Late Breaking News
Because of Formulary, VA Spends Far Less on Common Drugs than Medicare
By Brenda L. Mooney
PITTSBURGH, PA - Should some aspects of VA’s drug formulary be used as a model for the U.S. Medicare system?
That question is raised by a new study finding more than $1 billion in annual savings if Medicare’s spending on brand-name drugs for diabetes patients was similar to the VA’s.
The retrospective study, published recently in the Annals of Internal Medicine, used 2008 data from more than 1 million patients to determine that brand-name prescriptions for common drugs - oral hypoglycemics, statins, angiotensin-converting enzyme (ACE) inhibitors or angiotensin-receptor blockers (ARBs) and insulin analogs - was almost three times greater for Medicare Part D beneficiaries than VA patients.
The retrospective cohort study was led by Walid Gellad, MD, MPH, of the VA Center for Health Equity Research and Promotion in Pittsburgh, and involved about 1.1 million Medicare Part D beneficiaries and 510,485 veterans ages 65 and up. It determined in a cost analysis that Medicare spending on patients with diabetes would have been $1.4 billion less in 2008 if brand-name drug use matched that of the VA.
“Our study shows that we can make a big dent in Medicare spending simply by changing the kinds of medications people are using — and physicians are prescribing - without worrying about whether the government should or should not negotiate drug prices,” said Gellad, who also is an assistant professor at the University of Pittsburgh. “The levels of generic use found in the VA are attainable, and they are compatible with high quality care.”
“We found large differences in rates of brand-name drug use among patients with diabetes in Medicare Part D and the VA, with substantial economic implications,” noted authors of the study, jointly funded by the VA, National Institutes of Health (NIH) and Robert Wood Johnson Foundation. “These differences likely reflect structural differences in formulary management between the two systems.”
While Medicare relies on contracts with more than 1,000 private insurance companies, each using a distinct formulary and cost-sharing arrangement for prescribing drugs, the VA administers its own benefits using a national formulary with the same cost-sharing arrangement for all veterans.
A key to the VA’s success was prescribers’ use of “therapeutic substitution,” promoted by the formulary. While Part D plans have tools for encouraging use of less costly drugs, they are applied less extensively than at the VA, according to the researchers.
To compare rates of brand-name drug use among older adults with diabetes in these two populations, Gellad and fellow researchers focused on four medication groups commonly used by patients who have diabetes: oral hypoglycemics, long-acting insulins, statins, and ACE inhibitors or ARBs.
The following variations in brand-name drug use was found for Medicare patients compared to VA patients:
- Oral hypoglycemics: 35.3% vs.12.7%;
- Statins: 50.7% vs.18.2%;
- ACE inhibitors/ARBs: 42.5% vs. 20.8%; and
- Insulin analogs: 75.1% vs. 27%.
Overall, with the four types of medications, Medicare would have saved $589 million for oral hypoglycemics, $189 million for insulins, $404 million for statins and $183 million for ACE inhibitors or ARBs, according to the study. Conversely, if VA patients had used brand-name drugs at the same rate of Medicare, spending for those therapies at the VA would have increased by $108 million or 57%.
While the percentage of Medicare beneficiaries using any brand-name oral hypoglycemic ranged from 25.1% in the 5th percentile to 42.4% in the 95th percentile of hospital referral regions, the range by region for veterans receiving VA care was 5.1% to 21.9%.
Similar variations existed for insulin analogs, statins, and ACE inhibitors or ARBs, according to the study.
“We’re not suggesting that Medicare turn into a VA system, nor do we believe that brand-name drugs have no role in improving health,” Gellad said. “This study is about how we can manage our limited resources while maintaining high-quality care. The VA shows us that it can be done for prescription drugs. Going forward, we need to understand whether these differences in prescription use have changed, if at all, from 2008 to present.”Study authors conceded that their research was limited because all of the underlying factors behind differences in brand-name drug use couldn’t be described.
They concluded, however, that “significant savings” “could be realized through policies that promote Part D plan efficiency and by encouraging physicians to consider costs and value in their prescribing.”
- Gellad WF, Donohue JM, Zhao X, Mor MK, et al. “Brand-name prescription drug use among Veterans Affairs and Medicare Part D patients with diabetes” Ann Intern Med 2013; DOI: 10.7326/0003-4819-159-2-201307160-00664.