Rethinking Cost Containment in Publicly Funded Psychiatric Drug Budgets

Given my experience as a state level administrator several years ago, I have continued an interest in the way which public expenditures for mental health reflect a variety of interests — usually in an attempt to limit expenditures from the state coffers.  One of the areas of greatest concern to state legislators each session is the cost of participating in the Medicaid program.  A significant portion of state mental health budgets, especially for community mental health programs, is in this pot of money.  And psychiatric drugs are a major expense in state Medicaid program.   As I will point out, however, there are major advocacy groups who want to expand, not limit access to these drugs.

The federal government has a major fiscal investment in Medicaid because it pays approximately 60% of the costs of health services under the program.  So in 2003, the Office of the Inspector General in August 2003 produced a report on how states could become better purchasers of psychiatric drugs.   Even 10 years ago, a total of $20 billion was spent on drugs by Medicaid programs of which $4 billion of that was for psychiatric drugs–and this excluded antianxiety and sleep meds.  At that time already, in some states the cost of psychiatric drugs alone had surpassed the costs for high blood pressure, respiratory problems and diabetes (OIG report).

The OIG report studied the 10 largest states and showed that the cost of psychiatric drugs for their Medicaid programs were significantly higher than the rates paid by the Big Four federal agencies (Department of Defense, Veterans Administration, Public Health Service and the Coast Guard).  The OIG estimated that these 10 large states only (which represented about 58% of total Medicaid expenditures for the US) could have saved $256 million each year had they simply used the federal purchasing standards.  Smarter purchasing practices would be one way to save millions of dollars.  However, given the size of total expenditures for psychiatric drugs, this would have provided only marginal budgetary relief for the federal and state governments.

So, most states have made fairly feeble attempts to rein in the cost of these drugs through other methods.  These are all controversial but include requirements for “prior authorization,” “formularies,” “fail first requirements,” “use of generics,” “limiting the number of prescriptions filled,” and others.  One reason they’re controversial is that prescribers almost universally object to any and all restrictions on their practice and authority.

Various advocacy organizations have also jumped into the discussion in support of the professional objections to cost containment activities.  The Bazelon Center for Mental Health Law has been one of these and authored an article entitled, “Medicaid Policies to Contain Psychiatric Drug Costs,” in the respected journal Health Affairs in March, 2005.  The authors, Koyanagi, Forquer, Alfano, studied Medicaid policies that restrict access to psychiatric drugs by surveying 47 of the 50 US states.

Revealing one of many unspoken assumptions that the drugs are underused and effective, they worried that psychiatric drugs were not being protected in the haste to save money.  Consequently, they believed that restricting drugs would actually increase costs in the long term.  They lamented that in 2003 forty-six states made changes to reduce the costs of their Medicaid outpatient drug benefits.

As evidence of this concern, the article refers to a study in New Hampshire in 1990 that showed when psychiatric drugs were reduced, there was a “large increase” in the use of emergency mental health services and partial hospitalization for people with schizophrenia — but, and here is where I will begin to raise questions about advocacy efforts to keep drugs flowing freely — they ignore the increasingly clear evidence that reducing drugs without great care almost always leads to “rebound psychosis” which is the result of the drugs themselves causing super-sensitivity.  This kind of conclusion avoids the critical question of whether it was the decrease in drugs or the way in which they were decreased.

Tempering the authors’ concerns, they admit that there were “a large number of exemptions for those policies…”   And they cite Oregon as an example where the state allows practitioners much greater discretion than most other states.  In other words, the formulary in this case is voluntary and “practitioners are allowed to prescribe any drug that they indicate is medically necessary and the most effective available.”  There are 20 states, including Oregon, who have made this psychiatric drug “carve out.”

Shifting to a focus on children and youth, an April 2014 report, “The Five Most Costly Children’s Conditions, 2011: Estimates for U.S. Civilian Noninstitutionalized Children, Ages 0-17” (Statistical Report #434) from The Agency for Healthcare Research and Quality shows that the total US expenditure for all health services to children (private and public funds) in 2011 was $117.6 billion.  Of this, mental health conditions come in as the largest expenditure at $13.8 billion.  The cost of psychiatric drugs is 41.4% of this total mental health cost or $5.7 billion.  Medicaid picks up the tab for about half this cost; in a very small state like Oregon alone, this Medicaid bill comes close to $30 million every year!

In the face of threats to Medicaid budgets because of these clearly astronomical costs, the Bazelon article worries about the effects of “limitations on stimulants to children and youth with attention deficit disorder (ADHD), while others [children and youth] may be harmed by restrictions on barbiturates or anticonvulsants, which are often prescribed as supplements to other medications.”  In other words, Bazelon was implicitly encouraging the practice of polypharmacy for children and youth!  They go on in a similar vein to express approval of polypharmacy for adults with “serious mental illnesses, many of whom require treatment with multiple psychiatric medications.”  They correctly point out that many of these people have chronic physical disorders such as diabetes—but they seem unaware that these problems were nearly always a result of the use of antipsychotic medications themselves.

Just one more example of the confusion about using extremely expensive drugs appears in a 2012 article in Schizophrenia Bulletin, “Comparative Effectiveness of Second-Generation Antipsychotic Medications in Early-Onset Schizophrenia” by Olfson et al in which the primary author and most other co-authors acknowledge financial or advisory ties to pharmaceutical companies.

They compared short-term outcomes and physical health problems between first- and second-generation antipsychotics for young people.  Three quarters of young people discontinued their psychiatric drugs in first 6 months, many were experiencing weight gain and there was no difference in outcomes between those prescribed 2^nd vs 1^st generation antipsychotics.  It is curious that in this article there was no attempt to connect the dots — young people don’t want to gain weight and probably object to the other many side effects of antipsychotic medications, 1^st generation or 2^nd.

There are at least three main arguments that swirl around cost containment in public expenditures for psychiatric drugs.  The first is simply that limitations of any kind deny resources that are life-preserving and cost-saving to people labeled with “Serious Mental Illness” — they cite studies that show an increase in hospitalizations, homelessness and incarceration.  Never mind that there are many other possible explanations for these outcomes such as rebound psychosis, alcohol/drug use, poverty and discrimination.  As an example, this argument is made in visually attractive formats like that sponsored by Harvard Law School’s Health Law and Policy Clinic — and Bristol-Myer Squibb — not exactly a disinterested economic partner.  A corollary is that by gaining some modest savings, even more Medicaid enrollees can get even more access to the drugs.  This is one of the points made in the OIG report mentioned early in this blog and is echoed repeatedly in other drug-induced advocacy efforts.

There are Big Pharma lobbyists in every state capitol working the back offices to eliminate any and all restrictions on the use of their products.  Barring that, they will work to neutralize any kinds of cost containment barriers and keep the gate as wide open as possible — always arguing (despite evidence from unbiased research) that drugs are cost effective in both short and long term.

A second public policy discussion revolves around that idea that costs have to be reduced and there are reasonable though controversial methods already available to do this.  They simply need to be strengthened.   But then too, this argument is a piece of the conversation behind the scenes in state capitols and the pharmaceutical lobby has a powerful say in carving up the exceptions so that their highly profitable business sustains and augments itself.  Even more people end up taking their drugs.

The third argument is one that I would endorse.  Let’s pay attention to unbiased research that shows convincingly that we’ve overdone it with psychiatric medications.   For example, the so-called atypicals are expensive but no better — and in some instances worse because of their role in causing metabolic syndrome.  And how many “relapses” are actually caused by rebound psychosis from poor medication withdrawal practices?

We could reduce costs, get better results in both long term mental health outcomes, and furthermore lower costs in physical health care and mortality.  This argument leads in the direction of transferring savings from drugs to improving community services, peer supports and health care, and training more staff and aspiring mental health workers to understand the relationship between poor outcomes and over-use of drugs.  I believe we could both save money and augment recovery-oriented programs.  Would this be such a bad business deal?