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Statutory reimbursement agencies as well as private insurers throughout member states of the Organization for Economic Cooperation and Development (OECD) reimburse the cost of medicines on the basis of criteria that include robust clinical evidence, budget impact analysis, and incremental cost effectiveness. The Centers for Medicare and Medicaid Services (CMS) in the US are no exception to this rule and are, in principle, seeking to maximize benefit for their Medicare enrollees, whilst ensuring reasonable drug outlays for the small number of drugs that they reimburse. This paper provides a retrospective analysis of the way two functionally equivalent drugs are treated for reimbursement purposes by the CMS; the period under consideration was 2001–3. The two drugs, epoetin-α and darbepoetin-α, are used for the treatment of anemia in renal failure and in patients receiving chemotherapy. By reviewing the publicly available pharmacological and clinical data of epoetin-α and darbepoetin-α, the paper confirms the two drugs’ functional equivalence, despite their structural differences. The implications of dose conversion ratios and costs to Medicare are subsequently explored. It is argued that the issue of dose equivalence between epoetin-α and darbepoetin-α has significant implications for patients, practitioners, and payors. A payor’s perspective is adopted in this respect, whereby clinical evidence and pricing data are used simultaneously. Based on the clinical evidence, a dose conversion ratio for epoetin-α:darbepoetin-α is established, which achieves a comparable clinical effect for the two drugs and this is set to be <254IU:1μg. The incremental costs to Medicare are calculated subsequently. The Average Wholesale Price and the Outpatient Prospective Payment System rule that Medicare uses to reimburse providers are used and suggest that treatment of cancer patients with chemotherapy-related anemia with epoetin-α would save Medicare an estimated $US600 million each year. Patients would also benefit significantly in terms of lower co-payments for epoetin-α. The evidence is supportive of the decision made by the CMS to reimburse the two drugs at the rate reflecting the achievement of comparable clinical effects and therefore reducing the pass-through payments for darbepoetin-α to zero for the 2002–3 fiscal year.

Current guidelines recommend the use of warfarin in all patients with atrial fibrillation (AF) and/or an artificial heart valve who are at high risk of thromboembolism. While anticoagulation with warfarin greatly reduces this risk, a careful system of monitoring and management is necessary to maintain a therapeutic dose and minimize adverse events. This rigorous process places a burden on providers, and many patients managed in typical office practices are not optimally anticoagulated. To improve the quality and efficiency of anticoagulation and remove its burden from office-based physicians, newer treatment models have evolved, including anticoagulation clinics and self-monitoring by patients at home. While these newer models often incorporate innovative programs to streamline warfarin management, little is known about their individual or relative economic merits or those of traditional office-based care. The routine costs of anticoagulation within any model have not been well documented. The cost of warfarin is readily available; however, attendant expenses, such as dose adjustment, laboratory testing, and medical encounters, are difficult to gauge. Because of these challenges in collecting practice data, most estimates of the cost of anticoagulation services have relied upon assumptions about practice patterns. Assessing the cost of anticoagulation is easier in a clinic setting because all costs relate exclusively to anticoagulation. A recent study of anticoagulation clinics estimated that annual direct costs per patient for anticoagulation services totaled approximately $US280–$US380 (2002 values). Bleeding and other complications experienced by anticoagulated patients add additional types of costs, with inpatient care accounting for more than one-half of the total cost of managing excessive anticoagulation. When quality of life is considered alongside costs to gauge the cost effectiveness of warfarin therapy versus aspirin (acetylsalicylic acid), warfarin appears to be cost-saving in patients at high stroke risk and cost effective in those at moderate risk. For patients at lower risk of stroke, aspirin is more cost effective than warfarin. With the aging of the population and consequent increases in patient groups requiring anticoagulation, the US healthcare system greatly needs improvements to anticoagulation management. New research must determine which models of management will provide the most favorable outcomes for high-risk patients at the lowest cost to payors and society.

Pain has recently become the focus of attention as a major health problem in the US. The implementation of a pain management strategy in a rural not-for-profit federal hospital is described in this article. The strategy heightened awareness and changed the practice behaviors of clinicians in recognizing, assessing, treating and following patients with pain. Quality improvement initiatives monitored the performance of the healthcare staff regarding use of the assessment and documentation tools. Reduction of pain was surveyed in both transitional care patients and outpatients. Outpatients were also interviewed for satisfaction with their pain management plan. The efforts are ongoing as healthcare professionals continue to focus on reducing pain and suffering in their patients. Additional work is directed toward meeting both the objectives in the strategic plan and standards set by the health systems organization accrediting body described for pain management.

Diagnosis-based risk-adjustment measures are increasingly being promoted as disease management tools. We compared the ability of several types of predictive models to identify future high-risk older people likely to benefit from disease management. Veterans Health Administration (VHA) data were used to identify veterans ≥65 years of age who used healthcare services during fiscal years (FY) 1997 and 1998 and who remained alive through FY 1997. This yielded a development sample of 412 679 individuals and a validation sample of 207 294. Prospective risk-adjustment models were fitted and tested using Adjusted Clinical Groups (ACGs), Diagnostic Cost Groups (DCGs), a prior-utilization model (prior), and combined models (prior + ACGs and prior + DCGs). Prespecified high use in FY 1998 was defined as ≥92 days of care (top 2.2%) for an individual (i.e. the number of days during the year in which an individual received inpatient or outpatient healthcare services). We developed a second outcome, defined as ≥164 days of care (top 1.0%), to explore whether changing the criterion for high risk would affect the number of misclassifications. The diagnosis-based models performed better than the prior model in identifying a subgroup of future high-cost individuals with high disease burden and chronic diseases appropriate for disease management. The combined models performed best at correctly classifying those without high use in the prospective year. The utility for efficiently identifying high-risk cases appeared limited because of the high number of individuals misclassified as future high-risk cases by all the models. Changing the criterion for high risk generally decreased the number of patients misclassified. There was little agreement between the models regarding who was identified as high risk. Health plans should be aware that different risk-adjustment measures may select dissimilar groups of individuals for disease management. Although diagnosis-based measures show potential as predictive modeling tools, combining a diagnosis-based measure with prior-utilization model may yield the best results.

Increasingly, primary care physicians are being given budgets based on capitation formulae in the belief that such budgets will be fairer than budgets based on the historical utilization of funds. A second reason for giving primary care physicians budgets based on capitation formulae is that governments hope this will lead to beneficial changes in the behavior of physicians, for example, leading to healthcare resources being used more efficiently and appropriately. Ultimately capitation formulae are expected to produce financial benefits that can be reinvested in better clinical services for patients. In this paper these three key objectives are discussed using examples where capitation formulae have been used. There is limited evidence of the benefits of using capitation formulae but this evidence mainly comes from observational studies that are prone to bias and confounding. A major deficiency with the current capitation formulae used to allocate budgets to primary care physicians in England is that they generally only contain weightings for age, sex, and one or more ecological measures of need. Risk adjustment models have been used in the US but these models can explain only a small proportion of the variation in healthcare costs. At present in the UK it is uncertain whether capitation-based budgets and the enforced collaborative working arrangements for general practitioners will lead to a more efficient and equitable National Health Service. Continued evaluation of how capitation formulae are developed, the methods to adequately adjust for clinical risk, and how capitation formulae change clinical practice are required.

Alpha-1 antitrypsin (AAT) deficiency is a genetic disorder that leads to decreased circulating levels of AAT, which significantly increases the risk of serious lung and liver disease. Although previously considered to be limited to people of northern European ancestry, it is now known that people all over the world are affected. Over 100 abnormal alleles have been identified — the most common disease-producing of these being ‘S’ and ‘Z’. AAT deficiency is often beneath the diagnostic radar; consequently, it is typically unrecognized until the appearance of advanced lung or liver disease. It is important to detect AAT deficiency prior to the development of severe lung disease, since early augmentation therapy may limit the decline in function. Patients should be guided to immediately discontinue smoking and avoid smoke-filled environments, to keep away from other lung irritants, improve nutritional practices, participate in daily exercise, use preventive medical practices to limit disease, and become knowledgeable about the disease process and signs and symptoms of exacerbations. An aggressive disease management process should be initiated and continually refined for the individual patient. Disease management is a collaborative arrangement between patient and physician. The self-management component is a set of skills and routines to enable the patient to maximize disease control at home and recognize the earliest signs and symptoms of an exacerbation. A daily exercise program such as walking is essential on many levels. With continued research and ongoing clinical trials, patients with AAT deficiency will be provided with improved alternatives for managing their disease and perhaps an eventual cure. For the time being, aggressive preventive and disease management practices offer the best solution.

Objective: To describe the use of computer technology to enhance our ability to identify and notify providers of potential drug therapy problems using a mail intervention monitoring programme. Setting: Pharmacy benefit management company. Intervention: Use of clinical software systems and professional support to help physicians and pharmacists eliminate drug therapy problems using a drug therapy problem notification service. The service begins with an automated clinical screening system. Pharmacists then review the potential problems for relevance. After a potential problem is identified, the system generates letters to physicians and pharmacists. The letters describe the problem and explain its significance, provide recommended alternatives and supporting references, and give a patient prescription profile. Key enhancements to the system included: (i) use of a commercially available personal computer database program; (ii) client-server connections to large data sources; (iii) creation of sophisticated computer screening criteria; (iv) on-screen patient drug therapy problem review; (v) system loading of patient, physician and pharmacy information; (vi) automated follow-up; and (vii) criteria modification based on therapy changes. Main outcome measures and results: From January 1998 through July 1999, the service notified physicians and pharmacists of 100 894 potential problems for 49 892 patients. Over 60% of the interventions resulted in a change of drug therapy. Without this system it took over 3 months to mail letters. The turnaround time now takes less than 15 days. Pharmacists can now review 14 times as many potential problems in the same amount of time as taken previously. Conclusion: A combination of end-user programme development and information services department support considerably reduced the time required to identify, and notify providers about, potential drug problems compared with our previous system.

The objective of the study was to develop a procedure to distribute health resources among treatments for the primary prevention of coronary heart disease based on efficiency and equity. Two procedures to manage pharmaceutical resources for the primary prevention of coronary heart disease in Catalonia, Spain, were developed in this study. The following treatments were considered in these procedures: medical advice and nicotine substitution therapies for smoking cessation; hydrochlorothiazide (diuretic) and propranolol (β-adrenergic antagonist) for moderate/severe hypertension; hydrochlorothiazide and nifedipine (calcium antagonist) for mild hypertension; and lovastatin (HMG-CoA reductase inhibitor) for hypercholesterolemia higher than 7.23 mmol/L or 2.7 g/L. The first procedure was developed based on decision rules of cost-effectiveness analysis, giving a higher priority to treatments with a higher cost effectiveness. The second procedure was developed based on efficiency and equity, deciding allocation of resources based on cost-effectiveness and social preferences. Annual cost of treatments ranged from $US147.30 per individual for smoking cessation to $US2555.20 per individual for treatment with lovastatin 80 mg/day (1998 values). Resources should be allocated in the following order, according to the procedure based on decision rules of cost-effectiveness analysis, to smoking cessation therapies, hypertension treatments and hypercholesterolemia treatments. This is in contrast to the procedure based on efficiency and equity, where a higher priority should be given to the most cost-effective treatment for hypertension, hypercholesterolemia and smoking. The efficiency and equity strategy could reduce the amount of resources necessary to treat all individuals at risk by 26 to 47%, according to age and gender. The procedure based on efficiency alone should be used when the objective is to maximize health gains from available resources. The procedure based on both efficiency and equity should be used when society has an aversion to inequality in the distribution of health gains, treating all individuals with coronary heart disease risk factors at the lowest cost.