California Healthline Daily Edition

Summaries of health policy coverage from major news organizations


      HMOs "and other managed care plans are redoubling efforts to
cut medical costs" and prescription medications "are their
primary target," AP/MIAMI HERALD reports. In 1996, many HMOs saw
their drug costs increase by as much as 10% to 20%. According to
AP/HERALD, "HMOs have been in a profit squeeze because their
costs for drugs, doctors fees and other care continue to rise
while corporate employers are resisting higher insurance
premiums." Christine Bennis, an analyst with UBS Securities,
estimated that HMOs' pre-tax profit margins "fell to 4.3% in 1996
from 5.6% the year before." One reason for the drug cost
increase, Bennis said, is that people are "using more
prescriptions and each prescription the patient was using was
more expensive, on average." In response, HMOs are "imposing
additional hurdles for consumers and doctors to jump if they want
to get the broadest choices among today's top medicines." Peter
Lee of the Center for Health Care Rights, a patient advocacy
group, said, "If you want choice, you're going to have to pay for
DRUG REACTION: One way that HMOs are seeking to reduce
their prescription drug costs is through stricter enforcement of
their drug formularies. For example, California-based PacifiCare
Health Systems "is now offering employers who want to keep their
premium increases low a new drug benefits program with a 'managed
formulary.'" Physicians who wish to prescribe a drug not on the
formulary must first receive permission from PacifiCare. Alex
Gilderman, who manages the formulary for PacifiCare, said that
the physician requests are ruled on with 48 hours. He added that
70% "are approved because they are medically justified." He
said, "It's not intended to be a restrictive process. It's a way
for doctors to request non-formulary medicines when they feel
it's appropriate." Other HMOs such as Healthsource and United
HealthCare allow non-formulary drugs, "but charge new fees for
BUYER BEWARE: Critics contend that the more restrictive
formularies, such as PacifiCare's, are "leaving off important new
drugs" and "potentially depriving patients of the best medicine."
They note that PacifiCare's formulary does not include Risperdal
and Zyprexa, two new schizophrenia drugs "that work better than
previous drugs but cost many times the price." Patient rights
advocates "say people need to be vigilant to ensure they aren't
deprived of breakthrough medicines" (Sakson, 3/9).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.