The U.S. Pharmacopeia's draft model drug classification system for Medicare would require plans to cover at least 348 different drugs.

The draft guidelines released by USP for public comment outline a classification system that contains 43 therapeutic categories, 138 pharmacologic classes, and 135 "recommended subdivisions" of pharmacologic classes (see chart, pp. 18-22).

USP is developing the classification system to serve as a "safe harbor" for Medicare outpatient drug plans; sponsors would be allowed to use different classification systems if they wish (¹ Also see "Formulary Balancing Act: Medicare Rules Weigh Access Versus Cost Control" - Pink Sheet, 2 August, 2004., p. 17).

When USP unveiled the draft Aug. 19, it highlighted the number of unique pharmaceutical classes proposed: 146 (the 138 defined classes plus eight of the 43 therapeutic categories that have no associated classes) (² Also see "USP Draft Medicare Formulary Sets 146 Drug Categories And Classes" - Pink Sheet, 23 August, 2004., p. 5).

However, at the finest level of granularity, there are 237 unique therapeutic groupings (the 135 "recommended subdivisions" plus 94 pharmaceutical classes that have no subdivisions and eight categories that have no classes).

Under the Medicare implementing regulations, plans would have to offer at least two drugs in each therapeutic class.

USP said its intention behind creating the "recommended subdivision" level of classification is to require sponsors to offer at least one drug in each subdivision.

That would mean that some therapeutic classes would need to have more than the two drugs required by statute.

For example, the oral hypoglycemic class proposed by USP has five subdivisions (alpha-glucosidase inhibitors, meglitinides, biguanides, sulfonylureas and thiazolidinediones), so sponsors would need to cover at least five drugs in that class.

In order to comply with the two-per-class and one-per-subdivision approach, plans would need to cover at least 348 different drugs.

The "recommended subdivisions" proposal was one focus of discussion during an Aug. 27 public meeting on the USP draft classification system.

USP describes the proposal as a compromise between the interests of manufacturers and consumer advocates in ensuring availability of a wide array of products, and plan sponsors, who want to preserve negotiating leverage to control costs.

The Centers for Medicare & Medicaid Services appears to be on board with the idea that formulary standards should be more specific than the two-per-class directive.

A CMS discussion paper released ahead of the USP meeting explains that the agency "will evaluate formularies at a more granular level than described by the model guidelines to make sure they include sufficient choices of clinically significant drugs."

"This will likely include evaluating formulary choices and conditions at the sub-class level," CMS said.

The agency plans to publish guidance this fall on how it will evaluate formularies under the Medicare drug benefit program.

However, if CMS decides that it cannot implement USP's "recommended subdivision" approach, USP said it would then propose to treat the subdivisions as full therapeutic classes (requiring at least two drugs in each).

That approach would require plans to cover at least 474 different drugs (two in each of the 237 therapeutic groupings included in the USP proposal).

The relatively esoteric distinction between "recommended subdivisions" and full therapeutic classes could be profoundly important for some of the pharmaceutical industry's most commercially significant products.

Under USP's proposal, for example, statins would be considered a "subdivision" of the cholesterol-lowering class, meaning that managed care formularies could include just one of the drugs (³ Also see "COX-2s, Statins Have No Class In USP Medicare Draft Formulary" - Pink Sheet, 23 August, 2004., p. 3).

USP Drug Classification System Suggests At Least 348 Drugs On Formularies

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