These days, Phil Bredesen and Gordon Bonnyman don’t see eye to eye on very many issues. Quite possibly, the governor and his old-friend-turned-public-rival hold only one sentiment in common when it comes to this state’s Medicaid program. In Bonnyman’s words: “Not to put too fine a point on it, but we’re all drugged out in Tennessee.”
The 57-year-old public interest lawyer in the bug-eyed spectacles isn’t talking about the state’s high levels of methamphetamine abuse; he’s talking about its predilection for prescription drugs—a $5-billion-a-year habit that’s been incredibly hard to kick. So hard, in fact, that Gov. Bredesen decided it was necessary to stage an intervention: over advocates’ objections, he made plans to remove a few hundred thousand adult Tennesseans from the state’s health insurance rolls—before reinstating up to 97,000 of them—and limited the number of prescriptions available to the 1.1 million who remained. That, the governor said, was the only way the state could save TennCare: rein in the skyrocketing cost of prescription drugs by cutting the rolls and capping the number of scripts-per-enrollee.
So he did. Now that the enrollment and pharmacy cuts have been put into place, effective management will be crucial to the program’s success. After all, both advocates and the administration agree that bad management got the state into its TennCare crisis; could good management, over time, get the state health insurance plan back to the national model it once was?
Perhaps. But after Bredesen—who made his fortune as a successful HMO entrepreneur—is done reforming TennCare, it may look more like a private health plan than a public one. Today, for example, drug purchasing decisions are made by state bean-counters (themselves hired from the private sector) using clinical and cost information and recommendations supplied by the private company that manages TennCare’s pharmacy benefit program. A high-level committee of doctors, pharmacists and an attorney offers clinical input, but it can be overruled for financial reasons—although the state doesn’t tell them what those reasons are, citing contractual requirements with drug companies.
Taxpayers—among them sick TennCare recipients—are left to trust that state officials will make the best possible drug purchasing decisions both for their health and their pocketbooks. No one’s checking their work when it comes to clinical benefits vs. financial costs because no one outside a handful of government officials and a private contractor is allowed to see all the information. State officials don’t even write numbers down for fear they’ll become public. Meanwhile, effective drug use review—another management technique designed to curb pharmaceutical costs—still doesn’t seem to be happening.
As the state implements painful health care cuts that are putting a serious strain on some Tennesseans’ ability to obtain health care, prescription drug management moves to center stage. To be sure, TennCare has gotten leaner—but has it gotten any smarter?
Say you’re a TennCare recipient who’s making a visit to the doctor’s office this month. No matter what you have wrong with you—hypertension, acid reflux, allergies, diabetes, herpes, MS—unless it’s on a short list of the most severe diseases, you get five prescriptions for the month. Up to two may be brand-name medications and the other three must be generics. Your doctor has a seven-page preferred drug list, or PDL—here’s where the many abbreviations start flowing—from which your drugs are chosen; if for some reason your “provider,” as doctors are called in the medical care industry, believes that a non-preferred drug would be best for you, she must get “prior authorization” (PA) before a prescription will be filled. High cholesterol? Zocor is preferred, along with two other drugs; Lipitor, on the other hand, is one of six meds listed as “PA Required.”
Who decides which drugs make the list? The murky answer to that question involves a state pharmacy board, a handful of TennCare bureaucrats, a politically connected managed care company based in Virginia and the pharmaceutical companies themselves—depending on the rebate they’re willing to offer the state.
First, there’s the Tennessee Pharmacy Advisory Committee, or TPAC. It’s a board comprised of 15 doctors and pharmacists (though two seats are currently vacant), including one enrollee advocate attorney, tasked with developing and reviewing the PDL. Appointed by the governor, the lieutenant governor and the House speaker, this volunteer board reviews clinical information on each drug and recommends which ones should be included as “preferred” and which ones doctors need prior authorization to prescribe.
But TPAC is relatively toothless; the company with a $38 million contract to manage all aspects of TennCare’s prescription drug plan—to compile and implement a list of covered drugs and to make sure providers aren’t deviating unnecessarily from that list—is called First Health, a corporation whose website boasts its “core competency” is “managing care while still managing to care.”
First Health gathers data on various drugs and presents them to TPAC and to TennCare administrators directly. Company officials run TPAC meetings and control a multi-state purchasing pool that enables states to join together to achieve greater prescription drug cost savings. They collect cost and rebate information from drug manufacturers and turn it over to the state very secretively, careful never to leave a paper trail, withholding so-called “proprietary” information even from TPAC members.
The committee members are specifically authorized by statute to view confidential drug cost information—but only if the TennCare bureau chooses to let them, which it doesn’t. (State attorneys say that would violate the bureau’s confidentiality agreement with drug companies.) Besides, TennCare spokeswoman Marilyn Elam says cost considerations fall outside the purview of TPAC. “Ultimately, it is the TennCare Bureau’s decision as to what drugs to put on the PDL,” Elam says. “In terms of pricing and our budget and what we pay, we’re not relying on those physicians and pharmacists to make those major financial decisions for us.”
First Health’s singular role in the PDL development and review process doesn’t sit well with some TPAC members, who, again, are appointed by the governor. “They have not been very good about sharing information or about keeping the committee aware of what they are doing,” says Edward Capparelli, an East Tennessee physician with over 10 years’ experience on drug formulary committees of one kind or another. Capparelli says it’s particularly frustrating that TennCare administrators—who work closely with First Health officials—often cite cost considerations in overruling the committee’s decision on a drug but refuse to share net cost information. (In interviews with the Scene, three other TPAC members echoed that frustration.)
“That’s the way a private commercial insurance program might do business, but this is the government…. There’s no reason not to share that information,” former TennCare pharmacy director Leo Sullivan says of the state’s decision to withhold cost data. Sullivan says the contractor seems to be running the show. “First Health has become almost autonomous; there is very little oversight by the state. When I was there, I always kept a tight leash on the PBM [pharmacy benefit manager]. The TennCare Bureau made policy decisions, not the PBM. Now it’s calling the shots.”
TennCare officials deny that First Health has too much power. “The TennCare Bureau, working with our PBM, decides whether or not to implement the TPAC’s recommendation,” Elam says. “Ultimately, it is the bureau’s decision…. They’re our contractor. They work for us.”
Capparelli, the most outspoken of TPAC’s 15 members, questions the reliability of the data the company provides his committee. “First Health puts together a large packet for us,” he says. “Very frequently, their information is old information and is somewhat biased. Often, the information is there to support their recommendations.” Capparelli says that before each quarterly meeting—lately the daylong meetings have been held monthly—he talks to all sorts of medical professionals, including pharmacists, about clinical drug data. “There is a great deal of very reliable information from journals that [First Health officials] conveniently ignore when it doesn’t support their recommendations,” he says.
James Powers, a Vanderbilt physician who serves as chair of the committee, agrees that TPAC members are feeling a little voiceless these days. “In general, committee members have been frustrated with not having more say in the decisions that are made” about drug selection, he says. Powers understands that financial considerations are always relevant to prescription drug choices; he could just use more information. “Because of the multi-state contract, it’s much more difficult to get any sort of financial information from First Health,” he says, citing the company’s excuse for keeping financial data secret. “And the state has always been quiet about what cost savings we’ve achieved from the preferred drug list. We would estimate that it has been a significant amount—perhaps even enough to resolve the TennCare finance problems—but unfortunately we don’t have the accurate numbers to deal with.”
In addition, at least one major drug company, GlaxoSmithKline, is complaining loudly these days about the way TennCare handles its pharmacy benefit. GSK’s state drug contract was set to expire June 30, so in early May, company officials say, they approached TennCare about renewing it. “We put together what we thought was a really nice package to continue access for TennCare patients to our drugs,” says Jack Graham, GSK’s area vice president of state government affairs. He says TennCare chief pharmacy officer David Beshara seemed very receptive to the mega drug company’s $16 million rebate offer. Then, in mid-June, TennCare informed GSK that its contract would not be renewed and, thus, its drugs would no longer be listed as “preferred” on the TennCare drug list. “We got all the way to the altar, I thought, with the state,” says Graham, noting that state officials said they wanted to protect the integrity of the multi-state pool, which GSK has chosen not to join. “We’re still trying to figure out what the hell that means.”
Beshara explains that drug companies often offer the multi-state pool better rebates if they get more exclusive access to state Medicaid patients. For example, if TennCare will agree to make Drug X the only preferred drug for a particular class—say, intranasal antihistamines—X’s manufacturer will give the state a deeper discount than if it has to compete with three or four other drugs for preferred status. “It’s the economics of any selling situation,” says Beshara, a trained pharmacoeconomist who oversees a TennCare Bureau staff that performs clinical and economic drug cost/benefit analyses. “If you’re the only product on the shelf and you’re selling 100 percent of the time, the manufacturer can afford to have a lower profit margin because you have higher sales.”
Graham, the GSK vice president, says limiting drug choices aren’t in patients’—or his drug company’s—best interest and notes that the federal government encourages states to make deals outside of multi-state pools. “It limits competition,” he says. “At the end of the day, when the doctor sees the patient, he should have everything at his disposal to treat the patient.”
At the very least, it should be noted that reducing the number of preferred drugs—and increasing the number of drugs that require prior authorization—is in First Health’s financial interest: the company gets paid a fee every time a pharmacist calls its office for authorization.
Historically, First Health’s poor performance has caused some expensive headaches for TennCare officials. Citing a failure to live up to its contract, the state withheld several payments early in First Health’s tenure as pharmacy benefits manager, a relationship that began in January 2004. In December 2004, the company mistakenly shipped thousands of pounds of unopened, returned patient mail to TennCare’s offices, setting off a flurry of exasperated emails that eventually wound up as court evidence. The next month, state officials complained that First Health was continuing to pay insurance benefits for dead people—after repeated notices from the state that they were dead. “[First Health’s] failure to [stop paying claims] has cost the state money, this is unacceptable,” wrote Darin Gordon, TennCare’s chief financial officer, in an email to a colleague that was introduced at trial. TennCare officials had such a hard time dealing with the contractor, according to the court testimony of chief medical officer Wendy Long, that they considered terminating its then-$15 million contract.
But instead, they moved to triple it. In March 2005, TennCare Deputy Commissioner J.D. Hickey said First Health was having its contract expanded to a maximum of $45 million—which was later reduced to $38 million—because even though it hadn’t won any friends in Tennessee, it was performing well in other states. (Besides, he told The Tennessean, the newly amended contract contains clearer penalties, known as “liquidated damages.”) More recently, state Finance Commissioner Dave Goetz testified that some of First Health’s Tennessee problems stemmed from provisions of its contract that were “inartfully drawn.”
Under the amended contract—the amendment was not subject to competitive bidding—the company can almost triple its revenue from the state by implementing a host of new “edits” (the criteria that control how many and what type of prescriptions are dispensed on a case-by-case basis), as well as putting the five-prescription limit, newly required co-pays and the elimination of over-the-counter drugs into place. Another major task assigned to First Health in the amended contract is the implementation of a comprehensive drug utilization review program—an ongoing, systematic analysis of the prescription, distribution and usage of each drug that’s paid for by TennCare. Tennessee has been required by federal law for years to have such a program, although it is only now implementing one.
As it turns out, First Health has plenty of friends in Tennessee: the company was recently purchased by Coventry Health Care Inc., the health care outfit founded in the 1980s by Phil Bredesen himself. Longtime Bredesen friend Dick Lodge lobbies for First Health on Tennessee’s Capitol Hill. Nashville attorney Byron Trauger, another friend of the governor, served as Coventry’s chairman in the mid-1990s. In a March 2005 Tennessean article, both denied helping First Health get the $30 million contract boost, and at the time the governor, through a spokeswoman, said he had no role in the process.
Long, TennCare’s medical chief, testified in federal court that she was aware that First Health had a lobbyist by the name of Dick Lodge; Goetz testified that Lodge had “advocated with the administration on behalf of First Health.” But in a recent interview with the Scene, Goetz said that Lodge played only a small role in securing the contract amendment. “That was all done directly with First Health,” he said. “Dick had very little involvement in that, almost none.”
TennCare reform has at times made for strange bedfellows. Low-pay public interest lawyers representing low-income Tennesseans find themselves publicly agreeing with one of the world’s largest pharmaceutical companies. Enrollee advocates like the Tennessee Justice Center’s Bonnyman—and physicians like Powers, the TPAC chair—say they’re not demanding a totally open formulary; they just want one with a range of treatment options that preserves doctors’ ability to do what they feel is best for their patients.
But within limits, of course: implementing a preferred drug list is only the leading edge of TennCare’s war on high drug costs. Those who have sought to preserve full TennCare enrollment say an even more important cost-saving device is retrospective drug utilization review, or retro-DUR for short. That’s the process in which the pharmacy benefits manager tracks drug use in the state to see which drugs are being overused and why; it enables the PBM (First Health) to chart abuse, to find lower-cost alternatives when the PDL is proving insufficient or to encourage doctors to bring their prescribing habits in line with their regional and disciplinary colleagues’.
Again, strange bedfellows. “At pharmaceutical companies, sales representatives use retrospective drug review,” says Bonnyman, extolling the efficiency-creating virtues of the private sector. “They use profiling: ‘Dr. Smith, you haven’t been prescribing enough of the purple pill this month,’ ” he says in mock salesperson voice. If you’re the TennCare Bureau, he says, “maybe you’d want to look at the fact that the people in the marketplace are using it for the other side.”
Goetz, the state finance commissioner, says Bonnyman’s view is overly simplistic. “Look at how much money drug companies spend” on marketing, he says, citing a multibillion-dollar figure. “How is the state of Tennessee going to counter millions and billions of dollars that is spent on marketing drugs?” Goetz says the state can’t match resources with deep-pocketed drug companies, but nonetheless, he says, the state is implementing its retro-DUR program. Besides, he says, “Until you have the ability to actually enforce changes in prescribing behavior, you aren’t going to actually have a retro-DUR program.” Goetz says the advocates kept the state from implementing drug review, a major point of disagreement between the administration and the Tennessee Justice Center.
For whatever reasons—including both mismanagement under Gov. Don Sundquist’s watch and a lack of proper reforms under Bredesen (he blames the consent decrees)—TennCare has never had a very sophisticated drug use review program, and First Health’s costly new contract aims to change that. Earlier this summer, the TennCare DUR Board (administered by First Health) sent out letters to physicians whose prescribing habits seemed to be out of line with those of other TennCare prescribers. Joey Hensley, a Republican state representative and doctor from Hohenwald, got one. “Dear Prescriber HENSLEY,” the form letter began, before politely describing a “potential clinical problem”: he was overprescribing hydrocodone.
Unfortunately, the attached pages didn’t mention anything about hydrocodone. In fact, Hensley was listed as prescribing 11 percent controlled substances, while the average provider’s level was 14 percent. He had seen almost 10 times as many TennCare patients as the average provider—542 to 50—which would account for his patients having more prescriptions each. (They’re sicker.) He was prescribing 99 percent generic drugs; in fact, Hensley seemed to be a model TennCare primary care provider. He wrote a quick note on the response form—“information is useless”—briefly describing the report’s flaws and asking First Health administrators to call him. According to his court testimony, they never did. (They also didn’t respond to the Scene’s requests for comment.) Powers, chairman of the state’s pharmacy committee, got a similarly unhelpful letter.
As of July, meaningful drug use review wasn’t yet happening under TennCare. But how important is it anyway? “We’re doing a good job of doing retrospective DUR, but it’s not the panacea that I’ve heard it made out to be,” says Beshara, the TennCare pharmacy director, testing the limits of the word “good.” Goetz says that, in other states, drug utilization review is only saving $10 million to $20 million—again, according to First Health—which is hardly the significant savings advocates suggest. But Bredesen, in a February interview with PBS’s News Hour With Jim Lehrer, conceded that advocates who call for DUR, among other reforms, are “exactly right. There’s a lot of things the state could have done over the years to have averted this. There are no ‘bad guys’ in this thing.” In the governor’s mind, if these comments are any indication, retro-DUR might have saved the state significant money had it been implemented sooner.
So is it too late? The governor’s reforms are underway: disenrollments and drug limits have gone into effect, and medical service restrictions are slated to be next. The federal government has signed off on Tennessee’s pharmacy changes and is reviewing medical benefit changes; barring a special session convened by a vote of two-thirds of the state legislature, it looks like things will go Bredesen’s way, albeit a way he never intended. But there will be costs.
In fact, that is perhaps the only other point that advocates, physicians and administration officials agree on: cutting patients from TennCare and limiting the number of drugs available to those who remain will produce “downstream costs” that the state has not yet calculated. It is injecting millions of dollars in an attempt to strengthen the long-neglected “safety net” of hospitals and providers that grant coverage to the uninsured, but that won’t be enough.
“No state has done this, and there’s a good reason for that,” Bonnyman says. “We’re engaged in an enormous social experiment with human subjects. When you tighten down the screws too much on pharmacy, your costs will pop up somewhere else. That’s why even tight-fisted and scroogish states have not put in a two-drug hard limit.”
Goetz says the state was put in a bad situation—again, he blames Bonnyman’s intransigence—and is trying to soften the “admittedly blunt” cuts his boss is implementing. “We are doing what we can here to try and ameliorate any downstream costs,” he says, noting that he’s looked for a financial model to calculate the long-term effects of TennCare cuts, but one isn’t available.
Powers, the physician, says that makes him nervous. “In my experience, the administrators tend to have a very short-term view of things and not consider what happens way downstream, but as a provider I’m very concerned about that,” he says. “I worry that we haven’t seriously considered the alternatives to the cuts that are being made.” The pharmacy advisory committee, he says, has gone on record with alternatives to the cuts that are being implemented. “The five-drug limit, the two-prescription, three-generic limit, is going to be a hardship for that 15 percent of people who we spend the most money on. It may be a pennywise, pound-foolish solution, unfortunately.”
Not surprisingly, Tennessee Justice Center advocates agree. “It’s just so blinkered, so narrow in perspective about what’s going to save money,” says Bonnyman. He notes the governor’s significant history in private health care management—experience Bredesen brandishes when questioned on his TennCare reform plan, like he did in February on PBS: “I don’t think Tennessee will ever have a governor who cares more about health care than me. I mean, I spent my whole life in the field, and I certainly feel I bring some experience, you know, to the pot in doing it, and it’s frustrating for me to have people say, well, you know, no, we’re not going to let you run it.”
In that interview, the governor said TennCare is “like any business or any operation in government.” But Bonnyman sees a world of difference: “If you’re running an HMO, good business says you get rid of the sickest people,” he says. “If you’re running Medicaid and you do that, you’ve failed.”