
    b) Responses by telephone or other telecommunications device within 24 hours of a request for
        prior authorization;
    c) Consumer and provider education, training and information regarding before and after
        implementation of the PDL program, which shall include telephone and website access to
        information.

    Overrides

    The Prior Authorization process will be compliant and will remain compliant with
    all Federal and state laws and regulations. OBRA ‗90 stipulates that a response to
    a complete PA request must occur within twenty-four hours and that, except for
    non-covered drugs, a seventy-two hour supply of medication must be provided in
    emergency situations. As noted above, we have and will continue to devote all
    resources necessary to maintain the efficient performance of our PA processing
    system.

    It is a standard practice to include override-options for non-preferred drugs. With
    our guidance, the P&T Committee and DHS can establish the policies for these
    overrides as otherwise they can become prone to misuse for obtaining non-
    preferred drugs. Overrides include seventy-two (72)-hour emergency supplies and
    thirty (30)-day supplies. Implementation of these overrides is usually initiated by a
    data feed from the PDL database, which we would provide, to the POS system.


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    The POS vendor would be responsible to creating the logic to handle such
    overrides.

    Turn Around Times for Completed PA Requests

    Federal law and State Medicaid rules require the timely consideration of all PA
    requests within twenty-four (24) hours. We are aware of the paramount
    importance of always meeting these requirements. Responses will be made by
    facsimile, telephone, and in writing so that determinations are conveyed in the
    timely manner demanded by law. We will perform all of the necessary monitoring
    in order to continually verify turn around times.

    We will meet the performance requirement that all determinations must be made
    within twenty-four (24) hours of a complete PA request. Our PA help desk will be
    responsible for responding to these requests. They respond via telephone,
    facsimile, email, and mail.

    Member and Provider Access to Information

    The PDL program will provide both telephonic and web-based access to
    information about the ongoing efforts including member and provider education
    and more formal training opportunities.

    As described elsewhere, we will proactively provide information to prescribers,
    pharmacists, and members, periodically communicating with them about upcoming
    changes to the PDL and to follow-up with past changes. We have unique strategies
    that disseminate information to targeted populations via specialized analysis; we
    are able to notify specific prescribers about upcoming PDL changes and members
    that may be affected. This allows physicians to initiate drug regimen changes with
    their members before a PDL restriction come into effect. Our PA help desk
    technicians and pharmacists are available via telephone and email to respond to
    PDL-related inquiries. We also will have PDL information available on our
    website. Member specific information (personal health information or PHI) would
    not be available via the web, in compliance with HIPAA requirements.

   Ensure that Medicaid providers have accurate, timely and complete information about all drugs on
    the PDL; the Contractor shall make this information available through various sources, such as
    written materials and on the Internet. The minimum notification to providers is thirty (30) days
    prior to implementation.

    Accurate, complete, and timely information on the PDL for all providers is vital for
    success. This is our standard practice to facilitate and dampen the volume of
    unnecessary PAs from ill-informed providers. We utilize electronic and paper
    newsletters, email, facsimile, and mail. All of this information will also be


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    prominently posted on the website. All public disseminations will be approved by
    DHS and will follow DHS‘ minimum notification timeframe policies of thirty (30)
    days.

    In certain situations, such as positive additions to the PDL after implementation,
    drugs can be become preferred with simultaneous notification. In this case,
    dispersed information would not meet the thirty (30)-day requirement. We would
    violate the information dispersion timelines only upon written request from DHS.
    Any changes to the PDL will be highlighted in a section devoted to interim
    changes.

   Receive monthly claims files from the DHS contractor(s) to support evaluation and management of
    the PDL program.

    Monthly claims analysis will be an important part of evaluating whether the PDL
    strategies are working. As stated in other sections, the PDL is a dynamic structure;
    it must be able to shift and adjust to prescribing practices, new drugs, and
    fluctuations in drug pricing. Analysis of drug category expenditures and trends
    will be valuable information in discerning necessary PDL changes.

    Monthly pharmacy claims extracts will be obtained monthly from DHS‘ POS
    contractor. These extracts will enable us to perform the many elements of
    evaluation and management critical to the well being of this program.

   After the PDL is implemented, the Contractor will support the management and coordination of all
    activities related to the maintenance of the PDL, including presentation of ongoing efforts to DHS
    and the P&T Committee as appropriate. Activities include but are not limited to the following:
    a) Clinical review of new name brand drugs for clinical safety and efficacy as well as a cost
         analysis.
    b) Clinical review of new generic drugs for clinical safety and efficacy as well as a cost analysis.
    c) Clinical review and cost analysis of existing drugs for new indications or changes to
         indications
    d) Review of new product forms and strengths and associated cost analysis
    e) Development of and changes to criteria based on new information
    f) The contractor shall perform ongoing analysis and clinical reviews of the State of Iowa Medicaid
         pharmacy claims history and shall conduct a review and cost analysis of each therapeutic class
         at least one time per calendar year.

    The creation of the initial PDL does not mean that the Committee‘s work is
    complete. The following scenarios may require further action:
    · Drugs become unavailable due to shortages or discontinuation
    · New products and new forms enter the market incessantly and require prompt
       attention
    · Generics become available but are often financially unattractive initially
    · New FDA approved indications appear often and necessitate revisions of
       existing criteria



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·   Warnings are released on drugs and corresponding alterations must be made in
    the PDL
·   Prices drop and prices increase (mostly)
·   Companies come to the table late and negotiations begin anew
·   Especially in the first few months, updates and revisions seem to occur on a
    daily basis

PDLs (and formularies) and their enforcers, the prior authorizations, must evolve
over time or become obsolete. Criteria must be constantly revisited and revised.

PDLs are not meant to be static entities. Although consistency and stability over
time are desirable from the physician and member points of view, the trade-off is a
measurably significant loss of budgetary control. The state will need to exercise
strong oversight in deciding how to balance these opposing factors.

We suggest several standing procedures to help automate the maintenance process
and minimize losses due to inaction or procrastination. First, all new products are
automatically non-preferred, unless covered by an existing agreement until they are
reviewed at the next P&T Committee meeting. This gets the drug company‘s
attention. Second, new generics are priced compared to the after-rebate cost of the
brand and only made preferred if less expensive.

The proposed mechanics of the maintenance process and the criteria for
consideration by the P&T Committee for the addition or deletion of drugs to/from
the PDL can be conceptualized in the following three steps. In addition to abiding
by the Iowa P&T Committee‘s bylaws, we have incorporated the requirements
suggested in the Federal Medicaid regulations regarding deliberations for
formularies, which entails a stricter standard. Naturally we would amend the
proposed processes as necessary.

Step 1.   We will prepare material for distribution to Committee members
          commenting on efficacy, therapeutic benefits, and current peer-reviewed,
          evidence-based literature.

          The Committee will arrange for specialty providers, as appropriate, to
          comment on this written material. We will classify the drug(s) under
          consideration into one of three categories, described below, which shall
          trigger a predetermined procedure. According to the Iowa bylaws, the
          Committee shall review that determination and after review of the
          available material, may change the determination by a majority of a
          quorum. One potential framework is the following in which drugs are




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characterized relative to the reference drug or baseline drug as the case
may be. This process is described as an ongoing routine, not as a one-
time intervention.

Category A: Highly Desirable and Affordable Additions

Therapeutic benefit and no projected fiscal impact
Approval for drugs with no fiscal impact as defined herein shall be
submitted to the next meeting of the P&T Committee and shall be
automatically recommended for addition to the PDL. No projected fiscal
impact is defined as follows.

Reimbursement for the drug at the lowest adult daily dose for the primary
indication will be compared to the average costs of the lowest adult daily
dose for drugs within the same class, weighted by utilization for each
drug within that class for the prior quarter. No consideration should be
given to a recommended course of therapy, improved compliance, or
other similar component for drugs in this category.

For combination drugs, the billed amount should be less than the
combined prices of its components to have no fiscal impact.

Category B: Desirable but affordable?

Therapeutic benefit and a projected fiscal impact
Therapeutic benefit is defined as clinically (not pharmacologically) more
effective drug and/or a less toxic drug than alternative therapies currently
on the PDL. A drug for which the sole advantage is convenience or
compliance is not considered to have a therapeutic benefit.

The clinician assigned to a particular drug will address the therapeutic
benefit through his or her review. The Committee will make the final
determination.

Drugs with an estimated fiscal impact would normally be conceptualized
as only being added to the PDL in either of two ways with:

 i.   A specific appropriation of funds from the state or
ii.   A deletion (non-preferred designation) of other drugs from the PDL
      to maintain budget neutrality.




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          The therapeutic benefit of the drug being considered should be weighed
          against the therapeutic benefit of drugs already on the PDL. If the value
          of the drug under consideration is not thought to be great enough to
          justify an offsetting deletion and if no funds are appropriated for the
          addition, the drug shall be put on a pending list of drugs to be added to
          the PDL once funds become available.

          Category C: Undesirable and Unaffordable

          No therapeutic benefit and a projected fiscal impact
          Drugs that are determined to be of no therapeutic benefit which have a
          projected fiscal impact shall not be added to the PDL. Such drugs would
          be available only through the prior authorization process to the extent
          necessary for a specific individual.

Step 2.   At the conclusion of discussion of all drugs being considered at a
          meeting, the Committee members shall vote as specified in the Bylaws.
          The chairperson will tally the votes and announce the Committee's
          preliminary determination.

Step 3.   After a comment period has expired, the Committee shall review any
          comments and take a final vote on the addition or deletion of any drugs.
          Any preliminary or final determination by the Committee requires a two-
          thirds majority vote of the members present. Inclusion of a drug on the
          PDL will automatically include all conventional dosage forms of that
          drug, with the exception of transdermal systems, sustained release and
          injectable dosage forms, unless specifically approved by the P&T
          Committee.

DHS will need to exercise strong oversight in deciding how to reach final decisions
that will yield the desired budgetary savings.

Every therapeutic class will be reviewed at least once annually. Supplemental
contracts may run from one to three years but it is worthwhile for many reasons to
re-analyze the PDL completely each year. Expectations in each category should be
reviewed. Were they met? What lessons can be learned? Is there a different
approach possible this year for under performing areas? Can successful categories
be tightened further? If the category is problematic, is it due to incorrect
assumptions (excessive switching failures) or faulty execution (PA criteria not
being applied properly)?




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2.   Represent DHS in public relations matters and coordinate with other agencies, groups, boards and
     individuals regarding the program at the request of DHS. Such consulting may include, but not
     necessarily be limited to:
         Preparing draft written responses or assisting the DHS in responding to inquiries from providers
          and other interested parties concerning the PDL.

         Implementing a PDL requires soliciting and responding to input from various
         sources: prescribers, pharmacies, manufacturers, and members. We understand
         that during the development, implementation, and operation phases of the PDL,
         these various sources are going to have PDL-related inquiries. It is to the benefit
         of the PDL process and all associated parties, and ultimately to meeting the drug
         savings target to respond to inquiries with accurate and timely information. It
         makes sense that the PDL contractor assist DHS in these responses. It is our
         current practice in to have our Medical Director, PA pharmacists, and
         administrative staff available to respond to inquiries via email, telephone, and mail.

         We understand from experience that there will be a nearly overwhelming interest
         in the PDL. The state will need assistance coping with this initial blitz. Many
         questions will be posed that will command rapid responses. Some questions raised
         will be rhetorical and though not needing to be answered per se in writing, will
         need to be addressed with action. The prime example of this issue is when
         providers ask who is responsible for member injuries allegedly due to adverse drug
         switches. Another common theme will be an accusation of a lack of
         implementation time allowed. However slow the process is phased in, it will be
         too fast in the eyes of these providers. Other letters will question the motives of
         the PDL/PA contractor after hearing rumors that they are being paid per PA or per
         denial. Many letters will decry a perceived lack of input and public comment.
         Some parties will ask for exceptions; they will want specific groups excluded.
         Nursing home providers may ask for special treatment. Some doctors will ask
         about exceptions for members discharged home from hospitals. Members will call
         and ask about PDL issues related to out of state travel. Many providers will argue
         that pharmacy savings will be needed to pay for increased utilization of office and
         emergency room visits and hospitalizations. They will ask for an independent
         study of the issue.

         DHS needs to have a plan for addressing these common themes as soon as
         possible. We already possess answer templates for dealing with these and many
         other thorny queries.




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        Orally presenting the PDL process or otherwise informing various DHS personnel and designees
         including but not limited to the legislature, provider groups or associations, other state agencies, or
         any other interested parties about the PDL and supplemental rebate process.

         In addition to responding to PDL-related input as described above, it is important
         to be available to provide PDL-related information to the various state entities
         involved in PDL policy-setting and lawmaking actions. We are accustomed to
         making oral presentations and preparing presentations for state agencies to
         interested parties. Presenting an accurate reflection of the PDL strategies may
         relieve some of the tension that sometimes arises from implementing PDL-type
         restrictions. We will participate in the activities when it is appropriate for us to do
         so.

         We are experienced in presenting the PDL to a vast variety of audiences including
         state personnel, associated state agencies, physicians, pharmacists, hospitals, and
         legislative groups. Our presentations can be adjusted to the interests and functional
         level of each group. This is actually one of the most satisfying aspects of the job
         since it is much easier to develop a mutually beneficial relationship with personal
         contact. The audience begins to acquire a sense of control over the process with a
         better understanding of the inner workings of the PDL. Periodic interaction with
         the legislature is especially worthwhile since threatening PDL bills will pop up
         from time to time. Furthermore, control over the entire drug budget can only occur
         if the legislature removes the exclusion on the mental illness drugs. They will need
         to develop trust in the PDL and their early experiences with it must be good ones
         or this will never happen.

        Providing education materials, communication strategies, and/or providing training for groups that
         may be impacted by the PDL process.

         We will provide all of the educational materials, trainings and communication
         strategies necessary to ensure that all parties affected by the PDL will be in the best
         prepared state possible prior to and after implementation of the PDL.
         Individualized training materials will be developed for certain groups like nursing
         home and IV therapy providers. Special attention will also be paid to boarding
         homes and assisted living facilities. We discuss our various methods in more detail
         later in this section.

3.   Stakeholder support must be provided by the contractor and include:
     a. A method of communication, approved by DHS, for manufacturers to receive assistance with
         questions related to the PDL.

         The bulk of manufacturer communication in regards to the PDL comes during the
         supplemental rebate negotiation process. It is during this time that manufacturers
         are notified of Iowa‘s desire to implement a PDL and they have an opportunity to



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     impact whether their product(s) are designated as preferred or non-preferred. We
     will engage with manufacturers in a method approved by DHS. We offer
     suggestions on how we think this should occur later in this section.

     It would be most beneficial to allow any and all methods of communication with
     manufacturers to facilitate the PDL process. In terms of efficiency and speed, the
     two preferred modes would be email and telephone. Facsimile and mail would
     augment negotiations. In person meetings are the most time consuming. They
     should be reserved for appropriate special situations and not be an entitlement or
     routine occurrence since they consume an inordinate amount of resources. We will
     follow the state‘s directions in this matter.

b.   A website approved by DHS and available to all the public. The website must include but is not
     limited to the following:
      the preferred drug list
      prior authorization criteria and forms
      P&T Committee meetings, agendas and minutes
      information as set forth in article 6 under education services
      manufacturer specific directions for the supplemental rebate process
      a mailbox for submission of questions, which must be monitored regularly and responded to
         within a timeframe specified by DHS
      a mailbox for submission of public comment which must be monitored regularly and posted to
         the website within a timeframe specified by DHS
      all communications to members and providers, including training documents
      any other documents deemed necessary by DHS

     We will create a website that contains all of the elements listed in this section. We
     understand that it must be approved before becoming live. We already provide
     potential solutions for many of these website requirements in other programs we
     administer.

     All of the mailings to manufacturers, providers, members and affected parties will
     be posted on this website. They will be periodically archived and/or purged at the
     frequency specified by DHS. For example, it is probably unnecessary and
     confusing to keep multiple draft PDL versions posted on the site as the PDL enters
     into its second year.

     It may also be worthwhile to post relevant analyses to the PDL on the website. A
     number of utilization analyses, abstracts and links to articles/journals can be very
     informative and bolster the rationale for PDL decisions. We will be able to post
     other documents as deemed necessary by DHS.




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         In addition, we find that it is valuable to include items that alert prescribers,
         pharmacists, members, manufacturers, and other interested parties to recently
         implemented changes. A ―PDL Changes Summary‖ document allows these users
         an easy ―one-click‖ way to view recent changes rather than sorting through the
         longer and more detail-specific documents like the PDL, PA forms, minutes, etc.

         Our experience shows that maintaining an up-to-date website is an important part
         of a successful program. We monitor website access or ―hits‖ and have found that
         these documents are viewed frequently and the information obtained contributes to
         users‘ education. We have on-staff a web master who is able to meet our design
         requirements. As we move into the implementation phase of this contract, we
         would seek approval for our website content and design.

4.   Provide administrative support to the P&T Committee to develop, implement, administer and maintain
     the PDL and prior authorization services. The contractor shall:

     We have a thorough understanding of all the required elements necessary to ensure the
     clinically appropriate operations of a state Medicaid P&T Committee. The process of
     placing drugs on the PDL must balance the desire to provide the best clinical choice
     against the need to preserve an affordable health care benefit. Please read the previous
     sections to further understand our level of P&T support and interactions we are
     accustomed to having with the Committee.

        Ensure that meetings of the P&T Committee are conducted in accordance with Chapter 21 of the
         Code of Iowa (open meetings). In accordance with Chapter 21, notice shall be given of the time,
         date, and place of each meeting and its tentative agenda by publication in the news media and by
         appropriate posting of the notice. Notice shall be mailed on request to organizations or
         associations whose membership consists of persons who have an interest in the activities of the P&T
         Commission.

         The P&T Committee meetings will be conducted as required by Chapter 21 of the
         Iowa Code. Adequate notice will be given including time, place and date, along
         with the tentative agenda both on the website and in the news media. Interested
         parties such as medical and pharmacy associations will be included on the
         notification list.

         We understand the importance of following establishes rules, laws, and policies, as
         they affect the validity to the PDL program. The responsibility of complying with
         the required meeting obligations will be assigned to various staff by the
         implementation manager and then the operations manager once the program is
         implemented. Following established rules from the onset of the PDL makes the
         appeals component easier as the precedence for ―playing by the rules‖ is
         established and cannot be challenged. That means appeal decisions are made on
         their merit and not for protocol violations.



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   Schedule meetings, including presentations by manufacturers according to the policy established by
    the P&T Committee and provide public notice of the meetings.

    We will take responsibility for scheduling meetings and providing public notice.
    Presentations by manufacturers and other parties will also be scheduled for an
    agreed upon amount of time. The committee and/or DHS will dictate the quantity
    and types of presentation materials. Public notice will occur as per the above-
    specified manner.

   Maintain a website listing the P&T Committee meeting schedule, agendas, committee members,
    minutes of the meetings and other information deemed necessary by DHS.

    We will maintain a website that will include P&T Committee meeting schedules,
    agendas, committee member listings, minutes, and other pertinent information
    approved by DHS.

   Formulate information packets, including the preparation of the agenda, meeting minutes for
    Committee’s review and approval, and Therapeutic Class Reviews, and mail to the P&T Committee
    at least thirty (30) days prior to each meeting. At the same time post the therapeutic class
    recommendations to the website for public comment.

    We will provide information packets (information packets including agenda and
    prior draft minutes) for the P&T Committee members and mail these packets at
    least thirty (30) days prior to each meeting unless otherwise directed by DHS. It is
    conceivable that DHS may want to schedule a meeting within thirty (30) days of
    the onset of this contract in order to potentially have a portion of the PDL
    operational by July 1. Whether or not this is the case, the therapeutic class
    recommendations will be posted on the website promptly for discussion. Another
    possible exception to meeting these requirements is when P&T Committee
    meetings are scheduled on consecutive days. In these situations it will obviously
    be impossible to mail the prior meeting minutes thirty (30) days before the next
    day‘s meeting; however, an overall outline will be available.

    As described in other sections of our proposal, we will not only research
    Therapeutic Drug Class Reviews, but also assemble them into packets to assist the
    P&T Committee in performing the necessary comparable drug reviews for the
    PDL. In addition to providing informational packets, we will make other resources
    available (electronic and paper media) at P&T Committee meetings to supplement
    these packets.

    Therapeutic class recommendations will be posted on the website. We find this is
    a useful strategy for promoting supplemental rebate bids from manufacturers, as
    manufacturers can see what preferred status their product would hold prior to




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    formal PDL approval. Many times manufacturers will adjust their bid in an
    attempt to receive a preferred categorization.

   Record minutes of the P&T Committee meetings for approval by the P&T Committee and distribute
    the minutes as approved.

    We will record the minutes of each P&T Committee meeting. We will distribute
    these as is outlined in the previous section. We will make any corrections to the
    minutes and publish the approved version on the website. After the approval of the
    draft minutes with any corrections, an approved version is sent to members, DHS
    and then posted on the website.

   Provide information and staff support to the P&T Committee as needed to ensure timely
    implementation and on-going maintenance of the PDL and prior authorization programs.

    As discussed in previous sections, there will be a considerable amount of effort
    devoted to keeping the P&T Committee informed of PDL activities. The
    Committee will be kept apprised of negotiations, upcoming opportunities and all
    PDL maintenance data. They will be given all of the new drug information as it
    becomes available. With the state‘s approval, they will also be given a substantial
    amount of internal operations data that the state typically uses to monitor the
    program. For example we will share PA process statistics like:
    · PA determination times
    · PA approval/denial rates
    · PA volume by PDL category and by drug

    We will also provide them data on PDL success indicators like:
    · Average script cost
    · % Preferred activity in each PDL category
    · Average script cost changes within PDL categories
    · PMPM costs in aggregate and per PDL category, pre- and post baseline

   Facilitate the review of all therapeutic classes by the P&T Committee before and after
    implementation of the program.

    We will facilitate the review of all therapeutic classes by the P&T Committee
    before and after implementation of the program. In other sections of our proposal
    we describe this review process in detail.

    The initial review and the ongoing analyses after implementation are time
    consuming and vitally important. A significant amount of resources needs to be
    devoted to these functions. Therapeutic classes must be scanned nearly constantly
    after implementation for new targets and modifications. In keeping an eye on the
    PDL, the primary objective is to be observant regarding PA possibilities. This


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process is data-driven, primarily by a quarterly rebate adjusted utilization report
described later in this section. If you cannot obtain savings by attracting
supplemental rebates then you need to obtain the savings through prior
authorization. Prior authorizations are not always about redirecting members to a
different drug. In some cases the purpose is to be certain that the intended drug is
medically necessary. In other cases the reason is to promote the use of the
medicine in the most optimal manner possible. This means that prior
authorizations can support and drive clinical guidelines. Most of the drugs suitable
for placement on a prior authorization (non-preferred) list meet one of the
following three basic criteria:
· The drug costs substantially more than a therapeutic equivalent (especially
    generics)
· The drug is not as safe as other therapeutic equivalents
· The drug is prone to misuse or waste, especially due to improper diagnosis

We have institutionalized a number of reports and analyses that accurately identify
drugs meeting the above criteria. We routinely run a series of net cost reports,
safety profiles, and linked drug/medical claims analyses to distill a list of drugs
potentially suitable for prior authorization.

We routinely run a quarterly report termed the ―Prior Authorization Suspect List‖.
This report details all drugs paid for in the prior quarter sorted by ascending GPI
(generic product indicator) code. It also provides the relative rebate-adjusted unit
drug price along with the script count, total quantity, day‘s supply, amount paid
and cost per day. We begin the PA search from this list and continuously update
the list each quarter.

The developmental history of a PA begins with an analysis of rebate-adjusted drug
utilization data. Cost centers are identified, pricing variation inside drug categories
are examined, and drugs are ranked by cost. Patterns detected in the member‘s
data are researched further and prior authorizations from a collection of other
agencies and HMOs are studied; these activities suggest new ideas for PA
initiatives. The potential savings are estimated as well as the costs. Draft clinical
decision criteria are formulated based on the best clinical evidence and guidelines
available.

The rough drafts for the potential PAs are then presented to the P&T Committee.
This group studies the problems and proposed PA structure, offering guidance in
criteria revision, exemptions and exclusions. They also offer additional ideas for
exploration. Most members sit on other HMO or hospital drug committees and
provide assistance in how to streamline the process and align the criteria with what
already exists elsewhere in the industry.




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    Recommendations obtained from the P&T Committee are then presented to the
    DUR Committee. This group ensures that the PA is consistent with promoting and
    delivering clinically appropriate care. Criteria are often expanded and more
    precisely defined at this stage. Drugs that receive a recommendation of approval
    from this Committee are brought up for discussion and ultimate approval for
    implementation.

    Promoting an optimal sequence of medications (step order) can be extremely
    beneficial in both a clinical and financial sense. There is a significant amount of
    incremental savings to be realized by developing PA that supports more than just a
    referred drug, but also a preferred order of drugs. We will collaborate with DHS to
    devise unique PA criteria and also refine and customize criteria for different
    subpopulations.

    Another component that is helpful in tandem with step order is having access to a
    member‘s drug and/or medical history. As a POS provider, we have found that this
    availability can be utilized on the claims processor and for the PA pharmacist or
    PA physician as another way to make quality-informed determinations.

   Provide P&T Committee support by providing reviews of all medications in a therapeutic class for
    comparative efficacy, side effects, dosing, prescribing trends, and other clinical indications. The
    Therapeutic Class Reviews should include at a minimum a description of products scheduled for
    review at the meeting and clinical, safety and cost-effectiveness information for each drug class.
    The information must be accurate, reflect recent cost and clinical outcomes information, and be
    based on acceptable clinical review protocols and nationally peer reviewed, evidence-based
    research.

    In other sections of our proposal, we have described how we specifically address
    the clinical, safety, efficacy, and cost effectiveness for each drug class. We will
    provide the P&T Committee with accurate, up-to-date information that follow
    acceptable clinical review protocols and nationally peer reviewed, evidence-based
    research.

    The P&T Committee meeting reviews will include all of the required elements
    listed in this section of the RFP. Our approach mirrors what Iowa expects to occur
    in this process.

    Before the P&T Committee begins their deliberations, we would initially calculate
    the relative costs of medications within drug categories, net of all discounts and
    rebates, including what has been negotiated to date with the manufacturers.
    Generally, any medication determined to be superior to all other therapeutic
    alternatives is initially placed in the PDL regardless of the (best value) cost.
    Therapeutic equivalents are then subject to ranking in order of ascending cost.




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The Committee endeavors to provide a sufficient number of preferred choices
within each drug category to allow for differences in individual response rates and
tolerability. They consider unique qualities of the various medications at this
point. The Committee will designate the more expensive choices that do not offer
substantial clinical attractions as non-preferred. If DHS agrees, there is an
opportunity at this point for a drug manufacturer to improve their rebate offer in
order to re-position their drug as either cost-neutral or cost-favorable relative to the
index/preferred drugs. There is no interest however in designating less expensive
but clinically inferior drugs as preferred or in accepting rebates from drug
companies for the purpose of making such products more financially attractive.

The cost-effectiveness analysis often provides the rationale or framework for
opening a SR discussion with a particular manufacturer. For example, in the statin
(cholesterol-reducing drug) category, the surrogate healthcare outcome is the
amount of LDL cholesterol reduction. The statins vary considerably in potency
and even more so in cost per unit of cholesterol reduction. It is a relatively simple
and intellectually defensible strategy to request that manufacturers price their
products cost-neutral to the index drug on this parameter. It is much easier to
argue that DHS should not pay more for lesser clinical outcomes.

The PDL process must be rigorous. Manufacturers must submit dossiers that
include information on the disease in question, the product‘s role in therapy,
clinical efficacy, safety and effectiveness data (including off-label), an economic
evaluation, economic modeling, any reporting bias, outcomes modeling and the
drug‘s cost and value. The usual drug compendia recommended in the Federal
formulary regulations are also used for the development of a PDL including the
AHFS and USPDI. The most important components of the Therapeutic Class
Reviews are summarized below:

Evaluate new drugs on the basis of clinical efficacy, safety, expected level of use,
cost of treatment and overall cost-effectiveness. In as much as it is available, the
pharmacoeconomic data is compared for the various treatment alternatives in order
to determine the most cost-effective option. Pharmacoeconomic studies are used to
identify, measure and compare the cost and consequences of various treatment
alternatives. The goal of considering this data is to contain overall costs without
unintentionally causing a negative effect on member outcomes.

Have a PDL decision-making process that actively incorporates effects on overall
health treatment costs. When a program solely focuses attention on controlling
drug costs, ignoring complex therapeutic trade-offs, there is admittedly some risk
of spending drug ―savings‖ on adverse or sub-optimal medical outcomes.




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Therefore, it is important to either have an internal PDL decision support system
capable of accepting, integrating and analyzing non-drug medical data or an
independent third party that can supply this capability.

Evidence-based guidelines are instrumental to the ultimate success of the PDL. An
ever-increasing number of reputable medical journals have formally adopted the
standards of only reporting on evidence-based medicine. There is no longer any
shortage of evidence-based guidelines upon which to build a solid PDL foundation.
Although incomplete in scope, the bi-annual Clinical Evidence, published by the
British Medical Journal, is a superior and heavily utilized source of substrate data.
It specifically aims not to provide recommendations but rather the raw material
necessary for P&T Committees to form independent and unbiased opinions. Other
complementary compendia currently utilized include but are not limited to the
Cochrane Library, ACP Journal Club, Evidence-Based Medicine, Evidence-Based
Mental Health, and the Journal of Family Practice. It is crucial for effective P&T
Committee operations that only truly useful information sources are mined.

Decisions such as the choice of products on a PDL must be taken using a selection
process that is fully transparent and that can be justified to all parties concerned.
When healthcare resources are limited, decisions about the treatment options can
be complex and difficult to make, involving the careful balancing of multiple
factors. The decisions taken may have far-reaching consequences affecting many
people. Although everyone would agree that drug selection should be a rational
process that follows the guidelines of evidence-based medicine, many other factors
may play a role in decision-making. Some of these are explicit and rational, others
are less clearly defined, and decision-makers may be unaware of the influence
exerted by some of these factors.

In order to facilitate transparent decision-making that makes rational use of health
outcomes information, the System of Objectified Judgment Analysis (SOJA),
combines the quality advantages of the 'top-down' approach to drug selection,
based on a thorough literature review, with the compliance advantages of a
'bottom-up' approach, where the final decision is made by the individual P&T
Committee and not by the authors of the review. The SOJA method, based on
decision-making processes in economics, ensures that health outcomes information
is given appropriate weight. Such approaches are valuable tools in discussions
about product selection for formularies.

In evaluating the clinical literature pertaining to drugs under consideration, we
prefer particular study designs. When the effectiveness of a drug is tested we
prefer randomized, double-blinded, placebo-controlled trials. Assessing whether a
substance is related to the development of an illness is best studied with a cohort of
cases control design. Determining the prognosis or outcome of a particular disease


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    is best served with a longitudinal cohort study. The P&T Committee (or a working
    group reference drug subcommittee) uses a formal clinical evaluation trial checklist
    to assist in reviewing the relevant literature. This tool allows scoring on a number
    of characteristics including:
    · Population studied (inclusion/exclusion criteria)
    · Treatments compared (biopharmaceutics)
    · Experimental design detail (controls, randomized)
    · Data collection (reproducible)
    · Bias control (blinding)
    · Results (measures, drop outs)
    · Data analysis (statistical tests, clinically meaningful

    In the end, the driving force for or against PDL placement is the drug‘s unique
    clinical contribution. The P&T Committee must primarily rely on evidence-based
    guidelines to determine this value, rather than clinical experience, expert opinions,
    professional relationships, pathophysiology, common sense, community standards,
    publications, and other sources.

   The Contractor must develop and maintain a predictive pricing methodology that incorporates
    rebate and administration costs to estimate the net cost to the State associated with individual PDL
    decisions. This information must be provided to DHS and the P&T Committee for specific drugs
    reviewed by the P&T Committee.

    We have developed a predictive pricing approach to estimate the final budget
    impact of PDL decisions after accounting for all rebates, prescribing alterations
    and offsetting administrative costs. This was based on our experience in other
    states. We went through the process of estimating savings prior to each PDL
    decision, then after each final PDL decision and then after implementation. This
    approach is not perfect; however we have improved our projection accuracy over
    the past few years due to practice and constant reassessment. Many categories can
    be projected extremely accurately (PPI) because we have gone through several
    iterations of the process. Other neophyte categories (Atypical antipsychotics) are
    much more difficult precisely because it is the first time and because there is
    precious little data published on PDLs in this drug area.

    Based on our experience, we have acquired a good sense of all the factors
    necessary to predict accurately. It is vital to know what percent of a population can
    successfully be maintained on two or three specific preferred drugs. Each category
    is different. Prior utilization data around the PDL and prior authorizations must be
    mined to glean this information. It is also key to know what percent of the
    population is already on the preferred and nonpreferred agents. This is useful both
    for calculating successful switches and for estimating PA volume, a key
    component of administrative costs.



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    Although it may take more time, it is also very useful to determine who would
    already meet PA approval criteria by virtue of having already tried every preferred
    choice. This can lead to accurate savings discounts and to consideration of POS
    online ―approvals‖. Any age or condition exclusions need to be factored in as well
    as implementation timelines. Exceptionally tight or demanding criteria that require
    testing or specialty consultations must have their ancillary costs included.
    A number of categories have unique considerations that require further projection
    adjustments. The narcotics category had a lot of twists in it because many
    Oxycontin users became ―allergic ― to morphine as soon as the PDL was
    announced. It became necessary to insist on prior medical records to document
    these mostly unwitnessed allergic reactions. It also became prudent to require
    urine drug tests that monitored for morphine use since many members who
    developed morphine side effects were found to have negative morphine tests
    during the time they were allegedly on the preferred morphine product. All of this
    information will be made available to DHS and the P&T Committee.
    Administration costs including the PA and PDL contracts will be assimilated into
    the projections. We will also be able to provide some help in forecasting
    administrative fair hearing rates in the various PDL categories.
   Provide DHS with a written report of the P&T Committee’s PDL recommendations within three (3)
    business days of the conclusion of the meeting for review and final approval by DHS. This must be
    accompanied by a contractor analysis in cases where the P&T Committee made modifications to the
    original recommendations.

    In addition to writing and publishing P&T Committee minutes, we will create a
    summary report that highlights the Committee‘s specific PDL recommendations
    for DHS‘ review and action. In addition to this summary we will perform analysis
    (such as the PA volume impact) on cases where the Committee made modifications
    to the original PDL recommendations. DHS‘ approval of this report will trigger
    the implementation plan for the affected class(es) of drugs. We will produce this
    report, and any analysis within three (3) business days of the conclusion of the
    Committee meeting. Approved changes made to the PDL will be included in our
    ―Summary of Changes‖ report that we post on the web. This report will be useful
    to our internal processes of making PDL changes and PA forms.
    The report will also include a synopsis and an analysis of any recommendations
    that ran counter to our proposed actions. When this occurs we will attempt to
    explain:
    · Why we think the committee acted the way they did;
    · Whether it will have negative, positive or neutral consequences;
    · Whether or not DHS should approve or reject; and
    · Offer alternative courses of action or strategy




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   Provide quarterly summaries to DHS on the activities and decisions of the P&T Committee by the
    5th business day following the end of each quarter.

    Every quarter, we will provide P&T Committee activity and decision summaries to
    DHS. These will be delivered within five (5) business days following the end of
    each quarter. If there is a particular format desired, we will accommodate.

   Facilitate the P&T Committee’s use of clinical subject matter experts in reviewing various classes
    of drugs or individual drugs if such expertise is needed and is not represented among the P&T
    committee members.

    We realize that the P&T Committee will not have clinical expertise that deals with
    every therapeutic drug class. Therefore, we will facilitate the use of clinical
    subject matter experts. We provide the same service in other states and find that it
    relieves not only the Committee from the burden of making decisions in areas
    beyond their capabilities, but it gives answers to members and manufacturers who
    may question a clinical PDL decision.

    In addition to providing subject matter experts, we think the selection of P&T
    Committee members has a great impact on the probability of the success of the
    PDL. Where and when possible, we would like to be involved in the selection
    process. We have analyzed and acquired extensive knowledge of other state
    Medicaid formularies. It is desirable that most Committee members have
    demonstrable experience in P&T related areas. It is questionable for a dentist that
    presumably prescribes on a limited basis in the analgesic and antibiotic drug
    categories should occupy one of the positions on a nine member P&T Committee.
    We recommend soliciting providers that are participating in or have actively
    participated on insurance company (HMO/state) or hospital P&T or Drug
    Utilization Review Committees.

    We would be willing to advise and support the state to help ensure that the P&T
    Committee is able to meet the requirements of its bylaws. We would be interested
    in assisting the Committee in identifying qualified individuals to fill vacant
    Committee seats. We have the necessary experience in identifying, screening, and
    preparing P&T Committee members.

    We recommend that Iowa’s P&T Committee develop specific bylaws beyond the
    requirements imposed by OBRA ‗90. P&T Committees should be prepared to
    constitute advisory subcommittees to deal with issues outside the areas of expertise
    of its members. The P&T Committee should also demonstrate a willingness to
    educate itself before trying to educate others. Inviting guest speakers is a good
    way to deliver useful and provocative presentations.




                                                                                     Tab 9 Page 254
                                                                                     March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    We recognize that a strong, successful P&T program is contingent upon a
    dedicated, supportive P&T Committee. The relationship must be a symbiotic one.
    We are totally committed to this relationship. Committee members become
    increasingly valuable over time. It takes a considerable, sustained effort to
    cultivate the requisite knowledge in P&T Committee members. The proper
    analysis of drug utilization data is exacting and complicated by the idiosyncrasies
    of pharmacy benefit programs. It normally takes six months for new members to
    acquire the necessary skills to fully understand the complex array of reports and
    analyses. Experienced members are a treasured commodity and treated
    accordingly.

    New members are given introductory materials such as sample reports, definitions
    and the Bylaws. We would be willing to meet with new members prior to their
    first P&T Committee session to walk them through the program goals, procedures
    and reports.

    We also solicit information regarding any P&T study preferences that the
    Committee may have interest in pursuing. It has been our experience that pursuing
    P&T ideas of mutual interest is extremely productive for the long-term success of
    the PDL; it is essential to stimulate and maintain the intellectual interest of every
    member.

   Develop and facilitate a process for DHS to act on or deviate from the recommendations by the
    P&T.

    As briefly discussed above, DHS needs a mechanism to promptly review and
    approve recommendations while also discerning and mitigating poor advice. It has
    always been our practice to go into committee meetings with preconceived ideas of
    what constitutes good or bad recommendations. It is our belief that one of our
    duties is to influence the Committee decision making by providing them with the
    same data that led us to our opinions. Frequently, when the committee is given the
    same information, enough time to digest it and enough time for collegial
    discussion, consensus is reached. Unfortunately some committees are endowed
    with members that are philosophically opposed to the goals of a financially
    constrained Medicaid Program. Sometimes a provider, for whatever reason, may
    be entrenched in their opinion of a particular issue and may have been persuasive
    enough to affect the entire committee vote.

    Sometimes the entire Committee (including us) makes a decision in error and does
    not recognize it until after the meeting is over. When these scenarios arise, we can
    do the following:
    · Review all recommendations the following day
    · Recognize and investigate feelings of ―buyers remorse‖



                                                                                   Tab 9 Page 255
                                                                                   March 26, 2004
                                 IFMC Response to the Iowa Department of Human Services
                             Medical Services with Preferred Drug List - RFP #MED-04-034

         ·   Point out to DHS the potential negative ramifications
         ·   Suggest corrective actions
         ·   In some cases would recommend that DHS not accept the decision at this time
             and ask for reconsideration by the Committee or a detailed explanation of their
             rationale
         ·   In other cases we will propose that DHS actually send back a counterproposal
             for consideration, especially if it becomes apparent that key data was not
             available or given due consideration
         ·   Finally, there may be times when a particular decision is biased and/or ignorant
             due to a lack of specialty education or specialist involvement. In these cases
             the Committee may be directed by DHS to seek specialty input prior to a new
             recommendation.

5. Provide the following Supplemental Drug Rebate services:
    · Conduct meetings with the DHS, concurrent with the development of the PDL, to develop a
         competitive supplemental drug rebate strategy to negotiate with the pharmaceutical manufacturers.
         This process must be approved by DHS. It is not the Departments intent to simply accept the rate
         submitted by a manufacturer.

         We would have preferred to start negotiating supplemental rebates prior to the
         P&T Committee issuing recommendations. This weakens the state‘s bargaining
         position and makes it more difficult in this next phase of work. We would like to
         reach agreement with the Committee that many of the original recommendations
         would have been different if, at that time, the soon-to-be-negotiated supplemental
         rebates were available. Many of their original recommendations would appear to
         allow this line of secondary reappraisal since they involve therapeutically
         equivalent or comparable products. Essentially we need to communicate to the
         manufacturers what we would prefer if no supplemental rebates were available and
         what we would prefer if they suddenly do become available. It is somewhat
         disconcerting to potentially reverse positions on many drugs so close to the original
         deliberations, but this is exactly what happens in this process (but usually a year
         later). We predict that the manufacturers will not be fazed by this situation;
         however, it may challenge some members of the Committee.

         The first steps are to:
         · Sit down with DHS and map out the overall strategy
         · Explain how much of the PDL savings is likely to occur from supplemental
            rebates and how much will emanate from redirection to lower net-priced drugs
         · Review what needs to happen with key drugs and key categories to achieve
            success
         · Highlight the drugs that are popular and that will create pushback if designated
            non-preferred




                                                                                        Tab 9 Page 256
                                                                                        March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    ·   Using examples, explain how competitive bids will be stimulated and then
        maximized with subsequent counteroffers and by setting conditions
    ·   Illustrate to DHS how selective data analyses can be used to point out misuse
        or waste of certain medications thereby strengthening the state‘s position and
        forcing improved offers and/or protective limitations
    ·   Obtain approval from DHS to move forward with the strategy and the
        prescribed processes

    Certainly the process will include re-announcing to manufacturers that Iowa is
    creating a PDL; asking them to give their best SR price; ranking all drugs by their
    final cost—net of all rebates; and, using this data in collaboration with the P&T
    Committee to create a PDL. Many companies also prefer to have their government
    liaison personnel involved in this process and kept in the communication loop.

    It is important for all parties involved to know and agree that a SR offer does not
    guarantee drug placement on the PDL. Likewise, the absence of an offer does not
    necessarily mean that the drug will not be placed on the PDL. It is worth keeping
    in mind that SR offers inform, rather than dictate, the PDL construction process.

·   The Contractor shall serve as the DHS’ agent during analysis and negotiation of state supplemental
    rebate agreements with pharmaceutical manufacturers in a format approved by DHS. The resulting
    contract regarding supplemental drug rebates shall be between the manufacturer and the DHS and
    shall be presented to DHS for approval and execution. One hundred percent (100%) of the
    supplemental drug rebates collected on behalf of the state must be remitted to the DHS. The
    Supplemental Rebate Contract will be written using the template provided by DHS, as authorized
    by CMS.

    Manufacturers will not be surprised to receive the state‘s letter soliciting
    supplemental rebates. At least nineteen (19) Medicaid Programs are receiving,
    negotiating for or intending to collect supplemental rebates. Another fifteen (15)
    states have said that they are seriously considering them. In addition, states that
    implemented prior authorizations without inquiring first about supplemental
    rebates have received ―spontaneous‖ offers of such from drug manufacturers.

    After informing the manufacturers that the window for offering supplemental
    rebates is fast approaching, the negotiations commence. The format for doing so
    will be discussed with and approved by DHS prior to any manufacturer contact.

    Three business days after the initial request for contact information, we would
    typically send the SR Offer Forms to the manufacturers (via email). If no contact
    responses were received we would use the default contacts that we already possess
    from prior dealings with the manufacturers. We ordinarily require proposal returns
    within one to two weeks but we would have to be flexible in order to accommodate
    the state‘s needs.


                                                                                   Tab 9 Page 257
                                                                                   March 26, 2004
                     IFMC Response to the Iowa Department of Human Services
                 Medical Services with Preferred Drug List - RFP #MED-04-034

If the goal is to be able invoice for SRs for the third quarter of 2004, then
agreements will need to be in place shortly after the contract is awarded in April.
Squeezing in SR negotiations between a notice of intention to award on April 26
and a partial PDL implementation date of July 1 means that the negotiation period
will be brief, intense and focused. The manufacturers are not going to pay rebates
unless the PDL is in effect. It may make the most sense to immediately collect SR
offers on only the categories that have been reviewed to date by the P&T
Committee since they could be reworked the quickest and easiest. These revised
categories could potentially be implemented by July 1 so that the SRs could be
legitimately captured. The merits of this approach include the fact that the
Committee, prescriber and pharmacy communities are already fairly well
acquainted with the original recommendations. Subsequent modifications will be
easier to digest, especially if SRs allow some additional choices in key categories.

Each company would be requested to supply the list of their products and net price
in relation to AWP, AMP, wholesale acquisition cost (WAC) or guaranteed net
price (GNP). The final net price would be expressed as AWP minus both the CMS
negotiated basic rebate per unit and the proposed SR per unit.

Some companies will request an audience. Most of the time, we arrange and
conduct these by telephone. If DHS agrees, certain companies will receive an
initial, exactly defined, proposed SR. These companies will almost certainly desire
a more intensive discussion prior to their counter-proposal. One example is the
statin class (as discussed in the prior section). We expect these companies to
contribute additional rebates based on their products cost per unit of outcome, not
simply cost per unit. These companies will almost certainly desire a more
intensive discussion prior to their counter-proposal. This approach has been very
effective in producing substantial rebates and is potentially applicable to several
other drug classes.

We would analyze the offers over a one-week period, at the end of which the state
would receive an initial set of recommendations. Depending on how many issues
were raised after the state‘s considerations, the final recommendations would be
available in a week or less. At this point, the P&T Committee could begin serious
deliberations (or revisions) on the PDL. This approach has been very effective in
producing substantial rebates.

The timeline must be rigidly enforced or the process will disintegrate into a
protracted mess. Drug companies know that slowing the process will interfere with
the receipt of rebates. As long as they keep negotiating, no supplemental rebates
will flow to the state.




                                                                    Tab 9 Page 258
                                                                    March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    Our basic approach to rebate and program benefit analysis is to always keep in
    mind that access to therapy cannot be eliminated. Starting with therapeutic
    categorization and the understanding that individual therapies are not eliminated,
    but instead ranked, we review the prudence of individual therapies with respect to
    efficacy, safety market share, cost of therapy change, clinical relevance, PA
    volume, and projected volume of approved PAs by drug.

    Including the above and with initial SR offers in hand, individual products are
    ranked by net cost and potential PA volume (movement of market share). We
    consider other factors such as step therapy and grand-fathering. This ―ranking‖
    becomes a working draft of the PDL, from which we can review overall
    positioning of drugs and return to the manufacturer negotiating table. Additional
    negotiations must occur within the allotted timeframe. At the close of negotiations,
    the working draft of the PDL will be submitted to the P&T Committee.

    We recommend using a GNP as opposed to a percent of AWP, AMP or WAC.
    GNP forces prices to stay flat. Percentage arrangements do not limit prices from
    going up. This being said, not all manufacturers will negotiate a GNP, so it is also
    wise to remain flexible, while still preferring GNP. Nonetheless, we are able to
    negotiate the rebates relative to whatever price standard the state wishes us to use.

    We would negotiate and execute all contracts using Iowa‘s CMS authorized
    Supplemental Rebates Contract (template). As required and expected, 100 percent
    of the supplemental rebates collected will be remitted to the state in the manner
    specified.

·   Provide an opportunity for all manufacturers to negotiate supplemental rebate agreements for their
    product(s) prior to the P&T Committee’s review of a product. This opportunity must be transmitted
    in a timely and accurate manner. There must also be established a method for communication
    between the Contractor and manufacturers, as approved by DHS.

    All manufacturers will have the opportunity to have their products placed on the
    state PDL. Some will not care to take advantage of this chance for various reasons.
    Some will prefer to negotiate with the legislature, advocates and provider groups
    with the intention to mount opposition to the PDL. Others feel that their products
    are immune to adverse PDL effects. Initially some may take their chances and see
    if the Committee will vote against their product. They may even wait to see if the
    state will stay the course and actually implement a hard prior authorization. Prior
    experience has shown them that PDLs do not always become reality and delays can
    save money.




                                                                                   Tab 9 Page 259
                                                                                   March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    The invitation to participate will be clearly and loudly communicated to all
    manufacturers. Written letters will be followed up with telephone calls. Email
    notification will also occur (if the state allows). Web site pronouncements will
    also assist in dispersing the information. The method(s) of communication will be
    clarified and specified by the state. The documentation of all contacts and content
    will also be specified by the state.

·   The contractor shall accept and handle all contract discussions and inquiries from manufacturers,
    consulting with the DHS as needed.

    On behalf of DHS, we will accept and handle all contract discussions and inquiries
    from manufacturers. We find that this granted authority allows the negotiations to
    become more competitive; by being the center point of contract discussions, we
    will immediately know whether a proposed supplemental rebate is reasonable since
    we are also performing the analysis. When we realize DHS needs to be consulted,
    we will do so. In addition, we will provide periodic updates to DHS on the status
    of negotiations and the project impact they will have on the PDL.

    It is our preferred practice to negotiate all contracts completely and directly with
    the manufacturers and consult with the state as is wise and necessary. Some
    manufacturers will try to negotiate directly with the state or even the legislature or
    Governor‘s staff. It would be extremely valuable at the onset if these other state
    parties acknowledge beforehand their intention to stay divorced from this part of
    the process. Inevitably, some companies faring poorly in negotiations will try
    these other avenues, frequently claiming that they are not being treated fairly and
    that their ―great‖ offer is being ignored or snubbed.

    There are situations when a state representative can help to close a deal. If we
    sense we are in that type of situation it would be helpful if we could include a DHS
    representative in negotiation meetings with manufacturers.

·   The contractor shall maintain all the original agreements, and provide DHS with access to all
    supplemental rebate agreements and related documentation within twenty-four hours of request.
    The contractor must maintain electronic copies of all executed supplemental rebate agreements.

    We will maintain all of the original SR agreements, and provide DHS with access
    within twenty-four (24) hours of a request. A log of all contract negotiations,
    including failed negotiation materials, will also be available. It is just as important
    for DHS to be able to audit why SR agreements were not recommended for
    acceptance as it is for positive recommendations. Every decision will leave an
    audit trail.




                                                                                    Tab 9 Page 260
                                                                                    March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    Once DHS accepts and signs a supplemental rebate agreement, we will maintain
    the original agreements. These agreements will be scanned and saved as electronic
    ―pdf‖ files, which will facilitate prompt access and delivery to DHS should they
    request a copy of an agreement.

    In addition to meeting the basic RFP requirements listed in this section, it is our
    current practice to maintain a status log of all supplemental rebate agreements and
    potential supplemental agreements. We have found that there is usually a lag
    between the time when an agreement is verbally reached and when it is formally
    executed via a signed supplemental rebate agreement contract. This log helps track
    the status of agreements and then is also incorporated into our supplemental rebate
    billing process.

·   Ensure that supplemental rebates are over and above the federal rebates and in compliance with
    federal law.

    We will ensure that supplemental rebate offers are over and above the Federal
    rebates and in full compliance with the law. We will also ensure the same for the
    billing and collection of said rebates. Please note that some SR offers change over
    time and are sensitive to alterations in the Federal rebate.

·   Provide opportunities for a manufacturer to amend the amount of its rebate agreement.

    As a part of our overall strategy to achieve the most competitive, and thus the
    greatest supplemental rebate amounts, we include a defined period in which
    manufacturers may amend the amount of their rebate agreement. This will be
    formally done on an annual basis, and is done on an as-needed basis throughout the
    year. Changes in market conditions and drug conditions may promote an
    opportunity for a manufacturer to improve their bid.

    We think that the Iowa PDL should always be receptive to SR rebate agreement
    amendments. Although it is important for a coordinated, thorough PDL review
    process to attempt to synchronize all final offers to one point in time so that fair
    head-to-head comparisons can occur, it is also true that a PDL is so large and fluid
    that constant reassessments are the norm. The goal is to arrive at the most cost-
    effective PDL possible while preserving the greatest degree of choice. To do both
    requires a perpetually open door and open mind.

    If a new proposal is received that would not affect a current agreement and could
    be valuable to the PDL then we will compare the new drug to preferred choices (if
    applicable) and ask:
    · If it is equal, can it be added and not violate current SR constraints?




                                                                                   Tab 9 Page 261
                                                                                   March 26, 2004
                             IFMC Response to the Iowa Department of Human Services
                         Medical Services with Preferred Drug List - RFP #MED-04-034

    ·   If it is less than, can it be added and then used as leverage to obtain a SR or
        improved SR from other more expensive choices?
    ·   If it is greater, contact the manufacturer prior to the next P&T Committee
        meeting, inform them of the potential non-preferred status and ask if a SR is
        possible.

·   The terms of the supplemental rebate agreement with each pharmaceutical manufacturer shall be
    confidential, separate from any of the contractor’s other clients and shall not be disclosed except to
    DHS or it’s designee.

    We agree to the keep all terms of supplemental rebate agreements confidential and
    separate from our other clients. Details of agreements will only be disclosed to
    DHS or DHS‘ designee. We have a confidentiality policy for all employees; they
    must agree to the policy as a condition of employment. We are in the business of
    handling confidential data and maintain this confidence with all our clients. Any
    attempts by outside parties to ask for or otherwise inquire about this information
    shall be reported to DHS.

·   Provide supplemental drug rebate-billing data quarterly in a DHS approved format in accordance
    with timelines established by DHS. Ensure system interface with IME POS contractor for the
    receipt of data to track and invoice the supplemental rebates.

    We will provide the SR billing data quarterly in DHS approved format and in
    compliance with DHS timelines. We will do whatever is necessary to interface
    successfully with the POS contractor.

    Our preferred process includes the following steps:

        Calculation and Invoicing: Using data collected from the claims processing
        system and the pricing structure collected and loaded quarterly from the
        Centers for Medicare & Medicaid Services (CMS), we calculate rebates on a
        quarterly basis. This process generates invoices that are mailed to all
        participating manufacturers showing the units paid for by the program during a
        given time period. A database of manufacturer addresses, telephone numbers
        and contacts is maintained for reference and mailing information. We also use
        alternative media such as diskettes and compact discs to provide invoice data to
        manufacturers.

        Checks: Manufacturers submit checks reflecting the invoiced amount. We
        post receivables in an accounts receivable transaction system. After posting
        the remittance and notation of adjustments, the checks and transaction log are
        forwarded to the state.




                                                                                       Tab 9 Page 262
                                                                                       March 26, 2004
                             IFMC Response to the Iowa Department of Human Services
                         Medical Services with Preferred Drug List - RFP #MED-04-034

        Disputes: We communicate with the manufacturer to reach agreement
        regarding units billed and rebated amount. We send the manufacturer a drug
        inquiry report, which is a summary of actual pharmacy submitted claims. We
        generate and mail letters to manufacturers that have not sent rebate money. If
        necessary, we create reports to accommodate disputes.

        Manufacturers: We track manufacturers to determine if they have signed a
        contract and are participating in the rebate program. Manufacturers not
        participating in the rebate program are taken off the rebate list and the claims
        validation process marks their NDC-specific drugs as ―not covered.‖
        Pharmacies are notified that specific manufacturer‘s products will no longer be
        covered for rebate reimbursement. DHS may modify this process.

        Reports: Reports generated for the rebate program include drug inquiry
        reports, vendor transactions by date, transactions for selected vendor(s) by date,
        and payments by quarter.

·   Provide all supplemental drug rebate functions referenced in 5.3.2.5 of RFP MED-04-015 and the
    amendments, through June 29, 2005 at which point the IME POS contractor will assume these
    functions. The Medical Services contractor must assist in the transition of this function to the IME
    POS contractor.

    We would maintain the supplemental rebate process only until the new POS
    contractor assumes responsibility in June 2005. In order for us to expeditiously
    handle the supplemental rebate portion, we expect the current POS contractor to
    manage the federal program.

    The rebate process for the supplemental program should be similar to the federal
    process except that manufacturers would need to establish their supplemental
    rebate amounts in addition to their federal rebates. We want to caution the state,
    based on our experience, that late reporting of CMS rebates by manufacturers may
    create some difficulties with invoicing supplemental rebates on a timely and
    accurate basis (drug NDCs with heavy utilization but lacking a rebate amount on
    the CMS rebate tape).

    For supplemental rebates, GHS will need key claims fields and the federal rebate
    amounts from the POS processor. These fields will enable us to compute the
    number of units of drugs used and the supplemental rebate amounts. Invoices
    would be made separately for the federal and supplemental rebates to eliminate
    confusion in the case of disputes. Keeping the processes separate will also allow
    for easier processing of reversals and utilization corrections.




                                                                                      Tab 9 Page 263
                                                                                      March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    DHS will be responsible for providing a dispute resolution team. This team would
    be responsible for reconciling manufacturer disputes. In addition to dispute
    resolution, this team would proactively track rebates and confirm that the federally
    mandated timelines for submission of claims and disputes are met.

·   Establish and operate a process for accurate reporting and monitoring of negotiated supplemental
    rebates.

    We incorporate our negotiation tracking, SRs contract status, and SR contracted
    amounts into a database. We use this during negotiations, for communicating
    status to the state, and for computing SRs. We track PDL saving progress via
    standard reporting. This is referred to during any dispute resolutions when actual
    SR invoicing begins to occur.

·   During implementation phase provide weekly written reports concerning negotiation of
    supplemental drug rebates.

    In addition to serving as DHS‘ representative during contract negotiations, we will
    deliver a weekly negotiation status report to DHS. As a part of those reports, we
    will also include the supplemental rebate tracking log.

    SR negotiation status reports to be generated and provided weekly will discuss:
    · Who is (and is not) negotiating
    · Actual offers and projected savings
    · Initial reactions to standing offers
    · Recommendations to accept or reject specific offers
    · Recommendations to make counteroffers
    · Recommendations to accept with conditions
    · Offers needing special data analyses to calculate impact
    · Advice on what can be done to attract more interest, etc.

·   Provide to DHS monthly and ad hoc reports on the performance and savings associated with the
    PDL and supplemental rebates. Reports will be delivered to DHS in a format and on a schedule
    approved by DHS.

    We have a portfolio of standard monthly reports which includes PDL and
    supplemental rebate-related reports. DHS may choose from these or develop a
    unique format. IFMC has data analysts on staff that specialize in working with
    clients and our medical director to develop usable ad hoc reports. We frequently
    find that ad hoc reports become part of the standard set of reporting. We will work
    with DHS to determine a delivery schedule of standard reports.




                                                                                   Tab 9 Page 264
                                                                                   March 26, 2004
                            IFMC Response to the Iowa Department of Human Services
                        Medical Services with Preferred Drug List - RFP #MED-04-034

    Monthly and other ad hoc reports can be accommodated to allow DHS to monitor
    performance and savings attributable to the PDL. Any format and schedule are
    possible. We have provided some examples at the end of this section in PDL
    Attachments 04 - 06.

·   Provide quarterly supplemental rebate projection reports with projections of quarterly savings
    broken down by supplemental rebates and market shift data. This report must utilize a DHS
    approved methodology for determining savings. Reports will be delivered to DHS in a format and
    on a schedule approved by DHS.

    We will also provide quarterly and annual supplemental rebate projection reports.
    The reports will incorporate assumptions based on current utilization, conversion
    rates, successful conversion rates, expected market shifts and eligibility/user
    increases (or decreases). The savings will be identified as related to supplemental
    rebates, market shift or purely prior authorization in origin. We will utilize a DHS
    approved methodology to determine savings and we will deliver the reports in the
    format and schedule specified by DHS.

·   Provide quarterly rebate analysis and suggestions for enhancing rebates and/or lowering net
    pharmacy costs. This includes review and analysis of utilization data for performance under PDL
    drug classes, and areas for improvement for both clinical impact and cost effectiveness of PDL
    classes. Reports will be delivered to DHS in a format and on a schedule approved by DHS.

    We will provide quarterly rebate analysis after we invoice Iowa‘s supplemental
    rebates. Running supplemental rebate invoices is dependent upon the POS
    contractor running of the federal CMS rebates, as supplemental rebates are
    computed from the federal rebate amounts. We will include utilization data and
    the effects the PDL has had on utilization.

    In previous sections we discussed how we monitor for opportunities with our PA
    Suspect report. The general monitoring strategy is to check if non-preferred drugs
    (on the basis of cost alone) begin to match preferred drugs‘ preference level, then
    there is reason to consider either adding to the preferred side or putting more
    pressure on the preferred drug manufacturer to improve its SR amount.

    Quarterly rebate and utilization analysis is a useful method to be kept abreast of
    both positive and negative trends. Inadvertent effects need to be kept in mind.
    When you drive members away from specific drugs, they are sometimes
    unintentionally redirected into an unforeseen alley. For example, in Maine, when
    members were steered away from the off-label use of an atypical antipsychotic,
    some doctors prescribed expensive anticonvulsants that were just as off-label. On
    the other hand, some unintentional effects are fortuitous. When Oxycontin was
    made non-preferred, hundreds of users began to pay cash without bothering to try
    using preferred long acting narcotics.


                                                                                   Tab 9 Page 265
                                                                                   March 26, 2004
                      IFMC Response to the Iowa Department of Human Services
                  Medical Services with Preferred Drug List - RFP #MED-04-034

The PDL Compliance Report is our most valuable tool for monitoring the success
of the PDL (see PDL Attachment 02 at the end of this section). Under performing
categories are easily detected by virtue of their lower preferred prescribing
percentages and/or lack of change in average script price relative to the non-
preferred choices. These reports provide the data to differentiate between and
diagnose the healthy and ill sections of the PDL. We will provide them in the
format and schedule dictated by DHS.

There are many reasons why Iowa‘s pharmaceutical budget (adjusted for
eligibility) increased at an average 14.5 percent annual rate over the last eight (8)
years:
· Costly new drugs that have little or no clinical advantage over cheaper and
    older therapies
· Direct-to-consumer ads
· Physicians‘ lack of basic medication cost knowledge
· Off-label prescribing not adequately supported by solid evidence
· An aging population

We will look to our analysts to discern what expense increases are preventable.

In 1993, the OBRA ‘90 was the most effective means to achieve drug manufacturer
cost savings. At that time the rebates represented a savings. However, as time
passed and new drugs entered into the market, manufacturers have figured the cost
of rebates into the price of the new product thereby reassuring their profit margin.
The major problem, with respect to Medicaid, is the inability to control utilization
due to the fact that Medicaid is an entitlement program.

The good news is that in addition to negotiating SRs, there are other synergistic
cost-controlling strategies:
· Contain off-label prescribing on new drugs lacking sufficient evidence.
· Selective utilization of disease management initiatives that complement the
    PDL.
· Increase efforts to promote fewer prescribers on polypharmacy efforts. Dual
    eligibles (especially in pharmacy care) are often quite expensive. Medicaid
    provisions do not restrict who they can see, but rather, who prescribes for them.

Although dose consolidation was not described explicitly in the PDL section of the
RFP, we feel it is worth raising and offering in the context of other interventions
that can lower net costs.




                                                                       Tab 9 Page 266
                                                                       March 26, 2004
                                IFMC Response to the Iowa Department of Human Services
                            Medical Services with Preferred Drug List - RFP #MED-04-034

        Dose Consolidation

        Another key educational component concerns the savings attainable by dose
        consolidation. Many drug companies uni-price the different strengths of their
        drugs. In other words, all the different strengths are comparably priced.
        Unfortunately, doctors often mistakenly believe the opposite. They think that the
        next higher strength is double the cost of the lower strength and that it makes no
        difference if two of a lower strength are used instead of one unit of the higher.
        Therefore, a significant amount of effort should be spent alerting and educating
        providers about these situations. Another potential benefit to dose consolidation is
        that it may allow DHS to obtain savings in the mental illness medications. House
        File 619 says that drugs used for the treatment of mental illness shall not be subject
        to prior authorization. It does not prohibit limitations on the quantity of these
        drugs. Therefore it could be argued that dose consolidation strategies could be
        instituted since they only affect how many units of a particular strength of a drug
        one gets, not if one will get it. This would be very advantageous to the savings
        target.

6. Provide the following education services:
    · Subject to DHS approval, design, develop and implement an ongoing, broad-based education effort
       to ensure that providers and members are provided with timely and accurate information regarding
       the PDL and prior authorization. The education effort must begin immediately upon contract award
       and continue on an ongoing basis. This includes at a minimum Provider Manual changes and
       updates, direct mailings of written materials and web-based information. The website must be
       accessible within seven (7) calendar days of contract award. The website information must be
       approved by DHS and be accurate with regular updates as determined necessary by the DHS. Topics
       may include but not be limited to:
        a Program intent;
        b Process used to develop PDL;
        c Prior authorization criteria and processes;
        d Appeal process for denials;
        e How each group can assist to make the program a success; and
        f    The process that will be followed upon implementation.

        We will meet the requirement as outlined in the RFP. The educational effort will
        start as soon as the contract is awarded. It will be sweeping in scope and
        persistent. At a minimum, it will include Provider Manual changes, updates,
        mailings and web-based information. Any presentations could also be posted on
        the approved website. As required, the website will be operational within seven
        days and it will be kept updated.

        We have extensive experience in providing relevant clinical information and
        supportive pharmacoeconomic data to targeted high volume prescribers. This
        effort, called the Physician Directed Drug Initiative (PDDI), identified
        opportunities for prescribers to select cost effective clinically approved



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medications for a variety of medical needs. It included targeted mailing of price
specific information relating to high impact diseases as well as information
supporting improved member health care outcomes. PDDI resulted in significant
changes in prescribing behaviors resulting in direct cost savings.

As a result of the PDDI effort we became experienced at meeting with a wide
variety of physician groups and working in numerous presentation formats. Due to
our subsequent efforts with PA and PDL we met frequently with hospital, medical
associations, medical societies, health centers, larger practices and residency
programs. We learned to tailor the presentation the needs of the group. Certain
components like program intent, developmental process and PA criteria would
always be included; however for some groups we would customize the PDL
section presentations. We would detail and emphasize the various PDL areas that
can be accessed. Along with handouts, we reviewed implementation timelines and
emphasize any differences in how established versus new users are treated.

We will create a customized website for Iowa. Although it is probably true that
many providers will not choose to use a website to access information, we have
found that the providers who are so inclined are rather rabid about demanding this
option. Internally, a website is also ideal for archiving all valuable pharmacy
materials in a readily accessible format. We currently provide other ancillary
materials such as enrollment applications for email newsletters, disease
management materials, a variety of pricing reports along with program information
on the website.

It may be useful in the future to consider posting PDL provider data on the web for
prescribers to access. This could include member-specific data to help them
manage their members such as recent drug profiles or PDL compliance reports. If
pursued, the following steps would be taken to ensure confidential information
remains secure, and that those providers who would like to use this resource may
do so conveniently.
· Access to this confidential information will be handled with the best security
    and encryption available using 128 bit SSL certified login and encryption, and
    will therefore be in compliance with HIPPA regulations.
· In anticipation of security and provider convenience, we will provide on-line
    provider registration for those providers who wish to obtain secure access to
    their information.
· Once registered, the provider may log on to, access, and view only their
    information through their web browser.
· We will develop on-line technical specifications, helpful tips, instructions, and
    answers to frequently asked questions to providers regarding on-line access.




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·   We will provide telephone technical support to assist providers in setting up
    their secure connection.
·   For those providers who wish to use this service, we will also provide a ―list-
    service‖ email system to notify providers when new and important information
    is published to the website.

In the future we envision posting provider pharmacy outcome data on the web site.
In order to maximize the effectiveness of this drug outcome reporting tool, our goal
is to provide the ability to ―drill-down‖ to the much more basic parts of the
information that makes up the provider‘s outcome report.

All PDL and relevant drug and disease management information, letters, and
bulletins will be published to the website archive and will be available for viewing,
and also downloadable in multiple formats.

The web site will be immediately updated following the generation of the quarterly
PDL compliance and drug outcome reports and mailings. This includes all drug
lists, letters, bulletins, and outcome reports.

Although it is equally important to educate all providers, we suggest first focusing
on high-volume providers:

Educate High Volume Providers

We provide on-site PDL educational programs in order to facilitate an
understanding of the program goals and to acquire the cooperation necessary to
ensure success.

Attendance at on-site presentations is actively encouraged and quite successful. It
has been our experience that incorporating the audience‘s prescribing data into the
presentation is extremely engaging and effective. Being able to show the provider
their own volume of prescriptions, their detailed prescribing irregularities and the
many opportunities for improvement is of paramount importance. Sending
provocative provider-specific data will often open the door for an invitation to
explore the matter further.

In the framework of a PDL program, the most important prescribers to concentrate
on educating are the ones who have a similar alignment of interests. These
prescribers are philosophically, intellectually or financially motivated to both give
and accept assistance in the matter of keeping health care affordable. Several
hundred prescribers are responsible for an inordinately high percentage of the drug
budget and are crucial to the success of the PDL.




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    A further consideration is the division of the Medicaid drug benefit into two broad
    categories. The essential areas of the Medicaid drug benefit for PDL educational
    efforts to focus on are the drugs that are commonly prescribed by most physicians
    and that:
    · Have less expensive therapeutically equivalent alternatives, and
    · Form a large fraction of the drug budget and in some cases can be:
        - Consolidated, or
        - Stopped, or
        - Curbed with limits.

    Within this framework, the less essential drugs to address are the low volume, high
    expense medications. The use of such drugs, representing about 20 percent of the
    Medicaid drug budget, is best addressed with specialty-specific disease
    management activities.

·   Assist DHS in developing communication strategies for Medicaid members, Medicaid providers,
    pharmaceutical manufacturers, advocacy groups, DHS staff, DHS contractor staff and others with
    an interest in the PDL and prior authorization programs. No program materials may be distributed
    unless approved by DHS. The communication strategies include, but are not limited to:
    a Direct training of providers to educate them;
    b Direct involvement with constituent groups to facilitate their understanding of the program and
         the processes that will be followed; and
    c A combination of live trainings, telephone support, web-based information and direct mail.
         This includes printing and mailing services.

    We will assist the state in developing and implementing communication strategies
    as requested for all of the groups described in the RFP with respect to both the
    PDL and its PA components. We will distribute information only with DHS
    authorization.

    We have extensive experience in all the described communication strategies. We
    have experience in live trainings with state staff, doctors and pharmacies. We have
    been involved in working with various constituent groups including the legislature.
    Telephone support, the Internet, and direct mailings will be used to augment the
    educational efforts. For certain vital providers, targeted face-to-face discussions
    may be worthwhile. These discussions may include information gleaned from the
    provider and member database and related pharmacy claim information. This may
    be accomplished as part of a seminar program or video learning program made
    available utilizing recognized experts in various health care issues.




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    Provider Training Materials and Training Sessions

    We provide educational, clinical, and pricing information to all designated
    providers. In this context, the definition of provider includes any professional that
    either can currently prescribe or will soon be able to do so (physicians, mid-levels,
    residents, medical students). As mentioned earlier, it has always been our practice
    to tailor the materials specifically to the audience at hand.

·   Monitor and report on outcomes of the educational efforts.

    Providers, both pharmacists and physicians, need to be thoroughly educated
    concerning all aspects of the PDL and prior authorization process. A provider‘s
    understanding of the PDL is inversely correlated with their frequency of contact
    with the PA system. As the array of choices widens within the PDL, the need for
    prior authorizations proportionately diminish.

    Prior authorization is an effective but potentially expensive cost management
    technique. If physicians do not understand exactly what is and is not subject to
    prior authorization, many prior approval requests will be submitted needlessly. As
    more drugs are affected by the PDL and as the rules grow more complex with
    respect to exemptions and criteria exceptions, provider confusion will flourish and
    non-required PAs will multiply. New PDLs and PA systems often produce a 10 to
    15 percent rate of unnecessary PAs.

    There are many metrics readily available to measure the success of educational
    efforts. As noted above, one is the rate of submitted PAs that were unnecessary.
    Another is provider correspondence. These should all be logged and reviewed,
    regardless of whether they are telephone calls, facsimiles, electronic, or letters.
    Themes, including ignorance and inadequate preparedness, will be readily
    apparent. Feedback forms can be handed out and collected at presentations.
    Comment forms can be posted on the website and included in mailings.

    A sub-optimal level of comprehension exacts a toll on many fronts. The provider
    wastes time needlessly and may resent the program. The member thinks they need
    a decision before they can pick up the drug. The PA staff squanders time and
    indirectly the state‘s resources.

    Inefficiencies of this sort are not completely avoidable but they are amenable to
    educational interventions. In a broad sense the educational efforts must instill a
    working knowledge of:
    · PDL composition by physicians, pharmacists, and members
    · Prior authorization process by the same parties
    · Criteria for approval of non-preferred medications



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    ·   Exempted drugs, conditions, members, and providers
    ·   Emergency script rules (and correct overrides for pharmacists)
    ·   Processes for interacting with the P&T and/or DUR committees concerning
        PDL changes and the addition/revision of criteria
    ·   Administrative rights, Fair Hearing availability for members

    While all of the above components are essential for success, they remain
    insufficient to maximize the savings opportunities afforded by a PDL and PA
    program. In order to capture this additional level of savings the state must interact
    aggressively with providers using readily available pharmacy data. The state must
    routinely share provider-prescribing data with the providers themselves. The focus
    of this data is to:
    · Let them see how well they comply with the PDL.
    · Show them how their prescribing compares to their peers.
    · Investigate aberrancies and intervene with the outliers.
    · Reward the superior providers with earned benefits like specific PA
        exemptions for periods of time.
    · Periodically assess comprehension of the frequent provider communications.
    · Provide useful feedback to physicians that submit unnecessary PAs.

    We have included an example provider PDL compliance report at the end of this
    section (PDL Attachment 02).

·   Coordinate with the IME Provider Services contractor in training.

    We will coordinate all provider trainings with the IME Provider Services
    contractor. In addition, we will forward all pertinent training materials to the
    contractor to keep them up-to-date with current PDL and PA practices.

·   Recommend to DHS education and notification processes and methods that minimize transition
    disruptions.

    We will offer a number of suggestions in the areas of education and optimal
    notification process that will minimize transition disruptions. One of the first
    priorities is the provider address file. No amount of notification is going to help if
    it does not get to the right place. The more locations the information can be posted
    the better. Provider groups, hospitals, and professional associations may agree to
    either post the educational material on their websites or provide web links to the
    PDL. Many advocacy and society newsletters were more than willing to provide
    space. Our mailings have extensive checklists to remind us who gets what notices
    and whether they receive part or all of scheduled quarterly mailings.




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·   Design and implement targeted educational efforts approved by DHS to improve compliance among
    outlier providers in order to maximize the effectiveness of the PDL.

        Inevitably there will be providers that adversely affect the success of the PDL.
        These outliers, and they are few in number, will cause headaches far out of
        proportion to their size. They may be philosophically opposed to the restraints
        imposed on their professional autonomy. They may be ignorant or oblivious.
        They will be loud and they will be costly and DHS will need to be prepared. We
        spend a lot of time and effort profiling the practices of providers. With some
        doctors it is not possible to reach mutual agreement on what the best drug is. If
        you want to change their minds or at least their behavior, you will need to be
        persistent and prove repeatedly that the PDL choices are helpful or not harmful.
        This means showing them population and practice level data that PDL choices
        result in good health care outcomes. Finally, there may be some providers so
        recalcitrant that extraordinary measures like individually restricted prescribing
        privileges, across the board prior authorizations and Medicaid provider expulsion
        may have to be considered.

        In the remainder of this section, we discuss our various efforts directed at
        improving the understanding of and compliance with PDLs and PA with the typical
        provider and then with the more difficult variety. This is so vital to the long-term
        success of the PDL that we want to devote extra attention to the tools and methods
        available.

        Before we provide additional details, it may be worthwhile to consider approaching
        the education issue from the vantage point of the P&T Committee. The P&T
        Committee must be extensively involved in any strategy developed aimed at
        educating physicians. The three essential elements of any specific strategy are
        physician leadership, effective incentives, and tools for improving performance.

        Effective incentives may include:
        · Having a significant portion of compensation at risk
        · Consistent performance measures
        · Regular and timely distribution
        · Simple and intuitive programs
        · Evolution over time to meet new challenges

        It is also evident that the P&T Committee must support the various tools for
        improving performance such as quality management, clinical guidelines, case
        management, disease management and health risk assessment.




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The clinical literature also suggests that different types of interventions may work
better for different types of clinicians. Pragmatic doctors are best aided by concise,
bottom-line information from reputable sources, removing obstacles and strong
incentives. The knowledge-seeker must be handled with journal articles,
professional meetings, guidelines and the removal of major impediments. The
traditionalist benefits from academic counter-detailing, minimal obstacles,
reminders, feedback, rewards, penalties, and reinforcement. The receptive
physician can be reached with continuing medical education, sound guidelines, and
obstacle removal and are minimally affected by rewards and penalties.

Profiling involves providing physicians with data showing how their performance
compares to their peers. We will perform a wide variety and high volume of
provider profiles each quarter. There are many reasons why profiling is employed
so frequently. First of all, profiling is an excellent source of performance data to
feed back to physicians. Most doctors are firmly committed to the tenet of self-
improvement. Better performing providers appreciate the confirmation of their
quality work. Others respond to the challenge of further improvement.

Although profiles are mirrors, they can be subject to distortion. Depending on the
profile measure, case-risk adjustment may be necessary to eliminate clinically
significant distortions. Typically adjustments are made for differences in age and
gender. In certain situations case-mix adjustments are made for varying levels and
severity of co-morbid medical conditions. This requires either integrating non-
drug claims or inferring diagnoses from drug profiles.

Unfortunately, age, gender, and disease case-mix adjustments alone probably
explain only 4 percent of the variation seen in outlier providers. There are many
other profiling methodologies to consider. The accuracy of the claims data is
hindered by the increasing tendency to submit creative or ―power‖ bills aimed at
maximizing reimbursement. Sample sizes are crucial. Many experts point out that
the member‘s prior utilization or experience is a much stronger predictor of
variation than known case-mix variables. One way to obtain a good profile is to
mimic the HMO practice of purposefully selecting healthy members. Another
alternative to this process is to form fairer comparators. This might only involve
comparing a pediatrician to other pediatricians. Intra-specialty profiling demand
extra care and mitigate the need for complicated risk adjustments.

Depending on the situation, we can employ different physician profiling
methodologies. A guideline-based system (ETG's) looks at what a physician does
about disease episodes relative to a set of predetermined practice standards.
Practice based methodologies (ACG's and CCI) approach profiling from a
population-based perspective. The community determines the normative standard.
Physicians are compared to their peers in the community, not to a remote,


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prescriptive guideline. Regardless of the importance of physician profiling
systems, there is a slow transition to outcomes profiling that enhance the quality of
care for members.

PDL Compliance

The compliance report provides data on prescriptions, members, dollars paid, and
spending PMPM for preferred and non-preferred drugs across a large number of
drug categories. In any given category, prescribers may view their scores with
respect to what percent of their prescribing was preferred.

Compliance scores provide valuable information. They monitor the success or
failure of the PDL. They identify problematic drug categories and nettlesome
individual providers. Regional groupings occasionally reveal pockets of like-
thinkers. This may be helpful when considering interventions. Strategically
located counter-detailing is often rewarding.

Compliance scores can also be used as incentives. Physicians with exemplary
scores can be granted privileges such as exemption from specific prior
authorization requirements. Each earned exemption is valid until the next quarterly
report is run. Many physicians appear to value relief from administrative processes
as much as they do monetary rewards. When it is clear that providers understand
and comply with the PDL most of the time, it is reasonable to allow those same
providers greater autonomy as long as we maintain vigilant monitoring.

We will distribute reports to providers who prescribed drugs for at least ten (10)
members during the quarter. For PDL, the reports will provide essential feedback
to physicians as to how cost-effective they are prescribing compared to their peers.
For PA, it allows physicians to gauge their performance for the purpose of
exemption to PA.

GHS has the ability to respond to the recommendations of specialist and supportive
physicians through our capacity to engage in extensive studies of drug utilization
data. Dealing effectively with the specialty communities requires both in-depth
knowledge and the commitment to fully explore available data. Studies engage the
critics in a productive conversation. These studies reinforce that all parties can be
reassured that the PDL and PA programs are promoting quality health care.




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7. Provide information for system changes as follows:
   · Develop and implement a DHS approved procedure for communicating system changes to all affected
      contractors and State agencies.

        We recommend a simple and straightforward procedure that is also practical,
        thorough, and done in such a way that it meets both administrative and technical
        needs. We suggest setting up email groups for each affected contractor and state
        agency that contain email addresses of all necessary stakeholders. This
        methodology would be used to distribute all information about PDL, PA, and SR
        system changes to other IME vendors affected by the changes.

    ·   By no later than ten (10) business days after approval of the PDL by the DHS, the contractor shall
        transmit the PDL to: (1) the DHS and (2) the State’s fiscal agent or IME POS contractor. The
        contractor will design, develop, test and implement an electronic interface with the State’s fiscal
        agent to assure timely transmission and uploading of prior authorization data. The contractor must
        ensure computer system capability and interface between the contractor and the State’s fiscal agent
        or IME POS contractor so that the information provided by the contractor can be accurately
        accepted.

        The first step in designing an electronic interface to deliver the PDL to the IME
        POS contractor is to establish business rules of how the PDL will operate in the
        POS. From these rules, a file format, data content, and programming can be
        developed and tested. Sign off would be based upon whether the developed
        systems meet the business rules. As we have discussed throughout our proposal,
        there are PDL tools such as ―automated prior authorizations‖ (grand-fathering, step
        therapy, etc.) that, if selected by DHS as an appropriate tool, will need to be
        programmed on the POS.

        Transfer and transmittal of data should be done via a secure electronic exchange.
        For example, we would recommend secure email exchange using PGP, sFTP
        (secure ftp), or normal FTP with encrypted files utilizing PGP. If DHS or the POS
        contractor utilizes another proprietary file transfer system, we will be compatible
        using only standard protocols to interface with them.

        We will verify that transfers and transmittals of data are received. We will
        incorporate quality control measures to ensure that the entire transmission was
        sent, received, and electronic copies of all transmissions will be archived.

        We will have an acceptable electronic interface with DHS and the State‘s fiscal
        agent to provide the transmission of data. This transfer will be performed as
        described above within ten (10) business days after receiving DHS (written)
        approval of the PDL.




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·   The contractor shall electronically transmit to the State’s fiscal agent or IME POS contractor, the
    list of drugs requiring prior authorization due to the level of participation on the PDL in a format
    approved by DHS.

    Much of the same protocol discussed in the previous two sections will pertain here.
    IFMC will provide the assistance to ensure appropriate connectivity of PDL/PA
    data to the POS. IFMC has experienced Data Processing staff and IT departments
    to assist in establishing this connectivity. Connecting to POS data is of vital
    importance for a successful running PA program; therefore, we will dedicate the
    staff and resources to assist in this connection.

    We will work with DHS and the POS contractor to determine the best means of
    communicating the drugs that will require prior authorization based upon the PDL
    rating and rules. Once the format is established and approved by DHS, the PDL
    will be transmitted in the approved format and on a DHS approved schedule.

    We will assist the POS contractor in understanding the data and the requirements
    being placed upon the claims processor to accommodate DHS‘ PDL driven PA
    program. The actual implementation of the necessary claims processor edits to
    accept the PDL based rules reside solely on the POS contractor.

    Our PA system would need access to the following information:
    · Client eligibility
    · PDL
    · PA rules
    · Client profiles (pharmacy claims history)
    · Pharmacy providers (NABP numbers, addresses, facsimile numbers, etc.)
    · Member doctors (DEA numbers, addresses, facsimile numbers, etc.)

    In addition to the information necessary to administer a PA system, we desire to
    establish a positive working relationship with the current POS contractor. There
    are times when PA pharmacists need to access real-time information off the claims
    system or when the adjudication claims help desk needs to find out PA information
    from the PA help desk. Our system is able to accommodate these interactions, and
    we expect the current vendor‘s system to do the same.

    Ideally, we would like to see a telephone system setup so help desk calls to either
    vendor could be transferred. This would eliminate the need for the provider or
    member to dial another number to get service. Our telephone system has this
    capability.

    Current eligibility information is another point of information that sometimes
    demands a solid working relationship with the IME vendor responsible for



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    administering eligibility. Our customer service standards are such that we strive to
    respond to member requests immediately, and if the issue cannot be resolved
    quickly, to assure a prompt response. Having a strong working relationship with
    DHS and other vendors plays an important role in accomplishing this high level of
    service.

    There are various ways to form data connections to the PA system. For example,
    we could utilize a T1 line, a VPN connection, or a FTP server. Whatever the
    method, it would need to be mutually agreed upon by the connecting parties. We
    would expect the participating parties to be in compliance with HIPAA, by either
    following HIPAA formats or developing a trading partner agreement for ―flat file‖
    exchanges.

    Our PA system is a robust system, with the ability to send data to the claims
    adjudication system on-line in real time. The member pharmacy claims data we
    receive does not have to be real time. It is acceptable for the claims history data
    accessible to the PA program to be sent in regular cycles. However, the PA
    pharmacist occasionally needs real time access. It would be helpful to have an
    account set up and accessible on the adjudicator‘s system especially for this
    instance.

·   The contractor shall also prepare and transmit the PDL list to the DHS in a format approved by the
    state agency for posting on the DHS website in addition to maintaining an external website.

    We have significant experience in producing PDL documentation and training
    material that reflect its many changes and impacts not only the vendors involved,
    but also the provider community and the member population. IFMC will support
    DHS in creating appropriate formats to represent the PDL on state approved
    websites.

    There are several possibilities in posting a PDL. The PDL to the most detailed
    level would include every NDC that is preferred and non-preferred. This list
    would include the entire drug file of over 200,000 products. When we post or
    publish the PDL, we have varying formats depending upon the intended audience.
    The most widely used format is a summarized higher-level version that shows
    selected drugs (without strengths or package sizes unless applicable) in categories.
    This gives prescribers, members, and pharmacists a way to view alternatives to
    non-preferred drugs. We will review all the format options with DHS and transmit
    to them a version for their website and also post it on our website. We recommend
    posting the PDL in an electronic pdf format.




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     ·   The contractor’s project work plan should include detailed data integration requirements and the
         steps the contractor will take to ensure successful integration.

         Our data integration requirements are outlined above. We would need to establish
         business rules and agree upon the complexity of the PDL. We will work with POS
         contractor to create the formats for the PDL data files that follow the established
         business rules and allow the POS contractor to effectively program their system.
         The drug information in these files will be based on our standard drug reference
         database.

         We will create a work plan that incorporates all the strategies mentioned in these
         sections to ensure successful integration.

Contractor Responsibilities – PDL Member Inquiries/Relationships

1.   Staff and operate a toll-free member hotline from 8:00 a.m. to 5:00 p.m. CST, Monday through Friday.
     Calls received outside of these hours are greeted by a voice message that lists the hours of hotline
     availability.

     We will have a help desk specifically set up to respond to member inquiries related to
     the PDL. The operating hours will be from 8:00 a.m. to 5:00 p.m. CST, Monday
     through Friday. For calls outside of the regular business hours, a voice message will
     announce the help desk hours and direct them to our website as an alternative way of
     submitting inquiries. In addition, we will provide the telephone system and toll-free
     line in our current office space until the IME office site becomes available. A help
     desk for prescribers and pharmacists will also be provided. This help desk will be
     related to the PDL and PA processes.

2.   The contractor will be expected to research requests and provide information back to members.

     Our help desk is backed up with professional licensed pharmacist consultants. Our
     pharmacists know point of sale systems and are available to advise and provide
     information pertaining to prospective drug utilization, proper use of prescription drugs,
     and other medical standards. Generally, their purpose is to assist pharmacists and
     members in managing health problems more effectively so members can stay healthier
     and keep costs down. The first line of responses to members will come from help desk
     staff. If there are inquiries outside of a help desk technician‘s scope of knowledge,
     they will direct the inquiry to the help desk supervisor who will then find the
     appropriate level of expertise to respond to the inquiry. All inquiries, whether by
     telephone or in writing, will be logged.




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   3.   Provide reports indicating types and numbers of inquiries received and resolution, in a format and
        schedule determined by DHS.

        The call logging system incorporates the data necessary for providing reports as
        required, including the types and quantity of received inquiries, summaries on
        resolutions, and review of all (if any at the time of reporting) outstanding inquiries.
        Please see the following section for more detail on our call and inquiry logging system,
        including on-line reporting capabilities.

   4.   Maintain telephone statistics report showing, for each month in the quarter, the number of calls taken
        and the issue. Maintain statistics on written correspondence for each month in the quarter.

      We will meet the requirement as outlined in the RFP. Customer services logs are one
      of the ways we monitor common provider issues, identify ways in which the system
      might be improved and assure an important level of Contractor accountability. We
      have a help desk logging utility called HDCALL. HDCALL identifies calls by type,
      the length of the call, the time the call was taken, details of the call, completed calls,
      and the number of incomplete calls. Reporting, such as histograms for the average call
      volume over the hours of the day, will be produced on a monthly basis. Other help
      desk activity and performance reports may be produced upon request.
C. Required Reports

   All reports will be in a format and on a schedule approved by DHS. The preferred drug list and supplemental
   rebate contractor will provide the following reports:
   1. Weekly written reports concerning negotiation of supplemental rebates during implementation.
   2. Monthly and ad hoc reports on the performance and savings associated with the PDL and supplemental
        rebates.
   3. Quarterly supplemental rebate projection reports with projections of quarterly savings broken down by
        supplemental rebates and market shift data.
   4. Quarterly rebate analysis reports with specific suggestions for enhancing rebates and/or lowering net
        pharmacy costs.
   5. Ongoing analysis and clinical reviews of the State of Iowa Medicaid pharmacy claims history and with a
        review and cost analysis of each therapeutic class at least one time per calendar year.
   6. Quarterly summaries to DHS on the activities and decisions of the P&T Committee; also a written
        report of the P&T Committee’s PDL recommendations within three (3) business days of the conclusion
        of the meeting.

        We presently employs data analysts, database administrators, programmers,
        pharmacists, and other professional staff who have years of experience creating
        customized reports. We also have specific computer resources allocated specifically
        for this purpose. We encourage and will provide consultation to determine the best
        ways to access data to respond to specific reports or requests.




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                         IFMC Response to the Iowa Department of Human Services
                     Medical Services with Preferred Drug List - RFP #MED-04-034

Reporting is a key to finding how to lower overall costs and identify ongoing savings.
By analyzing reports, managers decide how and when to change policies. Time must
be taken to analyze data, and before that, it needs to be generated. We have the
capabilities to do both efficiently and cost effectively.

The following discussion defines our reporting system and capabilities—we would
need to negotiate with DHS to discern what is expected. We have four reporting tiers
available. This approach, consisting of Level One, Level Two, and Level Three
reports along with a web-based ad hoc reporting system, provides structure to our
reporting responsibilities. Reports are intended to provide the state with information it
requires to effectively and efficiently manage its programs, as well as to develop sound
policy.

The first tier of reports (Level One) consists of standard reports that are generated
routinely in accordance with a pre-determined schedule. The content of the reports,
their format and production schedule will be approved by DHS. They are static
reports, intended to provide updated information on the same set of parameters week
after week, month after month. Copies of Level One reports can also be posted on our
website (with secured and limited access and with DHS approval), allowing a broad
audience to view the findings.

The second tier of reports (Level Two) are reports that fall between the true standard
report and a highly complex, or Level Three, analytic report. This report is run
periodically, but not in accordance with a particular, predetermined schedule. The
report usually requires some modification each time it is run; this entails the
investment of some programming time, but does not require any substantial clinical
expertise to accomplish the desired modifications. We define Level Two reports as
those that require less than thirty (30) minutes of professional resource time for
completion. The level of input necessary to run the report correctly may include the
medical director, pharmacists, analysts, and/or programmers.

The third tier of reports (Level Three) are for new analyses that are produced for very
specific circumstances. They require considerable investment of time and expertise by
GHS clinical staff, programmers, and analysts at levels much higher than that required
in the more routine, Level Two reporting.

We are able to generate reports displaying five-year trends, along with analysis of
fiscal information. Such reports prove to be not only valuable as fiscal management
tools, but also allow for in-depth study and analysis of drug utilization patterns that
will assist in DHS policymaking. We also recommend and offer reports on PA
approval rate by physician, store, day of week, PDL category, and PA volume by drug
name.




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                         IFMC Response to the Iowa Department of Human Services
                     Medical Services with Preferred Drug List - RFP #MED-04-034

A fourth tier of reporting is described below as an enhancement to the scope of work.
In addition to meeting the requirements outlined in the RFP, the following optional
reporting mechanisms may interest DHS.

This fourth avenue of our reporting system provides web-based access for independent
reporting. This system could provide authorized DHS personnel with on-line access to
a querying tool populated by the POS database. There are two aspects to this web-
based tool. The first is best characterized as a parameterized reporting module for look
up reports. Look up reports have a preset design and information pool. Users – who
will access the system by logging on to a secure website – would be prompted to
provide parameters that will establish criteria for the report.

Our experience has revealed that certain types of ad hoc reports are requested over and
over again. While the parameters for the reports change at each request, many of the
reports share the same basic characteristics. This class of reports is suitable for user-
driven ―re-specification‖ that do not require GHS professional resources for redesign.
Instead, a user can access the system, find a report format that they have seen before,
and ―re-run‖ the report, substituting their own specifications. This could allow DHS
staff to create a variety of versions of a ―favorite‖ report easily and quickly.

The second aspect of the web-based access system is a data mining capability, which
we refer to as OLAP, or On-line Analytic Programming. The system could be
populated with POS data and allow users to build their own reports. The interface for
the system relies on familiar ―drag and drop‖ technology. Users may generate output
in any variety of formats, using graphs, histograms or other visual presentations, in
Word, Excel, PDF format, and others. Like the look up reports module, this system
could be accessed through log in to a secure website.

We have the ability to provide DHS staff with web access tool training and on-going
user support.




                                                                         Tab 9 Page 282
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                                IFMC Response to the Iowa Department of Human Services
                            Medical Services with Preferred Drug List - RFP #MED-04-034

D. Performance Standards

   IFMC will meet all performance standards specified below.

                   Performance Measures – 3.2.2.11 PDL & Supplemental Rebate
                                         Minimum Standards
          No.                                 Measure                                    %
           1.   Complete required reports accurately and timely. Monthly reports        100
                are due five (5) business days following the end of the month.
                Quarterly reports are due five (5) business days following the end
                of the quarter. Annual reports are due the 10th business day
                following the end of the year whether Federal fiscal year, State
                fiscal year, or other annual period.
           2.   Be able to demonstrate annual savings in the total outlay for           100
                prescription drugs.
           3.   Provide DHS with access to all supplemental rebate agreements           100
                and related documentation within twenty-four (24) hours of
                request.
           4.   Provide the P&T Committee with required information a minimum           100
                of thirty (30) days prior to the meeting.
           5.   Provide notification to providers a minimum of thirty (30) days         100
                prior to implementation.
           6.   All providers must receive a notification of provider training a        100
                minimum of thirty (30) days prior to the training.
           7.   Provide DHS with a detailed project workplan and timeline within        100
                five (5) business days of signing the contract.
           8.   Within ten (10) business days of signing the contract provide DHS       100
                with a PDL phase in schedule.
           9.   Provide DHS with a written report of the P&T Committee                  100
                recommendations within three (3) business days of the conclusion
                of the meeting.




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                     IFMC Response to the Iowa Department of Human Services
                 Medical Services with Preferred Drug List - RFP #MED-04-034



No.                                Measure                                   %
10.   For call in which a member has a person-to-person conversation, 95    100
      percent of the inquiries whose answer is not immediately available
      to the customer service attendant will be researched and answered
      within forty-eight (48) hours of receipt of the inquiry.
11.   Maintain a service level of 80 percent for incoming calls. The        100
      service level (SL) will be calculated as follows:
      SL = (T – (A+B) ) 100/T
      Where T = all calls that enter the queue
             A = calls that are answered after thirty (30) seconds
             B = calls that are abandoned after thirty (30) seconds
12.   Answer to at least 90 percent of telephone inquiries during the       100
      initial call from the member.
13.   Respond, with a complete response, to 90 percent of written           100
      inquiries from a member within five (5) working days of receipt.




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                                                                    March 26, 2004

								
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