Friday, October 20, 1995
3727 Colesville Road
Silver Spring, Maryland
PANEL 6 PROCEEDINGS
DR. PEDERSEN: We have one more panel on this subject, and then, as the agenda indicates, we have specified a public comment period. If anybody would like to make a public comment, and so far nobody has signed up to do so, please see Lee Zwansiger who is up in the front, so that we can put you on a list.
With that, I would like to proceed to Panel 6. I understand that the third speaker listed from Goldman, Sachs will not be joining us. We have Victor Dorodny and Edward Lennard.
DR. DORODNY : Madam Chairperson, thank you.
My name is Victor Dorodny. I am a practicing physician and President of Health Pro Consultants. It is a Pasadena, California based physician consultant organization with expertise in quality management, systems design, patient care advocacy and a program for waste and fraud reduction.
I have not received any compensation or fees related to my appearance at this hearing today. I am also President of the Pacific Division of the National Association of Managed Care physicians and a member of the Editorial Board of Managed Care Medicine Journal. However, the views and opinions I am going to express today, those are my own and do not represent the position of any MCP or Managed Care Medicine.
DR. PEDERSEN: Thank you.
DR. DORODNY: I would like to share some of my observations on the current and emerging trends and effects of information technology in health care. The actual result of my involvement in recent regional and national projects and information systems is how specifically the project that was conducted by the Institute for Alternative Futures and funded by the National Pharmaceutical Council, and the proceedings of that national project were published in March of this year and were released in the form of a monograph "Health System Design Workshop" that we will make a part of the document.
Some of the graphs and tables that I am going to use today are excerpted from that monograph. I am going to talk about the key incentives and disincentives that a rise in information technology has created in health care, specifically as they affect the pharmaceutical industry.
The disincentive that information technology creates for pharmaceutical companies include loss of control, especially for sales sector. It produces loss of revenue, because technology drives the margins down, more information about competing products are available to the general public, coupled with more "budget box" decision makers that drives margins down. There is less money available to fund R&D, since information technology becomes a competitor for scarce corporate dollars.
The incentives that information technology provides for the pharmaceutical companies are outcome research that allows for more accurate pricing and a more stable revenue base, more services to delivery and an increase in capability to deliver the new services, long-term distribution of revenue based on capability and service delivery, which leads to fewer, but stronger companies, more efficient research and development, and leading to long-term costs of drug development could be lower. It also will result in economic and efficient R&D outsourced independent labs. Another incentive for a pharmaceutical is a potentially shortened time for product approval.
On the side of pharmaceutical benefit managers (PHM's), the disincentives are confidentiality, physician liability and power, and the information that we have now is primarily claims data, which is often not very useful for making clinical decisions. Building on this base may be harmful for long-term effects.
The incentives the information technology create for PBM's are the ability to better choose correct diagnostic tool and treatment options and the opportunity to download electronic medical records for even greater power.
The proceedings of the national project actually indicated disincentives and incentives for FDA itself, and I thought you might be interested. The disincentives that the project felt information technology created for FDA is the FDA could become even more risk adverse with more data available to them, and the incentive is the government could act as a disseminator of information. Those are the remarks regarding FDA itself.
The emerging sets of incentives and disincentives -- I hope it is readable, and I am going to read it out. It fosters the evolution, where pharmaceutical companies are changing from chemical manufacturers to providers of unbundled solution, from supplier/vendors to partner/participants, from proprietary information hoarders to open participatory information sources, from molecular-oriented drug development to cost/quality gap oriented drug development, from pharmaceuticals to therapies linked to areas managed in part by drugs, and from one size fits all to one size fits one.
The key to moving the pharmaceutical companies from drug providers to total health solution providers include an expanded self-definition and developing their identity as a shared vision. Customers and partners who share an expansive vision of health help pharmaceutical companies to identify and create the new market opportunities. This enhanced feedback mechanism will move pharmaceutical companies along the path of development into markets that are being formed by new information systems that organize the population with ever-increasing regularity.
The pharmaceutical companies will use this information technology for mass markets when one size fits all to customized health solutions when one size fits one. In this growth, the competencies are naturally growing around the disease management. The ever-evolving definition of disease management by customers, including patients and their families, as well as professional providers, both physicians, pharmacies and the light health professionals, will expand the competence of pharmaceutical companies. This evolution leads to an expanded marketplace that reaches beyond the products actually into services, including many that are not medical, but nevertheless affect health.
The customers, i.e., patients with specific diseases who interactively help shape the new services, will lead pharmaceutical companies to pay far greater attention to post-market information. For this information to develop, pharmaceutical companies will form new partnerships with information companies, which some of them are doing right now, that can make enormous contribution. The pharmaceutical companies that succeed in such partnerships will be those that are open to participatory information development.
Increasingly, the customers and partners of the pharmaceutical company that succeeds in redefining themselves will look to these health solution providers for leadership. Also, creating such a partnership will help deal with the concept of fantasy of certainty. I don't remember, one of the distinguished panel members the other day asked about fantasy of certainty and shared vision, and I just want to take a 2-second detour.
Fantasy of certainty, and I refer to it as a great conspiracy in American health care, and what it means is if patients are not told that things in medicine can and do go wrong, they presume nothing will ever happen. That relates to side effects, untoward outcomes and malpractice. More than that, there are three levels of fantasy of certainty as with regard to pharmaceuticals. Level number one is every single drug or therapeutic intervention they read or learn about is safe and effective.
Level number two, if in fact it is safe and effective, it does not necessarily mean that it is applicable to this particular patient's disease process. And level number three, if in fact it is safe and effective and applicable to the disease process, that doesn't mean that it is going to be reimbursed for it. It means that some patients will have to pay for it either straight out-of-pocket or through some form of medical savings account, and so forth. This is a concept that is coming out in a monograph that we are presenting to an upcoming meeting of the American Society of Consultative Pharmacists next month. I just thought I would talk of fantasy of certainty and deal with it for a second.
Going back to PBM's and looking at PBM's, the process of moving PBM's from cost containment focus to becoming optimizers of cost vanishes. If you look at the graphic, it shows how the information in dollars flow in the system that it currently operates, and you can tell the information and dollars flow in one direction. One strategy is to use the feedback to help consumers to play a more important role. The successful application of this strategy also supports shifted consumers from possible recipients of care to empowerment -- there is an excuse for using that word again, it is slightly beat up -- the empowered proactives self-care participants.
With regard to the issue of shared care vision for health in the community, I want to refer interested parties to an article that I wrote that just appeared in the October issue of Medical Interface called "Shared Vision for Health in the Community." I am just going to move forward.
The process of reversing the flow of information here to create a new form of feedback for consumers is only simple because it rests on the detailed knowledge of the incentives that exist in the system which is simplified really in this graph.
In this graph, the PBM collects information on employed utilization of pharmaceuticals and the benefits program. They use this information plus their expertise to create a pharmaceutical benefit design, which is a variety of management tools to help control cost, while insuring quality.
Without placing a value judgment on these various techniques, some of them are restricted formulas, contracting in order to gain bulk prices, the use of generic products where practical, protocols of usage that dictate how products should be used, restricted networks of pharmacists who will provide discounted services, and computerized systems that allow for on-line adjudication and utilization management.
These cost containment techniques are put together in various strategies to meet the needs of employers, managed care organizations or insurance companies or whoever is taking the risk. The insurer takes this information on savings to the employee benefit manager, and the employee benefit manager then to the CFO human resource person in the company, who in turns reports to the chief executive officer of any organization. The chief executive officer gives this report to the stock market analysts who rate corporate performance. Those ratings go to pension fund managers who represent the ownership of most of corporate America.
The fascinating opportunity here to change rests on the fact that this ownership actually belongs to the employees who contribute the pension funds, but who have little or no information that can empower them to create the kind of changes they would want. Would employees, if asked, want the benefits of medicine to be taken into account along with the costs? I assume the answer is yes, but the information incentives are all focused on cost alone and flows only in one direction, with employees not receiving information that empowers choice.
A feedback strategy can give employees information that shows how the system provides their medicine on the basis of acquisition cost and encourages them to ask for an accounting of the tradeoffs affecting the benefits. PBM's that are evolving to have a greater concern with benefits are using their information technology to support health.
These PBM's are looking at their data to identify disease patterns in high-risk sub-populations. They are then starting to work as partners with disease management and risk assessment companies to modify behavior for health promotion. They are not only helping consumer change, but they are also participating in a mindset change between providers and managed care organizations. The PBM's that play this role will help other participants move from a controller mindset to that of a partner.
In listening to panel presentations yesterday and today, I have decided to change the remainder of my time and address very interesting California legislation that has just passed both the assembly and the reference committee and is currently in conference committee, and I have a copy of that legislation that was faxed to me today, that was sent by the office of State Senator Newton Russell. This is a so-called PBM bill. It is bill AB-1136, that was introduced by Council Person Valerie Brown and is sponsored by CMA.
I just want to read two excerpts from that bill to kind of illustrate what we are talking about. Since we are sitting here talking about what the FDA should or should not regulate, I just want to introduce you to what is coming to a floor vote maybe in two weeks in California. I got involved with it through my NMCP activity, which is usually vis-a-vis CMA and AMA, and that is how I got involved in this.
The purpose of the bill: The main purpose of the bill is to insure that enrollers receive pharmaceutical drug benefits that are based on the higher quality of patient care, and that health care service plans not require that the dispensing decision be made for reasons that would constitute a conflict of interest, that insuring that enrollers will have access to pharmacy benefits when offered by health care service plans or other entities contracting with the health care service, such as a pharmaceutical benefit manager, and that if the pharmaceutical benefits are denied, enrollers will have the ability to appeal that decision. That is part number one that I think is very interesting.
Part number two: The bill proposes the Commissioner to license all the specialized health service plans that provide pharmaceutical benefits. And when formulas are created for pharmaceutical benefits, the formulas are to become a part of a quality assurance program designed to provide appropriate care that is consistent with professionally recognized standards of practice and that are subject to review by the plan's quality assurance program to insure that appropriate care that is consistent with professionally recognized standards of practice is not withheld or delayed for any reason, including a potential financial gain or incentives. The Commissioner shall insure that when pharmaceutical benefits are denied, the employee shall receive the grievance procedure process under a different section of the bill.
The last part that I want to bring up is the part dealing with disclosure of information, and I think it is item 1373-9. The disclosure form shall provide -- they are talking about disclosure to both patients and health care providers and health care payers. The disclosure form shall provide at least one of the following information. There are 20 items that are going to go for the one that I think is of interest to us.
Whether the plan pays or offers to pay financial remuneration to a dispenser for substituting a prescribed drug for another drug, regardless of whether the financial remuneration is in the form of rebate, incentive, refund, commission, preference, patronage, dividend, discount or other consideration.
Having said that, I want to advocate that the FDA would regulate less and guide more and become a source of information for all of us.
DR. PEDERSEN: Thank you, Dr. Dorodny.
DR. LENNARD ): Thank you.
I am Edward Lennard. I am President of Resource Rx, which is a benefits management consulting firm located here in Washington. The views I am representing are my own. My appearance here will be funded by a pharmacy benefits manager. I have the financial interests in the outcome indirectly, because these issues affect really all of my clients. I consult with most parties to the pharmacy benefit management industry, but principally I work with managed care organizations in helping them to understand and optimize their relationships with pharmacy benefits managers, manufacturers and others.
DR. PEDERSEN: Thank you.
DR. LENNARD: I am appreciative of the opportunity to be here. I think this is a difficult, but very interesting question and one that will probably be with us for a while, regardless of the outcome of this particular process.
I would like to try to provide a different perspective perhaps than you have heard in the two days, and that is a kind of historical perspective. The history of this industry is fairly short. Managed pharmacy benefits is a fairly new concept. I have been involved with this for about 10 years and I have a slightly different slant on this than I think most of the speakers today.
Over most of these last 8 to 10 years, I have worked with drug utilization review programs, developing and managing those programs. These have been operated on the basis of databases created out of paid claims, paid pharmacy claims and to some extent medical encounter data that shows up in medical claims data sets, as well.
In this activity, we endeavored to identify sub-optimal drug therapy, drug therapy that puts the patients at risk for adverse drug effects and drug therapy that results in excessive costs for drug benefits. Over the course of developing those programs which are now standard and well accepted, that wasn't always true and there are often challenges mounted along the lines of how can you do this, if you don't know really what optimal therapy is, where is the data to support the criteria that these programs rely on and the information messages and the guidelines that you propagate in these programs.
I responded on two levels. One is that you can identify outlier behavior, without knowing precisely what the norm is that you are hoping to bring people more closely into line with. That is just true. It seems to me it is evident. The outlier is much more easy to identify than the precise treatment that might be optimal.
The second is that developing an infrastructure to support these kinds of activities seem to me to be a very great importance, maybe of really paramount importance, that one of the principal problems in health care delivery is the absence of information, and this occurs at many levels. It occurs at the practitioner level when the practitioner sees a patient about whom they know very little, and that can be not just a problem of patient history, but an ongoing problem. As the patient moves from practitioner to practitioner, from health plan to health plan, there is very continuity of data, so that is a recurring and persistent problem for a practitioner.
A second problem is the overwhelming volume of drug specific and other medical information that is continually being created as a result of all sorts of research, and promotional efforts, as well. Sorting through that and staying current is a formidable challenge.
The drug utilization review systems really were an outgrowth of claims payments systems, as such claims payments systems were really not ideal. There have been lots of problems in the data and there continue to be problems. But the secondary uses of the data, the utilization review and utilization management programs have driven the development of the database systems, so that the data is much better now than it used to be. We are still not at the next point where we need to be, which is the integration of medical and drug claims data, the transportability of patient records across plans, as they move about.
But pharmacy claims have come a long way. Pharmacy claims now are 100 percent electronic in nature. They are transmitted at point of sale to the payers in virtually all plans. There may be an occasional rural pharmacy that is not on-line, but the percentage that are is over 99 percent, and the percentage of claims that are paid through electronic submission is over 99 percent.
That has been driven by the payment process and the negotiation of discounts, but it has also supported drug utilization review. So that point of sale drug utilization review is universal, as well. When managed care organizations contract with the vendors, the PBM's in this industry, it is assumed that they will get point of sale drug utilization review, and they do. It is assumed that there are longitudinal databases maintained that permit point of sale prescriptions to be screened against an individual patient's history, and that is a good thing.
In the last couple of years, a two-say communication standard has developed, such that pharmacists can now respond to those DUR messages indicating that they took some action or even just to acknowledge that they received a message. That may sound like a normal evolution of the industry, but this is an industry that has only in the last few years become consolidated at all, and there are still many, many participants at every level, both at the pharmacy benefit management level, the PBM level, and at the software vendor level, companies that supply computers and software to pharmacies to operate in their retail outlets.
While there may only be 20 PBM's, there are more than 75 dominant computer vendors for pharmacy systems. Getting all those parties to work together to define these standards and to develop those standards is an ongoing challenge, and it has been driven by the client base. The client base has recognized the need and the utility for these systems, both to pay claims and to support the dissemination of treatment information about individual patients and in general.
Beyond the individual patient drug utilization review, physician level utilization review has evolved in the last few years, and that relies on the same database and the same kind of approach. But the scope of the review broadens a little bit, so that questions about product selection come up, does a given practitioner frequently prescribe the high-cost drugs.
There you can use statistical norms, as well as clinical norms, which are often more difficult to define. But if the patient panels are the same and the physicians have very different practice patterns, you can surmise tentatively that there is a different level of information going into the decision-making of that physician, and you can take steps to address that, to supply additional information, with the expectation that more cost-effective prescribing will result.
I believe that is a cost-effective endeavor and beneficial to patients and to payers alike. That has not yet been fully implemented, but it has certainly been well accepted and is really part of what is expected now in the marketplace. The marketplace is obviously evolving very rapidly, and the demands of managed care clients exceed those of employer groups, so that shift has resulted in an acceleration of interest in those sorts of programs.
The next level -- and I say this is not even viewed as established and fully accepted, but will shortly be so -- are what are called disease management programs, and really they are just a broadening of the same concept. Rather than just focusing on the drugs, one focuses on the other aspects of treatment, medical care, medical utilization. If you reduce drug use, you may increase medical use, and that has to be recognized.
The only really rational approach is to include all components of care and all components of cost. That is really the goal in this process, to create a rational system, and to do this there really has to be a systems approach, which means that there has to be feedback to physicians about how they are prescribing, how medical utilization and their patient panel is turning out, how they compare to their peers, how they compare to the clinical norms, to the extent that those are believable and reasonable, and over time to the extent that they have been validated.
As we all know, there is very little conclusive long-term data available about drug therapies or very many other therapies. But the creation of these databases will support that, and that is an important additional value beyond supporting the programs that are in place now.
That is where we are, as I see the industry. I think we might have gotten there a little quicker, if the Medicare Catastrophic Act had been implemented a few years ago, and I think it was well recognized in that legislation that the database has tremendous value in and of itself.
But that didn't happen, and now we are dealing with lots of different databases, but they are becoming more and more alike, as the custodians of those databases, the PBM's recognize that additional value and as they begin to implement these disease management programs, they and their customers recognize that the database can support research which will validate, which will result in modifications and refinements to these treatment guidelines known as disease management.
The other important benefit of this approach is one that is greatly valued by the managed care organizations, and that is the ability to support rational risk sharing, which in managed care is the next frontier. It is fine to identify for physicians what are cost-effective choices, assuming that there is enough agreement as to what that is. This is a complex issue and really the central focus of these discussions.
But more broadly, MCO's recognize that if they can provide appropriate information to physicians, then they can really make physicians part of the organization in terms of sharing responsibility for success and failure, not just at the patient care level, but at the financial liability level of the organization. Certainly, this is being done. Physicians are at risk, physicians are creating their own managed care organizations, hospitals in partnership with physicians are doing that.
But what I always come back to is how are they actually going to manage their patients' costs, if they don't get some feedback. I don't think that the intuitive sense of the physician is enough to manage a capitated program. I am not alone in that belief, but I think that the movement into risk sharing and capitation is a fast one, and it concerns me that that might occur in the absence of reliable and consistent feedback.
We have heard a lot about the sophistication of managed care clients, and in some ways they are very sophisticated. They are very sophisticated in terms of financial matters and contracting relationships, and many activities that were traditionally insurance activities. How sophisticated are they in terms of actually managing care? I don't think they are particularly sophisticated.
There are also organizations that have grown very rapidly and there are also organizations that have not for the most part inherited or developed sophisticated information management systems. Most of these organizations have grown through acquisition, so they haven't been created as a result of the drawing board exercise that put a viable information system at the core where there really needs to be one. So those items are lacking.
I would point out also that in terms of the drug benefit issues like the formulary, which really is essential to everything that has to do with PBM, while the sophistication of individuals within those organizations in most cases is certainly adequate to evaluate a formulary, the personnel resources in those organizations may be highly limited. I would guess that the response to the ASHP survey that indicated 40 percent of polled respondents indicated their organizations could not adequately maintain or review a formulary, had to do not with the knowledge base of the individuals there, but, rather, the number of individuals available.
It is a big job to review a formulary and to provide ongoing review for a formulary, and many managed care organizations have very thin resources to do that sort of thing, and I don't think that is going to change very rapidly.
I am sort of getting into the third component of what I wanted to talk about, which is what are the needs going forward. Well, to reiterate just as bit, I think the needs of practitioners for faster and better information is paramount for them to do their jobs. And whether it is selecting a particular drug for a particular patient or, more importantly, managing the totality of their treatment for that patient, they need better information about patients, they need better information about protocols and treatment choices every step of the ways throughout the process. By better, I mean faster and from a broader range of resources and with a better understanding of where that information comes from.
Now, I have great hesitancy about the role of regulation in this process, because I think it is such a far-reaching activity and it involves so many people and so many different forms and so many different relationships. I will say a little bit more about that, but I am not sure that regulation can insure that the information that reaches practitioners meets the quality standards that it should. But I think there needs to be some better understanding for physicians or by physicians of where the information is coming from, how it was developed and what it represents.
That is true for clients, as well. For the managed care client that has limited resources to carry out their own evaluations of formulary guidelines and even formulary documents for themselves, they need a better understanding of how those documents were developed and how they are maintained. They don't need to repeat all the effort that has gone into developing those documents.
Now, that is something that the marketplace will respond to. It has already responded to. There is at least one commercial service, unaligned, independent publishers that provides formulary services. You can subscribe to this and get a well-researched and fully documented review of every new drug that comes out, and it is really directed at hospital practice. But the same techniques apply in the outpatient environment.
DR. PEDERSEN: Dr. Lennard, could you wrap up in 5 minutes, please.
DR. LENNARD: Okay. There needs to be better understanding of the relationships of the vendors that come to the managed care organizations.
I believe that the formulary is central to all of these processes, and what drives the formulary largely is the rebate process. Monies flow from manufacturers to PBM's and to managed care organizations related to formulary decisions. That process is obscure and is obscured by the participants. That complicates the managed care organizations' decisions greatly. But that is not limited to the aligned PBM's, and I think that point has been made in earlier presentations.
Virtually all of the PBM's have extensive relationships with manufacturers. They are no different in their potential to influence inappropriately the communications that subsequently go to managed care practitioners. This is really just leading up to the last question which has been in my mind when I think about the prospects for regulation in the industry, and that is where do you stop.
If you begin to follow the money through this industry, it leads you virtually everywhere. My concern, having worked in this area for so long, is that in many ways the infrastructure that is developing is more important, at least in some cases, perhaps in many cases more important than the content. The content is important, but the content is self-correcting to an even greater extent. I think at the next stage when we really get into appropriate disease management and these organizations function like systems in the complete sense, that information flows freely among its participants, then the distinctions between drugs will become less significant, inappropriate distinctions will be less likely to occur.
DR. PEDERSEN: Thank you, Dr. Lennard.
Are there questions from the panel? Ms. Baylor-Henry?
MS. BAYLOR-HENRY: On the rebate issue, I believe you said the money flows from the manufacturer to the PPM to the managed care organization.
DR. LENNARD: Yes.
MS. BAYLOR-HENRY: Would you just explain that a little bit more, please?
Dr. LENNARD: Well, the rebate is a discount. Now, if you have two drugs that are comparable, and you often do the way pharmaceuticals are developed, and they are priced comparably and 50 percent of your prescriptions are for drug A and 50 percent are for drug B, you can get rebates on both of those drugs for keeping them on your formulary. When I say you, I mean the PBM or the managed care organization, whoever holds the contract.
If, however, you agree to drop one product or the other, you can get a much more substantial rebate, if you can really move market share. I think that is fine, because when you do a cost-effectiveness comparison, if you have adequate data -- for simplification, let's assume that the two drugs are really indistinguishable in terms of safety and efficacy. It is cost that matters.
Well, if you can get one for $50 and one for $70, it only makes good sense to use the $50 drug. But you don't always know how much of a discount is there. The PBM doesn't always share that information with the MCO, so the MCO experts, let's assume they have experts available, say these drugs are mostly alike. If they really cost the same, maybe we would have a slight preference for drug B because it has been on the market longer, long-term adverse effects are probably better understood, so we would go for B, but you are telling us we can get a better rebate if we go with A. How much better? Well, that is not always disclosed.
I think that is a big problem. I think it is okay on the basis of the information available for people to do cost-effectiveness comparisons. I think it is done all the time in the hospital, and I think that can be done in the outside. What hangs up on the outside in an outpatient environment is the lack of information provided to the end-user, the MCO or the physician, and that information has to include or be made available. The clinical safety and efficacy comparisons should be made freely available and the cost data should be freely available, the net cost, not the retail cost, but the net of rebate cost.
DR. PEDERSEN: Did you want to add something?
DR. DORODNY: Yes, I just want to add that that relationship probably would be appropriate for what are called horizontal linkages, which is linkages between PBM to PBM or PBM and pharmaceutical. In that vertical linkage, such as Pfizer value health, is a direct association with the pharmaceutical and the managed care organization. This problem doesn't exist. The managed care organization knows exactly what they are getting back. In other words, there will be beneficial information that the PBM would normally get.
DR. LENNARD: Well, it is a mysterious area in the industry now. There are rebates and there are rebates, it is true. Nobody really knows.
DR. PEDERSEN: Ms. Wion?
MS. WION: I would like to ask a follow-up question. One of the members of an earlier panel said that therapeutic decisions should be independent, and he was arguing that various economic relationships among the various players in the system should be permitted, but somehow independence should be maintained. Should we conclude from what you said about, if you follow the money, it goes everywhere, that there is no such thing as independence, and that for FDA to try to determine some criteria for independence would be an impossible task?
DR. LENNARD: I don't think there is any independence or there is very little. I think there should be more openness. I have encouraged clients and vendors alike to establish truly as best they can independent boards to review therapeutic decisions, and I think they could also provide that kind of comparison when the economic component enters into the equation, as well, because there is really no clear distinction.
If you talk about an adverse effect that affects one percent of the population and is mostly detectible if people are alert to it, and then you say, well, should we put up with that to save $20 on a prescription. That is a judgement call that I don't think a finance person can make in the absence of a clinical understanding.
DR. PEDERSEN: Dr. Morris?
DR. MORRIS: The independence I guess is between the pharmaceutical industry, the supplier of the pharmaceutical product and the managed care organization. Is that clear? It wasn't clear from your answer. In other words, if a pharmaceutical company offers a product to the managed care organization or information about a product, to what extent is the managed care organization providing independent analysis of that in formation or in terms of making a decision? It is a purchase decision regarding products.
DR. LENNARD: If the managed care organization can make that analysis because they have the staff resources available to do it and they have adequate information, they know what the drug really costs, then I don't think there is any problem. That works out fine. I think it can become an issue with the organizations that don't have the resources to follow those issues.
DR. MORRIS: The specific example was the case that we heard yesterday from a pharmacy benefit management company owned by a pharmaceutical company. Is there independence between those two entities I guess is the question.
DR. LENNARD: Well, I think that can be an illusion, because an unaligned and non-owned nominally independent PBM I believe has as many or very nearly as many economic ties to the manufacturers as does a fully owned PBM. The rebate dollars overwhelm the administrative fees. That is where the action is in this industry.
DR. PEDERSEN: Dr. Woodcock?
DR. WOODCOCK: If I could follow up on that, one other suggestion about independence that seem to be echoed in that bill was that the P&T committee deliberations be transparent and somehow be independent, and they might generate a list of alternatives which then could be chosen from based on cost considerations. Is that your experience?
DR. LENNARD: I don't think that the P&T committees are -- they may be independent. I really couldn't say. When I talked to PBM's and I talked at some length with the PBM that sponsored my coming here about how I thought this ought to work out. It is not exactly their views, but they thought it was interesting to have a diversity of opinion.
I suggested an independent panel review and publish its findings on a quarterly basis, reviewing their formulary and drug disease management programs be disseminated to their leading clients made public on a regular basis. I think that might be workable. But as I thought about it, I thought, well, who would those people be? They would be at the medical schools and the pharmacy schools, and where do they get their money? I don't know that independence really exists. What I think you can hope for and work for is disclosure of the process and the relationships.
DR. DORODNY: I certainly hope there is independence on professional providers, both pharmacists and physicians. I will remind the distinguished panel and everybody else that PBM's and MCO's don't practice medicine. Physicians and pharmacists do. They are the ones licensed to practice medicine. They are the ones with the moral and legal liability and responsibility to the patients for whatever decisions they make.
I believe one of the reasons that the bill is sponsored by CMA is CMA felt that their members are experiencing pressure from managed care organizations with regards to access and the appropriateness of care, and this is where this came about. It came about from one of the reasons of access to more expensive drugs and treatment modalities.
Again, somebody brought up earlier today the question of what is appropriate, and I have my own simple definition of what is appropriate and I would like to share it with you. Appropriate is the sum of all actions or inactions that lead to net outcome improvement for an individual patient. That is my definition of appropriateness. Working with that, you can see why that bill was introduced, mainly to allow the providers, professional services, both pharmacists and physicians to have a degree of independence --and we are talking of independence -- from the pressure exerted by the managed care organizations, the PBM's more directly.
DR. PEDERSEN: Any final questions?
At this point, we have provided time for public comment. Is there anyone in the audience that would like to step forward and make a brief public comment?
If not, I will turn to Dr. Woodcock to make some closing remarks.