TMAC Savings of 90% for Heartburn Drugs in the United States

TMAC Savings of 90% for Heartburn Drugs in the United States Therapeutic maximum allowable cost (MAC) is a managed care intervention that establishes a defined benefit dollar amount per therapeutic procedure or indication. TMAC can be established for any medical procedure (e.g., joint replacement) or any pharmacological indication (e.g., cholesterol reduction). Heartburn is ideal for TMAC, particularly since there is ample evidence that the PPIs are therapeutically indistinguishable. The potential cost savings that can be realized from a TMAC intervention for PPIs can be estimated from the data in Table 2, for community and mail-service pharmacy claims for the 90-day period ended April 30, 2006. The average price per standardized 30-day supply, excluding manufacturer rebates, varied by about 7-fold, from $26 for omeprazole OTC to $179 for brand-name omeprazole. These are the actual prices for average daily dosing; i.e., the average drug cost per day and cost per 30-day supply combine all dosages and strengths of the drugs as actually used and paid by plan sponsors and as copayments by drug plan beneficiaries. A small self-insured employer in the United States implemented a TMAC program for heartburn drugs on January 1, 2006. 9 This employer had approximately 300 employees and 650 total beneficiaries in its drug benefit plan in the month of implementation of the TMAC program. The defined benefit amount was $0.67 per day ($20 per month) of heartburn drug therapy. There were no prior authorizations or other exceptions permitted for this defined benefit amount. Actual drug utilization and prices for this employer group for the first 4.5 months of 2005 through May 15 are shown in Figure 1; the member costshare amounts are shown to model the expected outcomes when members used each of the drugs after the TMAC implementation. Motivation for this employer to implement the TMAC program arose from the large proportion (15.7%) of total drug benefit spending attributable to the heartburn drugs, nearly twice the average.10 Operationally, the Medi-Span Generic Product Indicator (GPI) was used to measure preperiod and postperiod costs and administer the TMAC intervention, using the programming logic, GPI begins with 492. This GPI captures all of the PPIs and all of the histamine-2 blockers (cimetidine, famotidine, ranitidine, and nizatadine). As illustrated in Figure 1, the member cost-share is $0 for any heartburn drug that has an allowed charge of $20 or less per 30-day supply (e.g., cimetidine or ranitidine).

The human resources department of this small U.S. employer used 2 methods to communicate the change in pharmacy benefits to take effect January 1, 2006, including TMAC for heartburn drugs: (1) a notice to all beneficiaries regarding changes to the Summary Plan Description (SPD) for 2006, and (2) patient-specific letters to beneficiaries who used any of GPI 492 drugs during the second half of 2005, including a chart of the relative costs of the PPI alternatives. The SPD notice included the language that the "heartburn-related drugs will be subject to a maximum benefit of $20, regardless of generic or brand" and for "heartburn-related drugs, a "maximum $20 benefit for a 30-day supply." This SPD included specific and actual costs to the employer and to the beneficiary for each of the heartburn drugs, including histamine-2 receptor blockers and PPIs, such as those presented in Figure 1.
The patient-specific mailing was performed for each beneficiary with a pharmacy claim for a PPI or histamine-2 receptor blocker in the preceding 4 months. This letter was delivered by the U.S. Postal Service to each beneficiary and included information such as, "Effective January 1, 2006, Plan benefits will be limited to a maximum benefit of $20 per month for drugs used to treat heartburn and other Digestive Disorders such as, but not limited to, GERD, Dyspepsia, Reflux Disease, Ulcers, Hernias and Heartburn. Copays will no longer apply to these medications." This mailing was a complete 5-page education document regarding medical and pharmacological management of heartburn and related symptoms. The patient-specific letter was mailed approximately 60 days prior to the effective date of the TMAC program (January 1,2006).
Compared with the first 4.5 months of 2005, the first 4.5 months of the TMAC program in 2006 were associated with a 92% decrease in employer costs for heartburn drugs, from $4.59 per member per month (PMPM) to $0.39 PMPM ( While TMAC for the heartburn drugs was expected to save this employer at least 80% in spending on these drugs, actual cost savings were larger than anticipated due to a drop in utilization. TMAC for the heartburn drugs also contributed a larger than expected amount to overall drug benefit cost savings.  Table 3).
TMAC is a progressive if not aggressive managed care intervention, particularly as implemented in this small employer health plan without an exception process. In this manner of intervention, TMAC is truly a defined (dollar) benefit without medical exception. The drug cost savings of 92% in this example are dramatic, and the administrative costs minimal, arising primarily from the creation of the general education materials and the patient-specific letters. The cost savings of $4.20 PMPM for the heartburn drugs is nearly twice the $2.20 PMPM savings for the PPI drugs reported by West et al. for a less aggressive managed care intervention that involved addition to coverage of omeprazole OTC, reduction of the copayment for generic omeprazole (from $10 to $5), no coverage for brand omeprazole, and $50 copayment for the other 4 brand PPIs (rabeprazole, esomeprazole, lansoprazole, and pantoprazole). 11 For relative cost, the 92% savings for the TMAC intervention in 2006 exceeds the 38% savings reported by West et al.
The 54.7% drop in utilization of heartburn drugs in the first 4.5 months of TMAC intervention may be cause for concern, and the absolute utilization of 0.63 days of heartburn drug therapy PMPM is about one third that reported by West   11 The intervention described by West et al. was certainly less aggressive than TMAC, involving primarily the addition to coverage of omeprazole OTC and adjustment of copayments to encourage utilization of omeprazole OTC. Concern about underutilization of heartburn drugs might be assuaged by (a) the findings of Inadomi et al. in which 40% or more of patients on chronic PPI therapy could take histamine-2 blockers or no heartburn drug therapy 12 and (b) some unknown amount of utilization of omeprazole OTC that likely occurred without a pharmacy claim during the first 4.5 months of this TMAC intervention, with the member paying the entire $24 per month out of pocket.
One of the findings that might surprise some observers is the large proportion (76%) of higher-cost PPI pharmacy claims in the first 4.5 months of the TMAC program. However, about 3 out of 4 of these PPI claims were for generic omeprazole, which had declined in average price to $38 per 30-day supply in 2006, resulting in drug plan members in this TMAC program paying an average cost share of $18 per generic omeprazole prescription in 2006. This use of PPI drugs with higher cost compared with omeprazole OTC contributed to the large increase in average member cost-share for heartburn drugs, from 20.2% in 2005 to 67.3% in 2006 ( Table 3).
The average member cost-share is expected to drop precipitously by year-end 2006 as heartburn drug users consult with their physicians and pharmacists to change therapy to lowercost PPIs or histamine-2 blockers. Only 13% of heartburn drug users in the first 4.5 months of the TMAC program had a pharmacy claim for omeprazole OTC, accounting for 13% of total days of heartburn drug therapy, much lower than the 55% share reported by Harris et al. that was associated with a benefit design change to encourage the use omeprazole OTC. 13 Omeprazole OTC had an actual average allowed charge of $24 per month in this TMAC program, of which members paid an average cost-share of $4 (17%) and the plan cost was $20 per month.
Generic omeprazole in the TMAC program accounted for 58% of total days of drug therapy in 2006 compared with 44% in 2005. The proportion of patients who use lower-cost omeprazole OTC and the proportion of total days of PPI therapy accounted for by omeprazole OTC are important measures of interest as this TMAC intervention for this small U.S. employer matures at year-end 2006.
For the first 4.5 months of 2006, the TMAC program achieved drug costs savings of 92% for the heartburn drugs for this small employer and contributed to overall drug benefit cost savings of 18% PMPM. Two notable limitations of this analysis are (a) the absence of a comparison-control group, and (b) assessment of drug costs only without consideration of medical costs. It is possible that reduction in the use and costs of heartburn drugs could be associated with an increase in medical costs.
The small proportion of heartburn drug therapy patients (13%) who received omeprazole OTC in the first 4.5 months of the TMAC intervention is surprising and may be due, in part, to a failure to communicate effectively the implications of this defined benefit to plan beneficiaries prior to the point of care. This apparent lack of awareness was not expected since considerable thought and preparation went into general education of beneficiaries and patient-specific letters prior to benefit changes. Nevertheless, the lesson from this intervention is poignant and generalizable-beneficiaries are not likely to assimilate information regarding a change in benefits until the point of need, i.e., at the time that they go to the pharmacy to pick up the prescription. For the plan sponsor, TMAC can provide substantial relief from the symptoms of heartburn associated with rising drug benefit costs.