Penny-wise prescriptions Economies in drugs cost HMOs more in long run, study says


Restricting physicians' choices of prescription drugs, while intended to hold down expenses, actually increases total health costs, according to a study published today in the American Journal of Managed Care.

Health maintenance organizations (HMOs) often adopt lists of drugs, called formularies, to reduce costs by getting doctors to prescribe less expensive or more effective drugs, or by earning the HMO volume discounts.

But a study of patients in six HMOs found that the more restrictive the formulary, the more likely patients were to use other health services -- they had more doctor visits, more emergency room visits and more hospital admissions.

One of the six authors of the study is Phoebe D. Sharkey, associate professor of information systems and decision sciences at Loyola College in Baltimore.

The principal author is Susan D. Horn, a professor of medicine at University of Utah and senior scientist at the Institute for Clinical RTC Outcomes Research in Salt Lake City. Dr. Horn taught at Johns Hopkins for 24 years before going to Utah in 1992.

The importance of the study, Dr. Horn said, lies not so much in what it says about drug formularies as in what it says about how managed-care organizations measure cost savings.

Often, she said, a less expensive treatment in the short run may not cure the patient, and thus would result in more costs in the long run.

"The relatively simplistic approach of saying you can't use certain drugs doesn't seem to be having the effect we want," she said.

"You've got to determine what is best to get the patient better as quickly as possible that's really the whole picture."

Said Dr. Sharkey, "The incentives that are created by various cost-containment strategies are often perverse and need to be evaluated very carefully."

The study involved following nearly 13,000 patients at six HMOs for a year. The patients all had any of five conditions -- ear infections, arthritis or joint pain, ulcers or upper abdominal pain, high blood pressure, and asthma.

It was sponsored by the six HMOs, which are not identified in the study, and by the National Pharmaceutical Council, a trade group.

Even before publication, the study was being used as ammunition by groups contending that cost-control measures can mean patients don't get the treatment they need.

The public relations firm representing the National Pharmaceutical Council distributed not only copies of the article but also statements from such groups as the Allergy and Asthma Network-Mothers of Asthmatics (AAN-MA) and the National Association of People with AIDS.

"We are concerned that restrictive formularies and increased use of generic medications is having a negative impact on the war we wage against asthma," said the AAN-MA statement. "Now, thanks to Dr. Horn's research, we have proof."

On the other hand, managed-care industry groups expressed reservations about interpreting the study results.

"The study found a correlation between stricter formularies and increased use of medical services, but it doesn't say those patients had poorer medical outcomes," said Donald White, a spokesman for the American Association of Health Plans, a trade group for HMOs and other managed-care organizations.

"The quality-of-care argument is one that a lot of people are going to be making, and we don't think the studies support that."

Carol Sardinha, a spokeswoman for the Academy of Managed Care Pharmacy, an organization of pharmacists who practice in HMOs and other managed-care plans, said the study did not provide enough information about how the HMO plans developed their formularies. Developed properly and updated frequently, formularies can save money, she said.

Dr. Horn said she believed that the procedures used by the HMOs studied were similar to general industry practice, which typically involve physicians and pharmacists in developing the list of recommended drugs.

Also, while all the plans allowed doctors to get exceptions if they thought the patient needed drugs not on the approved list, 96 percent to 98 percent of prescriptions came from the list, she said.

Dr. Sharkey said future studies will look at elderly patients in particular and at the effect of excluding newer drugs, which may be more expensive, from formularies.

Pub Date: 3/20/96

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