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Managed Care Trends: Balancing the Good with the Bad

Managed Care Trends: Balancing the Good with the Bad

According to the latest Galderma Quality Report for Dermatology & Managed Care, change is coming to dermatology — although perhaps not quickly enough for some still frustrated by issues such as referral and prior authorization protocols and formularies developed with too little input from dermatologists.

However, the data gathered suggest that the future looks good for the 10,500 practicing dermatologists who generally express satisfaction with their growing and high-in-demand specialty.

Dermatology: Neglected by the Managed Care Decision-Makers

In the March 2006 issue of Skin & Aging, I reported on data from the previous Galderma Quality Report for Dermatology & Managed Care, (Managed Care: Navigating Dermatology’s Needs. Skin & Aging. 2006;14:33-40). That report, which had been published in 2005, presented an interesting and enlightening review and analysis of dermatology and managed care.

To that point, dermatology and the costs associated with providing skin care had been largely overlooked or substantially neglected by managed care decision-makers and employers. The report revealed areas where there was a lack of understanding about dermatology by plan administrators and employers, and of managed care by dermatologists.

What’s New in 2007?

In April 2007 Galderma presented a second report based on newly collected information. Galderma commissioned Kikaku America International, Strategic Impact Marketing, and the National Association of Managed Care Physicians to conduct surveys of medical directors, pharmacy directors, other managed care professionals, and employers. In addition, dermatologists plus office staff were surveyed on the characteristics of their practices and their relationships with third-party payors.

As with the original surveys and report, the objective was to gain opinion and insight on policies, trends, costs, and other issues from multiple perspectives, and to better understand how much — or how little — the parties involved actually know about each other.

The current surveys inquired about the use of and benefit coverage for dermatological prescriptions, including biologics and injectables. Employers and health plans were asked about medical benefits provided by or through their organizations, about coverage and usage of cosmetic and “lifestyle” drugs, and about key trends in the treatment of psoriasis, acne vulgaris, and other conditions.

Few Improvements, Many Frustrations

The results of this second report and the surveys on which it was based are detailed here. In some cases, the new information reveals modest changes in both perceptions and factual understanding about the “other side.” In other instances, the data demonstrate that frustratingly little has changed.

The 2006 Skin & Aging story on the 2004 Galderma report (page 34) noted that, “Given the historic relative low cost of dermatology therapies in relation to other therapeutic categories and disease states, is it really worthwhile for managed care organizations to focus their efforts on managing dermatology spending?”

As we’ll see, with dermatology’s landscape changing very rapidly, the answer certainly should be “yes.” But clearly there is an unfortunate sense of indifference coming from managed care and employers.

Who We Are and Who We Are Becoming

This newest Galderma report opens with a brief overview of dermatology demographics. The data reveal a profession in transition and well positioned for success, even in an evolving managed care world.
• Practicing dermatologists now number approximately 10,500.
• Dermatology is a very popular residency, with approximately 800 applicants annually for just 300 positions.
• Dermatology has the lowest proportion of foreign-trained graduates of any specialty, and residencies are virtually inaccessible to those from non-traditional allopathic backgrounds.
• Dermatology has one of the highest proportions of women (in 2005, 32% of practicing physicians and 65% of those in training).
• Approximately 20% of practices employ aestheticians.
• Between 2000 and 2004, the number of physician assistants in dermatology increased by 49%, and currently approximately 25% of dermatology staffers are either PAs or nurse practitioners.
• While practices may be devoting more time to and deriving proportionally more revenue from cosmetic visits, most practices still devote about 60% of their efforts to medical dermatology, 30% to surgery, and 10% to cosmetics.
• Demand for services continues to outstrip supply. The wait time to see a dermatologist in many metropolitan areas is greater than that for most other specialties. Nationwide the mean wait time for a new patient to be seen is more than 1 month. (See Tables 1 and 2, below.)



Despite the tension and anxieties brought on by managed care, the Galderma Report also notes that this all bodes well for the profession, and it is reflected in the high satisfaction levels expressed by dermatologists. The Galderma Report cites the AAD/A 2005 Practice Profile Survey revealing that more than 90% of dermatologists are highly satisfied or satisfied with their careers, with dermatology as a specialty, and with their training.

What Was. What Is.

The 2006 report highlights numerous recent changes that are causing — or certainly should cause — managed care decision-makers and employers to put dermatology on their radar screens, and to re-evaluate current policies and coverage regarding the specialty.

For example:

• On the treatment side of the equation, 23% of dermatologists now use photodynamic therapy for actinic keratoses, compared to just 9% in 2004. And in the same period, as a result of concern over growing microbial resistance, 50% are prescribing fewer antibiotics to treat acne (up from 42%).
• On the cost-control side, the use of 4-tiered formularies to manage biologic drug costs grew more than 20%.
• And on the administrative side, 68% of dermatologists believe managed care negatively impacts patient satisfaction (down from 74% in 2004).

The Survey Targets

The 2006 Galderma report results were compiled from the surveys described below, then discussed.

• Managed care: Surveyed decision-makers in third-party plans including pharmacy directors, medical directors, and other key executives responsible for benefits and coverage interpretations, cost accounting, utilization, etc.
Dermatologists: Surveyed both physicians and key office staff.
• Employers: Surveyed human resource directors, benefits managers, and other key executives responsible for deciding the “richness” of their offerings and for evaluating the resulting “bang for the buck.”

Results from the Managed Care Survey


Formularies: Formularies continue to be a problematic issue for many dermatologists and most of their patients. Not only does each health plan have its own formulary, but also each may have multiple co-payment levels and a different number of co-payment levels compared to a competitor’s plan. And there can be a significant disparity among plan formularies, with one plan covering drug “X” for a nominal co-payment, perhaps in tier 2, while another plan puts a significant percentage cost on the same drug by classifying it in a higher tier. Keeping track of all this is not easy for the physician, staff, or the patient.

One or more formularies are used by 93% of plans. Of those plans reporting, more than 75% define their own, while about 18% use a Prescription Benefit Manage-ment-defined formulary; just under 6% use other means. (See Figure 1.)


Most third-party plan members are covered by 3-tier formularies. One-fourth of the responses indicated benefits available under 4-tier formularies. The average co-payments for those tiers are shown in Figure 2. Note that while some respondents indicated a dollar amount for tier-4 co-payments, many others stated that members pay a percentage averaging 37% of the cost of the drug.


Tier-4 drugs for dermatology typically are biologics and injectables such as Enbrel, Raptiva, and Amevive, or cosmetic products, although fewer than 10% of plans reported that they cover lifestyle/cosmetic treatment. Respondents indicated that they put drugs on this 4th tier due to their high cost and as a means to encourage (force?) the covered individuals to first try other, less-costly therapies. Payors also see this as a very effective means of placing some measure of financial accountability on each patient’s shoulders.

Generics: Generics make up 70% of the prescription medications on formularies, and many respondents indicated that their plans have mandatory generic policies. Of respondents, 80% indicated “never” or “seldom” when asked whether branded topical steroids are on their preferred formularies if there is a generic equivalent.

P&T Committees: One common frustration for dermatologists is that many plans seem to understand so little about dermatology and dermatological medications. Perhaps part of this is the result of under- or no representation on pharmacy and therapeutic (P&T) committees. Of respondents, 88% indicated that their plans operate their own P&T committees. However, of those plans with a P&T committee, 87% do not include a full-time dermatologist on that committee. It is no surprise then that frustrated dermatologists may wonder who is making critical decisions affecting patient care, and if those decision-makers are sufficiently knowledgeable.


Referral and prior authorization protocols: A little more than half of plans reported that members can self-refer to a dermatologist. Co-pays for these visits are the same as for a primary-care physician in about 66% of plans, are higher in 27%, and are lower for 7% of them.

The ease of making appointments notwithstanding, many dermatologists are thoroughly frustrated by the hoops they must then jump through to get their patients the recommended care. More than three-fourths of plans require prior authorization for certain dermatological services. The most common prior authorization “triggers” include requests for:

•Enbrel, Raptiva, and Humira
• treatments that could also be considered cosmetic (prior authorization is required to substantiate medical necessity)
• Accutane.

Interestingly, 70% of payor respondents anticipate that they will see dermatologists providing more biologic treatments for psoriasis in the next year. (See Figure 3.) This includes Enbrel, Raptiva, Humira, Remicade, Amevive, and some others not yet FDA-approved.


But that anticipated increase will bring with it certain pre-delivery complications for dermatologists. The Galderma Report surveys indicated that only 4% of plans allow the use of biologics for psoriasis without prior approval. Seventy-seven percent require that the patient previously fail other systemic treatments before they will consider a physician’s request for approval. Fifty-five percent of plans ask for submissions requiring prior failure of phototherapy. In 29% of plans, a minimum of 10% body surface area (BSA) must be involved, while 13% require a minimum of 5% BSA involvement before consideration is given to the use of biologics.

And as one indication of just how complicated it can be for dermatologists and their staffs to determine what is or is not covered, to confirm coverage, and to get prior approval, consider this: Of those health plan executives reporting, 21% stated that their plans did cover laser treatment for psoriasis, 46% reported they did not, and an incredible 33% had no idea (and would not have been able to help if handling a coverage or prior-approval inquiry from a dermatology practice).

It’s not surprising that physicians and patients encounter many obstacles. Health plans are, after all, in business to maximize profits. And in part that means reducing the medical loss ratio (i.e., dollars paid out for patient care).

One commonly cited hurdle is a sometimes-onerous set of protocols mandated by payors when branded drugs are to be prescribed. These can have an almost “back-door” impact on the use of certain treatment modalities.

And it’s no wonder so many physicians and staff are frustrated with managed care. Over time, dynamics such as these can change a physician’s prescribing patterns.

Interestingly, at least in the minds of health plan executives with a clear propensity toward the use of prior authorization, there seems to be something of a bifurcated sense of dermatological costs and their impact on employers. For example, more than 85% of health plan respondents indicated that their employer-clients are not overly concerned about pharmaceutical expenses for acne, melasma, or rosacea. However, 43% of them felt that employers were moderately or significantly concerned about the costs of treating psoriasis (almost certainly a result of the pricing of biologics).

And perhaps not all that surprisingly, few managed care decision-makers were aware of any employer concern regarding the indirect costs that result from patient depression associated with acne or psoriasis. Of those very few indicating an awareness of such an employer concern, most stated that their health plans offered depression disease management and education to reduce such costs.

But certainly the depression and associated costs are not unknown to dermatologists — even if employers and health plans seem unaware. The Galderma report cited a survey conducted by the National Psoriasis Foundation. It found that, “Dermatologic conditions, because they are visible, negatively affect patients’ quality of life … 26% of those diagnosed with psoriasis stated that their condition negatively impacts their emotional well-being; even 21% of those with mild disease felt the same impact.”1

So it would seem that while some employers express concern for the pharmaceutical costs of psoriasis, many are not concerned about the collateral costs of depression and the decreased quality of life. Dermatologists know that a well-designed treatment program for psoriasis can help to alleviate the quality-of-life frustration and anxiety facing these patients.

Where We Stand on These Issues

The upshot of the findings discussed here in part 1 of our coverage of the 2006 Galderma Quality Report for Dermatology & Managed Care seems to be that dermatologists have cause for optimism, as the field grows and they can offer patients effective treatments such as photodynamic therapy and biologics. At the same time, they remain frustrated by managed-care imposed obstacles to offering their patients access to these and other treatments. To this end, they need to take steps to make managed care decision-makers more aware of the realities of their specialty and perhaps the implications of ignoring issues — for example, the psychological impact of skin conditions such as rosacea and psoriasis — that may increase dermatology expenses.


Part 2 of our coverage of the Galderma Managed Care Report will delve into results of the physician survey, the coding and reimbursement survey, the employer survey, and thoughts for advancing the quality of patient care and repositioning the profession.

Copies of the Galderma Report can be requested on-line at Click on “For Professionals,” and then on the Galderma Report button (blue-green) on the left side.





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