More on OTCs (June 2006): Paradigm shift

June 1, 2006

Although any change in moving newly released over-the-counter (OTC)medications to benefit designs or formularies is currently beingdriven by health plans, other emerging market factors willinfluence how plans and employer groups think about coverage forOTCs. For example, Blue Cross and Blue Shield of Minnesota has hadnumerous inquiries about OTC coverage, usually from employer groupsthat know Medicaid and some Part D plans can cover OTCs. Inaddition, some states are evaluating their pharmacy practiceguidelines to determine how to revise them to accommodate changesin dispensing OTCs. This change is driven by the addition of OTCsto formularies and by the move to put pseudoephedrines behind thecounter. Another industry trend in some states, includingMinnesota, allows pharmacists to prescribe OTC products for publicprogram recipients.

Although any change in moving newly released over-the-counter (OTC) medications to benefit designs or formularies is currently being driven by health plans, other emerging market factors will influence how plans and employer groups think about coverage for OTCs. For example, Blue Cross and Blue Shield of Minnesota has had numerous inquiries about OTC coverage, usually from employer groups that know Medicaid and some Part D plans can cover OTCs. In addition, some states are evaluating their pharmacy practice guidelines to determine how to revise them to accommodate changes in dispensing OTCs. This change is driven by the addition of OTCs to formularies and by the move to put pseudoephedrines behind the counter. Another industry trend in some states, including Minnesota, allows pharmacists to prescribe OTC products for public program recipients.

According to WR Hambrecht & Co., the seven blockbuster drugs going off patent in 2006 are worth an estimated $21 billion. We can expect that some of these blockbusters will go generic and also will be offered in an OTC version within the near future. For example, there is speculation in the marketplace that statins such as Zocor could be approved for OTC.

The 2006 list includes:

Additionally, current "low-cost" drugs, such as weight-loss agents, also may go OTC. In this context, plans and PBMs have just a few years to evolve an OTC strategy before the market starts dictating what that strategy should be based on the practices of a few first movers or regulatory bodies.

Formulating an OTC strategy

Most plans and PBMs already are making dramatic changes to formularies to include a wide and diverse selection of generics. As our attention turns to OTCs, the question remains: is benefit design enough? Our formularies must be "aware" of OTC alternatives to prescription drugs (and thus move those prescription drugs to higher tiers or simply exclude them from the formulary) and also anticipate the need for broadly administered benefit designs that include OTCs. As a result, pharmacy and therapeutics (P&T) committees must begin to evaluate formulary mixes that include a tier of OTCs today in anticipation of what is potentially a new paradigm within the next several years. Similarly, operational groups within plans and PBMs need to begin planning support for OTCs at the formulary level, rather than the benefit design level, and begin migrating systems, pharmacy network relationships and operational processes accordingly. The new paradigm will affect the plan's or PBM's view of formulary and benefit design and also the standard operating practices for retail pharmacists, physicians and how members purchase their OTC drugs at the pharmacy.

That leaves the final question: What criteria dictate which OTCs to include or exclude from a formulary? As we move into this new paradigm, there will be debate within P&T committees to address that issue. Getting there will require a mind shift for those of us schooled in a time where there were very distinct lines between prescription medications and OTC remedies for short-term, minor ailments. Dossiers of information probably will not exist for these individual agents as OTC, but our cumulative experience will help in determining the right approach.

Alan Heaton, PharmD, RPh, is director of pharmacy at Blue Cross and Blue Shield of Minnesota, Eagan, Minn.