Tuesday, February 28, 2012

Managed Care 101 – The Prior Authorization Hoax

As managed care organizations worked on how they could prioritize pricing over medical decisions they came up with various plans to “manage” how physicians prescribed medications.  I was a member of two Pharmacy and Therapeutics Committees (P & T) that  both had this as a goal.  One of those committees had a much stricter mandate in terms of saving money.  The basic strategy used by that committee was to place a drug “on formulary” or “off formulary”.  If it was “off formulary” it was not available to any doctors within the HMO to prescribe.

The idea that all drugs within a class that had the same purported mechanism of action ruled the day.  As an example, all of the selective serotonin reuptake inhibitors (fluoxetine, paroxetine, sertraline, citalopram, escitalopram, fluvoxamine) would be considered equivalent medications and the committee would decide to place the least expensive ones on the formulary.  At the time, the major controversy was fluoxetine because there was no generic brand available and the company that produced it was notorious for not negotiating prices with hospitals and health care systems.  There was an eventual appeal by psychiatrists who presented to the committee on the unique qualities of fluoxetine.  At the time it was the only medication studied in adolescent depression for example.  Eventually a rule was passed that it was nonformulary for any physician who was not a psychiatrist.

The total cost of the drug was more of a consideration than the absolute price.  Very expensive drugs were approved that had questionable endpoints based on the fact that utilization would be low and that advocates for a particular untreatable illness would want it.  So the decision of the committee and their mandate was to reduce the use of relatively more expensive drugs that would be used fairly frequently.  In some cases, the off formulary drugs were available by “prior authorization” meaning that the prescribing physician needed to usually write up an appeal and fax it to the pharmacy or health plan and in some cases make additional calls.

The health care business has a long history of introducing layers and layers of management driven largely by the amount of money involved.  If you can successfully insert more management for even a small percentage of the available health care dollars you will potentially have a multi billion dollar business.   The management of pharmaceuticals is no exception and the Pharmacy Benefit Manager or PBM was born.  The task of the PBM like the task of a P & T Committee is to control the prescribing physician and force them to choose a medication based on the lowest cost.  Individual variation between patients and all of the other variables that physicians have to take into account do not matter.  If the physician or the patient thinks that they do – it will take a prior authorization for the alternate medication.  

The PBM model was designed from the outset to take a central role in the management of prescription drugs by replacing the relationship that the patient has with their health plan, their pharmacist, and even their physician.  How do I know this?  Take a look at their game plan from an internal memo in the diagram below.  This diagram was taken from an internal memo from over 15 years ago.  The structure depicted in the diagram is the system of care that exists today and the one that 95% of patient have their benefits managed through 

The prior authorization fallacy is essentially the same as the utilization review fallacy.  The most charitable interpretation is that it assumes that a person who is not necessarily a physician and who has no personal responsibility for your care can substitute their judgment based on a cost consideration.    

The diagram is also instructive in the way that the prescribing decision (and the dispensing decision) is trivialized as a "habit" rather than a decision that takes into account the evaluation and personal knowledge of the individual patient.

Today all physicians are routinely subjected to prior authorization procedures that waste significant amounts of their time and the time of their staff in order to make seem like the PBM decision has some degree of medical legitimacy.  The cost to medical practices is huge and completely unnecessary.  If PBMs are really businesses there is really no legitimate reason that they need to include physicians in their decisions of what medication should be covered.  They just need to plainly state that to their patients and deal with the public relations problems instead of wasting about one million hours of physician time per week.  In the weeks that follow I will demonstrate just how far this business plan has infiltrated medicine and psychiatry and what the response has been to date.

George Dawson, MD

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