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DDP Program Year 2 Report

Overview

The Drug Distribution Project ("DDP") was created in the fall of 1999 to implement the drug distribution portion of Master Agreement of Settlement and Release of Pharmaceutical Cases I, II, and III in the Superior Court of the State of California, City and County of San Francisco, J.C.C.P. Nos. 2969, 2971, 2972 (hereafter "Original Settlement Agreement"). The DDP is part of the Medicine for People in Need (Medpin) Program (previously called the Pharmaceuticals and Indigent Care Program), which operates under guidance from its Advisory Board (Attachment A) and as part of the non-profit Public Health Institute.

Pharmaceutical Company Participants

From April 1, 2000-July 8, 2001, the DDP distributed products from nineteen pharmaceutical companies ("Participating Companies") pursuant to the Original Settlement Agreement of 1999. On July 9, 2001, six additional Participating Companies joined the DDP, pursuant to a document referred to here as Second Settlement Agreement (see Attachment C).

Eligible Recipients and DDP Order Periods
Attachment B lists the Eligible Recipients (called "DDP Participants") approved to participate in the DDP for PY 2, after documenting to Medpin's satisfaction that they are one of the types of safety net providers specified in the Original Settlement Agreement and have in-house pharmacy capacity (a drug dispensary or pharmacy) licensed by the California State Board of Pharmacy. These DDP Participants had three opportunities to request products during DDP PY 2 Order Request periods: April 23- May 9, 2001; September 10-24, 2001; and January 7-21, 2002. All participants' order requests were reviewed by the DDP and adjusted as necessary before being transmitted via facsimile or Electronic Data Interchange to the appropriate Participating Companies.

Assignment of DDP Credit Limits
To maximize equity and efficiency of ordering across all DDP Participants, each community clinic was assigned a Program Year 2 "DDP Credit Limit" based on the most recent available public records of the amount of indigent care they had provided. For clinics part of county health systems, DDP Credit Limit was assigned based on the most recent available public data on countywide indigent care provided and the county's proportion of residents living below the poverty level.

Value of DDP Credit
Despite attention often given to participants' credit limit figures, DDP experience to date shows that the credit limit is a ceiling, but not a guarantee of value to the Participant. If all DDP Participant Companies had offered DDP Participants sufficiently valuable drugs in sufficient amounts, then the credit limit figures would have a stronger correlation with actual value. For participants who cannot find the pharmaceutical products they seek on the list of DDP offerings, or who find their request for an "available" drug significantly cut back due either to ordering restrictions imposed by a Participating Company or that Company's overall liability ceiling, credit limit figures overstate the value of the DDP to participant clinics.

Differences Among DDP Participating Companies
Attachments C and Attachment D reflect the DDP"s varying degress of success during PY 2 in "spending" each company's Product Balance. Those companies with the largest unspent (and therefore rollover) amounts are assumed to be those companies whose products offered through the DDP were considered less valuable by Participant Clinics, or who placed additional order restrictions on their more popular drugs. Note the differences across companies of rollover amounts: Knoll, Carter Wallace, Schering-Plough, Warner Lambert, Pfizer, Eli Lilly, and Boehringer-Ingelheim all have less than $100,000 rollover (Attachment D). By contrast, AHP, Merck, SmithKline Beecham, and Upjohn (from the original group of Participant Companies), plus Novartis, Hoechst-Marion Roussel, and Searle (from the Second Settlement group) have rollovers ranging from $1 million to $4.7 million. Companies in this "high rollover" group may have a better chance to spend down their DDP liability when other companies' more popular products become "spent out," leaving the less popular drugs still available through the DDP.

The right hand column of Attachment C shows each company's final DDP program year liability as a percentage of its total DDP liability. For companies in the Original Settlement group, this percentage would be expected to be one-third (33%), based on the Settlement's implication that equal portions of each company's total liability should or would be expended in each of the three program years. Medpin expects it will be difficult and perhaps impossible to spend out the total liability for any Original Settlement company showing a percentage significantly larger than 33% unless that company takes steps such as offering to add more valuable drugs or relaxing its DDP ordering restrictions.

Some but not all companies have recently taken major steps in this direction; the orders transmitted based on the first period of the final (April 8-22, 2002) DDP program year will provide a strong indication of the success of these recent steps in helping spend down those companies' total liability before the end of the DDP. For companies in the Second Settlement group, the figures show that it was possible to "spend out" any of those companies during their initial period of DDP participation (OP3 of PY 2), except Searle, which allowed but did not reach a 50% expenditure. Attachment E suggests why some companies have large liability rollovers: they have not made some of their most popular drugs available to the DDP (AHP and SmithKline Beecham are most notable in this respect), or have done so too recently to have these changes reflected in PY 2 figures (Merck is most notable in this respect).

Changes in the List of Drugs Available Through the DDP
Attachment F and Attachment G show that the Original Settlement's selection of drugs and additional ordering restrictions on some drugs has been modified over the two years of DDP operation to date. On balance, Medpin believes that the value of the DDP's total list of products has increased as a result of some Participant Companies adding to the list of drugs they offer the DDP or relaxing the ordering restrictions placed on products already offered. (This same view is held by one of the DDP Participants quoted in Attachment J).

Attachment F indicates that AHP, Bristol-Myers Squibb, Merck, Pfizer, and GlaxoWellcome added valuable drugs to the DDP at some time during PY 2. Information from the initial order period (April 8-22, 2002) of the DDP's final year will indicate whether the additions are sufficient to create an expectation that that company's total DDP liability will be spent down before the DDP's close. Attachment G shows that Participating Companies have removed a total of 26 drugs during the DDP's first two years.

Notable Events of Program Year 2.
Perhaps the most notable event of PY 2 was the addition and integration of six new pharmaceutical companies to the DDP, starting with Order Period 3. These newer Participant Companies operate under procedures substantially similar to those in effect for the original nineteen companies. One difference for these new companies is that they do not adhere to the same Product Distribution Year apportionment of Product Balance as the original group, due to the date of their entry to the DDP. Searle made half of its total DDP liability available in PY 2's final order period, with the remaining half available during the DDP's final year. All other companies from the Second Settlement made all of their liability available immediately upon their entry into the DDP, toward the end of PY 2. Attachment C shows that three of the six new DDP Participant Companies (Janssen, Roche, and Ortho-McNeil) succeeded in spending most of their total liability after only one order period, resulting in rollovers of less than $250,000. The other three new companies have much more substantial rollovers ranging from $1.9 million to $4.7 million.

Another event of PY 2 was the occurrence and resolution of a significant problem involving transmission of order information. On May 22, 2002, incorrect order information from Order Period 1 was transmitted by Choice Systems, Inc., the company Medpin has contracted with to manage and submit ordering data to Participant Companies. For a major part of the following month, Choice Systems, Inc. and their parent company AmerisourceBergen, Inc. worked with Medpin, DDP Participating Companies, and DDP Participants to resolve the resulting problems. Medpin thanks all DDP Participant Companies for taking immediate steps to reduce or eliminate the number of incorrect product shipments resulting from this error. Particular thanks to Merck and Bristol-Myers Squibb, whose practice of shipping DDP orders immediately upon receipt resulted in the need to recall or rectify a number of those shipments. Many people within these two companies took prompt, constructive steps to halt as many of those erroneous shipments as possible.

Special recognition also goes to Linda Burkett, Vice-President and Chief Information Officer at AmerisourceBergen, for her and her staff's proactive approach to working with Medpin to rectify the problems associated with the erroneous orders. Medpin has worked closely with AmerisourceBergen and ChoiceSystems, Inc. to add procedures that greatly reduce the possibility of any future errors. Medpin appreciates the efforts of all companies and organizations that worked to correct or minimize the confusion and other problems resulting from this error. It may not be surprising that a major error would occur at some point of operating a complex, unique, and recently created system of drug order transmission and delivery. Medpin is proud of the DDP's overall record of creating and operating an efficient, cost-effective distribution of pharmaceutical products to clinics of highly diverse size, location, and circumstances.

Medpin's Education and Research Activities

The DDP has brought great value to Participants not only through the drugs it offers, but also as a catalyst for a number of education and research activities. These activities, supported to date by The California Endowment, The California HealthCare Foundation, The California Wellness Foundation, and the DDP, are an important complement to the free drugs now available through the DDP, and a source of assistance for safety net providers facing the end of their no-cost indigent drug supply at the same time that their pharmaceutical costs are steadily rising.

  • Pharmaceutical Management Workshops: During January through March 2002, Medpin staff offered one-day workshops at seven California locations ranging from Redding to San Diego. Approximately 180 people attended these workshops, which (1) educated attendees about the federal 340B drug discount program, (2) helped clinics wanting to establish a licensed drug dispensary understand the rules for obtaining a "clinic permit" from the California Board of Pharmacy, and (3) presented and discussed a "model contract" for an outside pharmacy to dispense a California safety net clinic's 340B drugs, pursuant to federal law and a California statute that took effect January 1, 2002. Chap. 631, Stats. 2001.

  • Bi-monthly Newsletter: Medpin now publishes The Medicine Cabinet (Attachment H), a bi-monthly newsletter mailed to 1800 California safety net providers and other nonprofit organizations, and also sent electronically to hundreds of people within and outside of California

  • Conference Call Trainings: On alternate months, Medpin's bi-monthly Conference Call Trainings have brought one hour presentations and discussion to scores of call participants who have discussed pharmaceutical companies' patient assistance programs, use of drug samples for indigent patients, and generic drug selection and use. The next call will discuss the potential impact on patient assistance programs of drug companies' new coverage and discount cards.

  • Trainings and Consultation: Other education activities include development and distribution of written informational materials (summarized on the Internet at www.medpin.org/education/k_pharmacy.html, www.medpin.org/lowcostdrugs/purchasing_options.html, and other places within the Medpin website), and free consultation with an experienced indigent care pharmacist. Medpin's first annual conference in May 2002 will bring together clinicians, administrators, pharmacists and others from the nonprofit community to share perspectives and information with each other on the increased role and cost of pharmaceuticals as part of health care for vulnerable populations.

  • Research: Medpin works with academics to conduct health policy research that informs lawmaking and program administration activities affecting vulnerable people's access to medicines. A national study of drug companies' patient assistance programs is currently in progress, in partnership with faculty from the University of California Schools of Business and of Pharmacy (see Attachment I for a summary of preliminary findings). Medpin also works with faculty from the University of Southern California and the University of California at San Francisco to address a range of issues regarding drug selection and pharmaceutical cost management.

  • Conclusion

    The Drug Distribution Project and the larger Medpin Program have clearly benefited many of California's indigent care providers and their patients during the past two years. Attachment J provides an informal presentation of some of these providers' comments on the DDP, its impact to date, and possible future implications.

    The most significant challenges for the DDP in its third and final year of operation are (1) to work successfully with those companies whose Product Balance will be expended only if they offer greater numbers or quantities of their more valuable products, and (2) to help clinics currently using DDP drugs prepare for the termination of this source of support for vulnerable patients.

    Report submitted by:

    Kathryn Saenz Duke, JD, MPH
    Medpin Program Director
    Leon Wilde, RPh
    Medpin Program Pharmaceuticals
    Specialist
    Liz Maslin, MA
    Medpin Program Administrator
    Marice Ashe, JD, MPH
    Director, Public Health Trust

    Program Year 3 Report»

    Program Year 1 Report»

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