The Wall Street Journal (from which this is stolen in its entirety as most of you can’t get to it) basically advocates Pfizer’s claim that their DSM process in Florida works and saves money; $41.9 Million to be exact:

Pfizer Inc.’s health-management program in Florida cut the state’s medical costs by $41.9 million in the 27 months ended in September 2003, Pfizer said Tuesday. Pfizer, the world’s largest drug maker, in 2001 launched the joint initiative, which provides patient education and nursing care to patients with chronic diseases such as diabetes who are covered by Medicaid, the federal and state health-insurance program for the poor.The goal was for Pfizer to save Florida $37.5 million for the life of the program’s four-year contract, which ends in September next year, Pfizer spokesman Jack Cox said.

During the 27-month period, Pfizer also has given the state about $19.2 million worth of other investments and its medicines, Pfizer said. The results of the program so far validate "the original approach we took with respect to the state’s budget problems," Henry McKinnell, chairman and chief executive at Pfizer, said in an interview with The Wall Street Journal.

He said Pfizer is in discussions with other states about applying the same approach. But Florida has been alone so far in pursuing the Pfizer model. The results were determined by Medical Scientists Inc., an independent organization.Mr. McKinnell praised Gov. Jeb Bush’s willingness to try the approach despite opposition in some quarters in Florida. Meanwhile, Pfizer is talking with several employer groups about applying similar principles and is looking for partners overseas for analogous projects in Germany, Italy and Sweden.Under the current contract, Pfizer is exempt from paying heavier rebates on drugs for Medicaid patients in Florida, in exchange for offering its disease-management services.

However, earlier this year, the Florida Legislature put a stop to new contracts like this that offer value-added programs in lieu of supplemental rebates. Pfizer’s program remains in force through September 2005, and the company said it would use the positive results in an effort to persuade lawmakers to reconsider allowing such plans beyond then. Pfizer said that the program has reached nearly 150,000 Medicaid beneficiaries in Florida.

But the State of Florida is by no means as happy as Pfizer thinks it should be, or as the WSJ’s cheerleading suggests it is. Why not?

The disconnect between Medicaid, Florida lawmakers, and Pfizer hinges on a scathing report put out by the Office of Program Policy Analysis and Government accountability several months ago. In a roundhouse blow to Medicaid DM in general, the OPPAGA said that the Legislature’s big hopes for disease management never panned out; big savings weren’t being realized, the numbers that were reported were suspect at best, agency oversight was weak, and many of the recipients that were supposed to be in the program weren’t. In fact, only about a quarter of the chronically ill patients ever made it into DM. Their penetration of disease categories were only 19% for Asthma, 29% for Diabetes, 17% for CHF and 22% for Hypertension. (though they were at 69% for HIV)

Based on OPPAGA methodology, DM did pay back $1.46 in savings for every $1 spent. LifeMasters, for example, was credited with saving slightly more than $5 million for its CHF program, comparing the $7.63 million in program costs with $12.66 million in gross savings. Pfizer produced $900,000 in net savings in a program that cost $7.5 million. And in a field where there are no "perfect methodologies," OPPAGA said that Pfizer’s calculations for determining gross savings were fundamentally flawed, seriously inflating its earliest returns. Just don’t tell that to Pfizer, which fires back that OPPAGA is the one that’s guilty of fuzzy math."The report is not accurate," counters Cox. "It had several glaring errors in it. They didn’t even recognize that Pfizer was paying for the program."

But perhaps even more convincing for state legislators, OPPAGA had already rendered a negative verdict on the kind of value-added program that Pfizer championed. Not only were drug companies avoiding discounts or supplemental cash rebates if they offered value-added programs, the state agency maintained, so were their competitors. Any drug company with a competing product didn’t have to discount its price significantly to get a drug on the preferred drug list if Pfizer and the others weren’t discounting at all.

In fact the state believes that it gave up closer to $60m in rebates and discounts to get those $40m in savings. In other words, DSM works but not well enough. That has a nasty implication for drug companies trying to use DSM as a wedge into preferred positions on formularies. Payers may believe that they are better off just getting the maximum discount possible from the pharma company (which its competitors then have to match) and paying for the DSM themselves, rather than giving the pharma company a better deal and hoping that they’ll save more in payback from a the DSM process that the pharma funds. This should be pretty good news on the face of it for the independent DSM vendors like Lifemasters and American Healthways, but then again there are three sides to every story.

The third side has been causing a fuss in the DSM community this week. A couple of different studies have not such good news for the whole DSM community. One from Texas is about CHF patients using ACE inhibitors, and another is about the results of Kaiser Permanente’s DSM programs since 1996.

The

first study from Univ. Texas researchers showed that a DSM program for a chronically ill populations with CHF and diabetes didn’t save any money. Smartmoney reports that:

After 18 months, the disease management group lived an average of 76 days longer than those in the control group. But the study showed no difference in doctor visits, hospitalizations and prescription drug costs.

"Unfortunately, it did not save any money at all," said Dr. Autumn Dawn Galbreath, the study’s lead author. She noted that some states such as Florida have set up disease management programs and then cut their Medicaid programs in anticipation of savings. She said previous studies of disease management programs were smaller. She also said they preceded newer treatment guidelines, which appear to be more effective in managing heart disease. For example, heart patients are now routinely put on blood-pressure lowering medications known as ACE inhibitors. Fewer than half of patients in previous disease management studies were on ACE inhibitors, while 77% of patients in the Texas study were on them, researchers said.

Meanwhile the Kaiser study in Health Affairs (abstract here, full paper here) comes straight out and says that costs for the group in the DSM programs increased, as did quality indicators. Some extracts from the Kaiser study:

Costs rose for each of the four conditions during the study period. After adjustment for age, sex, and inflation, annual costs for CAD patients, for example, rose $2,110, or 19 percent. Among adults without the conditions, costs increased by fewer real dollars yet by greater or equal percentages. For patients with and without the four conditions, costs rose in each of the five categories (data not shown). The only exception was hospital costs among diabetes patients, which stayed the same. Increases were steepest for pharmacy costs and least for hospital costs.

Hospital admissions increased less on a percentage basis in the chronic disease populations than in their comparison populations, and, with the exception of heart failure, so did hospital days. Diabetes and asthma patients had fewer hospitalizations in 2002 than in 1996, even as hospital days stayed about the same. Heart failure and CAD patients had more hospital days in 2002 than in 1996…..ER visits decreased by a greater percentage for asthma patients than for their comparison group.

A commentary from some senior staff at Permanente suggested that even though costs went up for the DSM group, there were savings over what the costs for the groups in the absence of the DSM program would have been. Of course there wasn’t a control group for Kaiser like there was in the Texas case. However, most quality measures or process measure outcomes such as levels of LDL, etc, were overwhelmingly positive. And the commentary also pointed out that Kaiser patients were relatively well managed (and had relatively little money spent on them) in advance of the program’s creation. So it appears that finding cost savings is very hard–especially if you’re not screwing up in the first place–while improving care quality is somewhat easier.

Of course, the members of the online DM Forum had various opinions, ranging from Al Lewis saying that

you could surf in Tahiti even if the "old school" said you couldn’t (i.e. he didn’t believe the Texas study) to those (Vince Kuratis) who said that the problem was either the patients were already too well managed — already 77% of them were on their ACE inhibitors — or (Mary Wieg) that they weren’t sick enough on average and that DSM should concentrate on the sickest ones. Still others (Margaret Radzwill) suggested that the actual DM process itself was flawed because there were fewer patients on ACE inhibitors at the end of the study than the start. And occasional TCHB contributor Dave Moskowitz put out a press release saying that the ACE inhibitors being used were the wrong ones in the wrong dose! (There’s alot more comments at the Forum and if you’re interested in this topic you should sign up).

There’s a lot to chew on here, but the obvious conclusion is that while DSM is good for patients, it’s hard to get some patients into it and once you get past the really low hanging fruit, it may not be that good for the bank balances of the sponsoring plan/payer. That plans have been reluctant to do DSM is no new news. Don’t forget that most Americans will move from their health plan in less than two years. So the incentive to put these programs out there remains cloudy for most private plans because even if they do pay back, the money will be saved by the next plan, not them. So we shouldn’t be surprised that DSM is not storming the world.

But it’s a bit of a shock to find that DSM might potentially hurt the bottom line of a plan like Kaiser that tends to keep its patients around. (Although the Kaiser top brass apparently don’t think that it is hurting them, other health plan execs might not be so sanguine). As Medicare is starting to lumber towards DSM this is going to be a big discussion issue, and it would be very nice to know what’s really going on.

UPDATE: Mary Weig, who I referenced as saying that the patients in the Texas study weren’t

sick enough on average and that DSM should concentrate on the sickest ones, writes in accusing me of being a Fox News employee:

The way you quoted me was a bit misleading. My point was that DM programs should concentrate on people who are not complying with optimum treatment plans–as well as the sickest ones. If they don’t comply with optimum treatment plans, they will end up sicker eventually. That’s why stratification and focus are so important.

This piece has generated quite a bit of feedback (some of it quite complimentary), and at least one excellent detailed response. So please check back for more on DSM tommorow. (And no, of course Mary never said I should work for Fox, but if they’re hiring….)