July 31, 2013
Medicare Could Save $1 Billion on Diabetes Drugs Annually With VA-Style Formulary

Pittsburgh, PA—The Medicare Part D program could potentially save $1 billion a year if spending on brand-name drugs for diabetes was similar to the U.S. Veterans Administration, according to a new study.

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, led by researchers from the VA Center for Health Equity Research and Promotion in Pittsburgh, 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 lead author Walid Gellad, MD, MPH. “The levels of generic use found in the VA are attainable, and they are compatible with high quality care.”

The authors note that the variation likely reflects 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 pharmacist-managed 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.

The following variations in brand-name drug use were 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%.

“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.”

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