america’s MARCH 2007

Published by the National Community Pharmacists Association PHARMACISTTHE VOICE OF THE COMMUNITY PHARMACIST

• post-sale planning Attention to Details • controlling diabetes mellituseffective quality controls for compounding • Tax breaks, opportunity

A Winning Combination MTM and independent pharmacy

Ensuring a smooth sale • contraceptive choices •

www.americaspharmacist.net america’s

PHARMACISTTHE VOICE OF THE COMMUNITY PHARMACIST CONTENTS

Features

From the Cover 10 Therapeutic Care  by Jeri Lynn Kirschner CCRx’s MTM program is a winning combina- tion for pharmacists and patients.

14 After the Sale–Now What? by Michael T. Tarrant  You’ve sold your pharmacy and look forward to retirement. Have you planned for your finan- cial future?

22 Patient Tax Benefits and Pharmacy by Kent N. Schneider, JD, CPA  Health savings accounts and other programs designed to provide tax benefits to consum- ers may create opportunities for independent pharmacists. Departments 4 Up Front  by Bruce Roberts, RPh May legislative conference.

7 Newswire Drug misuse crisis: NCPA survey.

8 The Audit Advisor  by H. Edward Heckman, RPh 22  DAW 1 and single source drugs. 9 Inside Third Party Eye on PBMs America’s Pharmacist Volume 129, No. 3 (ISSN 1093-5401, USPS 5535- 410) is published monthly by the National Community Pharmacists Asso- ciation. © 2007 NCPA®. All rights reserved.

Postmaster—Send address changes to editorial and advertising office: America’s Pharmacist 100 Daingerfield Road, Alexandria, VA 22314; 703- 683-8200. Periodical postage paid at Alexandria, VA, and other mailing offices. Printed in the USA.

Send editorial opinions to [email protected]. For membership information, go to [email protected].

 america’s Pharmacist | March 2007 www.americaspharmacist.net 27 Pharmacy Marketing by Bob Owens The secret to direct mail.

29 Continuing Education by Kerri DeNucci, PharmD The incretin pathway and therapeutic targets for diabetes mellitus.

42 Rx Law by Denise M. Fletcher, Esq. Succeed in competitive bidding.

44 Notes From Capitol Hill Our 2007 legislative agenda. 14

Cover: CCRx’s MTM program offers inde- pendent pharmacists a winning combination of patient care service and revenue sources. Cover art by Colin Anderson/Corbis

Executive Vice President and CEO Bruce Roberts, PD Second Vice President John Sherrer, PD Senior VP, Communicatons Robert D. Appel Third Vice President Mark Riley, PD Director, Membership Colleen Agan, [email protected] Fourth Vice President Keith Hodges, PD Fifth Vice President DeAnn Mullins, PD Magazine Staff Editor and VP, Publications Michael F. Conlan,[email protected] Executive Committee Managing Editor Chris Linville Chairman Holly Whitcomb Henry, PD Contributing Writers H. Edward Heckman, RPh, Jaclyn Lopez, PharmD, Committee Members Donnie Calhoun, PD; Robert Greenwood, PD; Joseph H. Adam G. Kennedy Harmison, PD; Joseph P. Lech, PD; Lonny Wilson, PD Director, Design & Production Enjua M. Claude Senior Designer Sarah S. Diab NCPA® represents the nation’s community pharmacists, Layout Production Milburn & Associates including the owners of more than 24,000 pharmacies. Manager, Sales & Marketing Nina Dadgar, [email protected] The nation’s independent pharmacies, independent Account Manager Robert Reed, [email protected] pharmacy franchises, and independent chains represent a $92 billion market- place, dispensing nearly half of the nation’s retail prescription medicines. Visit NCPA Officers the NCPA Web Site at www.ncpanet.org. President John E. Tilley, PD President-Elect Stephen L. Giroux, PD America’s Pharmacist annual subscription rates: $50 domestic; $70 foreign; Secretary-Treasurer Gerard A. Herpel, PD and $15 NCPA members, deducted from annual dues. First Vice President Bradley Arthur, PD

www.americaspharmacist.net March 2007 | america’s Pharmacist  Up front

May Legislative Conference

Our annual legislative Our 39th Annual Conference on National conference is always interesting, in- Legislation and Government Affairs is the place formative, and important. But the ob- to arm yourself with the legislative facts on these jective of this year’s meeting, with the issues and translate them for your lawmakers into 110th Congress in session, is very the “facts of life”—their impact on your patients different. For the first time in a dozen and your practices—as only frontline pharma- years, both the House and Senate cists can. You have credibility. Americans trust are controlled by Democrats. Beyond their pharmacists. A recent USA TODAY/Gallup the party lineups, however, the new Congress also has a far poll that found 73 percent of those surveyed rank different composition than any of its predecessors. druggists/pharmacists “very high” or “high” in The House, where Democrats hold a 233–202 margin, terms of honesty and ethics. Senators come in at is led by Nancy Pelosi of California—the first woman to be 15 percent and congressmen 14 percent. elected speaker. She is one of a record 71 women in the House: 53 Democrats and 21 Republicans. Pelosi spoke at We supported 138 candidates in the last year’s conference. 2006 contests. I am pleased to report House members also include 55 freshmen (42 that our candidates won 131 of those Democrats, 13 Republicans), 40 African-Americans (all races. That is an amazing 95 Democrats), 23 Hispanic-Americans (20 Democrats, three percent win record. Republicans), six Asian-Americans (5 Democrats, one Republican), and one Native-American, a Republican. The conference will be a little different this In the Senate, a record 16 women were elected—11 year—we’ll be starting on a Monday (May 14) Democrats and five Republicans—to a chamber where instead of a Sunday and wrapping things up on Democrats have a two-vote edge (51–49). There are 10 Wednesday, May 16. It will be held at the Hyatt freshmen (eight Democrats, one Republican, one Inde- Regency Washington on Capitol Hill, which has pendent); three Hispanic-Americans (two Democrats, one memorable views of the Capitol and is within Republican); two Asian-American Democrats; and one walking distance of House and Senate office African-American Democrat. buildings. Go to www.ncpanet.org, or call 800- NCPA, through your contributions to our political ac- 544-7447 for details. tion committee, helped elect a sizable proportion of these I hope to see you there. lawmakers. So did the votes of many independent pharma- cists. We supported 138 candidates in the 2006 contests. I am pleased to report that our candidates won 131 of those races. That is an amazing 95 percent win record. NCPA will be focusing most of its government affairs ef- Bruce Roberts, RPh forts in the 110th Congress on three critical areas: Medicaid, NCPA Executive Vice President & CEO Medicare Part D, and business negotiation rights. If the play list looks familiar, that’s because it is. While we made great strides in these same areas in the last Congress, we all have much more work to do get them across the finish line.

 america’s Pharmacist | March 2007 www.americaspharmacist.net Newswire

Drug Misuse Crisis: NCPA Survey

Nearly three out of every four the prescription they were given. knowledgeable than other health consumers admit they don’t always “These findings are very care professionals when it comes take their prescription medications disturbing,” said Bruce Roberts, to information about prescription as directed. That’s the key finding of RPh, NCPA’s executive vice medications. a new national prescription drug sur- president and CEO. “They suggest Nearly nine out of 10 (86 per- vey by NCPA and Pharmacists for that patients aren’t fully aware of cent) said they would be likely to the Protection of Patient Care (P3C). the implications of not taking the talk to their pharmacist about their The survey found a major right dose of medicine at the right medications. disconnect between consumers’ time. Medications are powerful “Two-thirds of consumers said beliefs and their behaviors when it and can be life-saving, but when they go to one pharmacy for all comes to taking medication cor- used improperly actually can harm their prescription medications,” rectly, as well as a golden oppor- patients. Even more surprising, said Ian Salditch, P3C’s founder. tunity for pharmacists to use their fewer than half indicated they had “This presents an excellent op- specialized training and accessibil- consulted their doctor or pharma- portunity for pharmacists to help ity to help improve patient compli- cist before making these changes.” educate patients about how to take ance and health outcomes. The economic impact of patient their medications properly.” While most consumers believe non-adherence has been estimat- The survey also showed that they are highly compliant when it ed at nearly $100 billion per year in a successful patient education comes to taking their prescription increased hospitalizations, doctor campaign needs to utilize many medications (64 percent said they visits, lab tests, and nursing home communication channels, including follow their physician’s instructions admissions. The human toll may physicians, pharmacists, insurance “extremely closely”), the survey be even higher in terms of diseas- providers, the Internet, government found they’re not nearly as com- es not treated, decreased quality of programs, and written materials. pliant as they believe, with nearly life, and preventable deaths. Better packaging that reminds pa- three-fourths (74 percent) admit- “We’re talking about much tients when to take their medicine ting to some form of non-adherent more than dollars and cents here,” also could improve compliance. behavior. Roberts said. “It’s really the well- “What we need is a systematic being of the American public.” approach that helps educate pa- Key findings: The good news out of the sur- tients on the value of their medica- • Nearly half (49 percent) said they vey was that consumers appeared tions and the importance of taking had forgotten to take a pre- open to tapping into the unique ex- them exactly as prescribed, as well scribed medication. pertise of their pharmacist in order as one that promotes dialogue • Nearly one-third (31 percent) had to improve medication adherence. with the patients’ entire health care not filled a prescription they were More than eight out of 10 (83 team,” Salditch said. given. percent) agreed that pharma- The telephone survey of 1,000 • Nearly one-quarter (24 percent) cists can play a role in improving adults was conducted by the poll- had taken less than the recom- adherence by helping to make ing company inc. between Oct. mended dosage. sure patients take their prescription 25–29, 2006. The margin of error • More than one in 10 (11 percent) medications correctly. for the survey is +/- 3.1 percent at had substituted an over-the-coun- More than two-thirds (68 per- the 95 percent confidence level. ter medication instead of filling cent) said pharmacists are more ➥

www.americaspharmacist.net March 2007 | america’s Pharmacist  Independent THE AUDIT ADVISOR Pharmacy Today DAW 1 and Single Source Drugs Inventory turns increased as Q: If a physician writes a prescription for a single source brand drug and indi- sales increased, yet the pharma- cates “DAW 1,” should I go ahead and bill the prescription as “DAW 1?” cies with sales above $6 million A: The best option is to bill the prescription as DAW 0. On occasion, a physi- were slightly less efficient than cian will indicate “DAW” on a single source brand drug even though a generic those with sales just under $6 substitute is not available. Such situations should be billed online to the third million (32 days versus 31 days party as “DAW 0.” Billing single source drugs as “DAW 1” may flag you for for those pharmacies in the $3.5 an audit (excessive number of DAW 1s) and may also count against you in million to $6 million range). tabulating PBM generic utilization incentives. A caveat does exist on refill The smallest pharmacies prescriptions for brand drugs that have become available generically since the (having sales of less than $2.5 original fill date. In this situation, the original hardcopy should be retrieved million) kept their stock on and reviewed or the physician called for a new prescription that specifies the hand almost 40 percent longer current DAW status. Remember, it is safest to bill single source brand products at 43 days. Slightly larger opera- as “DAW 0.” tions with sales of $2.5 million to $3.5 million turned their inventory every 35 days. By H. Edward Heckman, RPh, PAAS National, the Pharmacy Audit Assis- Efficient management of tance Service. For more information call toll free to 888-870-7227. prescription inventory had a significant impact on the trend of increasing overall inventory turnover as sales increased. What’s New Here Source: 2006 NCPA-Pfizer Digest www.NCPAnet.org measure consumer behavior relat- Editor’s note: Pharmacy surveys To keep up to date with the latest ing to medication adherence. The that will be the basis for the news, tools, and other electronic research findings are presented 2007 NCPA-Pfizer Digest will be included in the April issue of resources available for independent on the Patient Adherence Initiative America’s Pharmacist. community pharmacists, check page. Photos from the adherence the “What’s New Here” tab on the news conference held Dec. 15, NCPA home page every time you 2006 at the National Press Club visit. Some of the latest additions are accessible in the NCPA Photo No NPI Soon Will include: Galleries. Mean No Payments Wal-Mart Predatory 2006 Digest The Centers for Medicare & Pricing Interview The 2006 NCPA-Pfizer Digest is Medicaid Services is reminding An MP3 of a nearly six minute radio now online. The Digest offers a health care providers that time interview of John Rector, NCPA summary of selected financial is running out to get a National senior vice president and general and demographic information that Provider Identifier (NPI)—the counsel, discussing predatory illustrates the value independent unique number needed to re- pricing laws and the impact of the community pharmacists provide ceive payment for products and Wal-Mart $4 generics ploy, is on to their patients by maximizing services from government and the Legal Proceedings page. medication effectiveness. It is the private insurers. The deadline is most comprehensive report on May 23. After that date, phar- Patient Adherence independent community pharmacy macists and other health care NCPA and the Pharmacists for the available. providers will be unable to file Protection of Patient Care jointly claims without an NPI. commissioned a national survey to

 america’s Pharmacist | March 2007 www.americaspharmacist.net inside Third Party

and fixing reimbursement levels and ye on PBMs rates, restricting the level of service Every month, America’s Pharmacist highlights an example of PBM abuse of the nation’s independent community pharmacies. These transgres- offered to customers, and arbitrarily sions not only hurt our business and our profession, they negatively affect limiting the ability of retail pharma- our patients, their employers, and our local economies. E-mail a recent cies to compete on a level playing example of a problem you’ve had with a PBM to mike.conlan@ncpanet. field with the PBM’s mail order org, or fax it to 703-683-3619. We may edit it for length and clarity. E pharmacy. “It would be blatantly illegal for The Daily Grind “The frustration continues to mount with the nonsense that we’re put through. insurance companies or employ- Just a couple of quick things. We have had several rejections for ‘patient not cov- ers to agree on the rates they pay ered,’ ‘coverage terminated, or ‘invalid ID no.,’ when in fact the wrong birthdate to pharmacies and the restrictions was entered into the system. they place on consumers,” Michael “This seems like a ridiculously time-consuming problem caused by misin- Freed of the Chicago law firm of formation sent in response. Obviously, if the response had been ‘non-matched birthdate’ we could quickly correct (usually—unless it is wrong in the system, Much Shelist Freed Denenberg but then even they could return the correct birthdate for verification), avoiding Ament & Rubenstein, a spokes- the need for a lengthy and frustrating phone call. man for the plaintiffs, said when the “Every first of the year we seem to get numerous changes in insurance suit was filed. “Medco and Advan- causing these frequent problems: eligibility lags, no card provided yet. We cePCS have abused their role as have one case in the Medicare D arena, which is interesting. A dually eligible PBMs for many major insurance patient (Medicare and Medicaid) also has HMO coverage through her former employer’s sponsored retiree health plan. Because of her dual eligible status, her companies, Blue Cross plans, copay should be $1 or $3. HMOs, and large employers to ac- “However, because she has the HMO through an employer group, they complish the same result. And, it is default to that copay level (much higher), and we can’t get it corrected (five just as illegal.” phone calls over the course of the last month). Medicaid won’t take her copay The PBMs profit directly from secondarily, because she should have Medicare D. Because she’s in an HMO, she this anticompetitive conduct by should have its D plan. But, she has their plan through an employer group so the copays are wrong. pushing reimbursement rates so “What a mess. Just some of the benefit frustration we’re forced to ‘deal’ far below a competitive level that with for no compensation.” they have created a “spread” be- tween what they bill plan sponsors and what they pay the pharmacy. NCPA Lawsuit Against PBMs Can Proceed In addition, they operate mail order pharmacies that compete A federal judge has given indepen- includes Medco, alleges that the with retail pharmacies. By preclud- dent pharmacies a procedural win pharmacy benefit managers (PBMs) ing retail pharmacies from offering in their antitrust lawsuit filed in 2003 have illegally reduced or eliminated a 90-day supply of drugs or lower against AdvancePCS, which is now competition on price, service, and copays, the PBMs place artificial Caremark Rx. U.S. District Court consumer choice that otherwise limits on consumer choice to divert Judge John P. Fullam in Philadel- would thrive among plan sponsors business from community phar- phia vacated an order that would that each of the PBMs represent. macies to the PBMs’ mail order have sidetracked the NCPA/Phar- Each PBM allegedly does so by act- pharmacies. macy Freedom Fund case into ing as a common agent for the plan arbitration. sponsors in their dealings with retail The original suit, which also pharmacies, including negotiating Michael F. Conlan

www.americaspharmacist.net March 2007 | america’s Pharmacist  Therapeutic Care CCRx’s MTM program a winning combination for pharmacists and patients

By Jeri Lynn Kirschner

edicare Part D must spend at least $4,000 on medications, presented pharmacists with numerous chal- have multiple chronic conditions, and take lenges in its first year, but it also offered op- multiple medications to qualify. As a result, Mportunity—notably medication therapy man- each plan was allowed to determine its own agement (MTM). The Centers for Medicare form of MTM. Some chose MTM by letter, & Medicaid Services (CMS) required that all others by phone, and a small number chose Part D plans offer MTM to qualified patients, face-to-face sessions with pharmacists or

but the program only stipulated that patients other health care providers. ▼ colin anderson photography:

10 america’s Pharmacist | March 2007 www.americaspharmacist.net Therapeutic Care

March 2007 | america’s Pharmacist 11 In a recent survey published in the Journal of the Ameri- can Pharmacists Association, Daniel Touchette of the Uni- versity of Illinois, Chicago, and colleagues found that only 19 percent (four of 21) MTM programs surveyed used the services of “contracted pharmacists.” These pharmacists were not necessarily community pharmacists and the services were not necessarily face-to-face encounters. Additional sur- veys also indicate that community pharmacists had limited opportunities for MTM under Medicare Part D in 2006. On the other hand, one national Part D provider, Com- munity Care Rx (CCRx), qualified more than 130,000 pa- tients for pharmacist-delivered face-to-face MTM services in 2006. CCRx expects as many or more to qualify in 2007. Using the free, Web-based Community MTM (CMTM) system to conduct, document, and bill for CCRx MTM services, many community pharmacists embraced this new “MTM is the first large-scale opportunity, and numerous success stories have emerged. Richard Logan, PharmD, owner of L & S Pharmacy in effort to secure the future Charleston, Missouri, believed he had to take control of by separating MTM. He and his son Tripp worked together and began the of pharmacy process by sending letters to patients to explain the concept product from service. It is the first of MTM and then following up with phone calls. ray of sunshine in what will be a “We schedule patients when we’re both here,” Logan says. “In short, we schedule in accordance with our work- bright day for flow. It worked well for us and our patients.” ” Danny Cottrell, RPh, of Medical Center Pharmacy in pharmacists. Brewton, Alabama, thought the CCRx MTM program was a —Richard Logan great opportunity, but was concerned about his busy work- load. Thinking out of the box, Cottrell found a solution. CMTM, with a pharmacy network that has doubled “I had a pharmacist in my area who was not working at in size in the last six months to more than 39,000, allows the time,” Cottrell says. “I paid him the money reimbursed pharmacists to provide quality MTM services, along with for the MTM visits as a way to keep these valuable services a variety of other patient care services. Medicare Part D is in our store.” just the tip of the iceberg. History has shown that the pri- vate sector often follows the lead of the federal government Community MTM—Making Life Easier in health care. If Part D MTM shows measurable success, If there was one thing that could help a pharmacist save pharmacists can expect to see private payers offering phar- time with MTM, it was the creation of CMTM. “CMTM macist-delivered patient care services. provides a structured template for conducting sessions,” The increasing number of pharmacies contracting says Christine Gonzalez, PharmD, of Uptown Drug and Gift with CMTM and the rapid adoption of our solution into Shop in Los Angeles. “It helps the pharmacist focus on the their existing workflow demonstrates that community most important issues, and the personal medication record pharmacy is ready to expand its business model beyond it creates is incredibly valuable.” dispensing to include new patient care services,” says Despite having done MTM for a number of years, CMTM Chief Operating Officer Kurt Proctor, RPh, PhD. Logan never had a formalized method. In CMTM he found “Our network of community pharmacies continues to an intuitive application that allowed him to easily schedule grow. The interest from program sponsors in reaching this

provide, and bill for services. network will result in tremendous new revenue opportuni- diane wilson P hotography:

12 america’s Pharmacist | March 2007 www.americaspharmacist.net ties for these pharmacies, better health outcomes for the CCRx is rolling out its 2007 MTM program on the patients involved, and cost-savings in health care delivery.” CMTM platform. Once again, pharmacists will have a gold- en opportunity to demonstrate to CMS that face-to-face The Future services are preferable to letters and call centers. Commu- Pharmacists who provided Part D MTM in 2006 are con- nity pharmacy has much to be proud of for the progress it vinced that patient care services will be the key to surviving made in 2006, but it still needs to become the “mainstream” and thriving in the future. for Part D MTM by contributing results worthy of “best “Pharmacy is heading in the right direction, and Com- practices.” munity MTM is helping strengthen the role of the pharma- Logan looks forward to the day reimbursed services cist in the patient’s total health care management,” says R. expand beyond MTM. “Take-it-or-leave-it contracts, as- Morgan Moon, RPh, CDM, of Moon’s Pharmacy in Tifton, saults on AWP (average wholesale price), looming AMP Georgia. (average manufacturer’s price changes), and slow payment At Uptown Drug and Gift Shop, Gonzalez and the rest from third parties are all eating away at pharmacy incomes,” of the pharmacy staff have embraced MTM as an additional Logan says. “MTM is the first large-scale effort to secure the revenue source and marketing opportunity. As a result of future of pharmacy by separating product from service. It their patients’ positive MTM experiences, the pharmacy has is the first ray of sunshine in what will be a bright day for benefited in increased referrals. pharmacists.” At Medical Center Pharmacy, Cottrell realizes that these opportunities will likely mean increasing existing staffing levels, but he believes it is important to not let the business Jeri Lynn Kirschner is director of marketing for Community Care go outside of his pharmacy. “I hope as a profession we do Rx. She can be reached at 703-600-1253. More information is not let this get away,” he says. available at www.communitymtm.com. After the $ale – Now What? You’ve sold your pharmacy and look forward to retirement. Have you planned for your financial future?

By Michael T. Tarrant

n 1985, a 45-year old pharmacist made Ia potentially risky decision. Midway through his career, he purchased a small, indepen- dent—and somewhat unprofitable—pharmacy in one of Georgia’s fair cities, and leaped from the security of a job to the uncharted waters of self-employment. Twenty-two years later, after transforming that business into one of the state’s most profitable pharmacies with an 8.5 percent profit margin, Tom successfully sold it to his junior partner and received $1 million for his efforts. More importantly, through deliberate, disciplined, and strategic financial planning, he and Karen, his wife of more than 30 years, made the most of this significant asset by providing a comfortable and dignified retirement for them-

illustration: I mages.com/ C orbis illustration: selves. Hopefully your story will be similar. ▼

14 america’s Pharmacist | March 2007 www.americaspharmacist.net After the $ale – Now What? A question to ask yourself, now that you have sold ment of one’s personal financial concerns. If you are not re- your practice, what will you do with the money? How will ceiving this level of ongoing professional advice and service you ensure that the financial results of your life’s work in a long-term relationship with your advisor, then I would are not decimated by inflation, estate taxes, or the ever- suggest that you have not employed a financial planner. increasing costs of health care and long-term care? Worse, Further, every financial plan must—by definition—address will you outlive your money? In this article, I will walk you the four financial needs of the wealth and security model: through Tom and Karen’s story to illustrate three essential protection, security, financial freedom, and your legacy. financial planning strategies that every pharmacist must Every house has to be built on a solid foundation to consider. Obviously their implementation will differ in stand the storms of life. Likewise, a financial plan’s founda- your situation; however, with a firm grasp of the concepts, tion is protection. Adequately addressing this need helps you will be well on your way as you begin the journey. protect your loved ones from the risks of premature death or disability, protracted illness, or the liability exposure of Getting Our Bearings the primary owners and/or earners. The second need for Before we set out, let’s get our bearings by figuring out security involves an ample emergency cash reserve (and a where we are going. The words “financial planning” have good yield thereon) coupled with prudent debt and cash almost limitless meaning. To some, it simply means “assets flow management. Next, financial freedom means differ- under management.” To others it might mean annuities ent things for different people; however, it usually focuses or insurance. Unbelievably, even people in the profession on having enough assets and income to do the things you confuse the matter by providing different levels of service want to do, while minimizing the risk of outliving your while calling themselves planners. Studies show that the money. Last, but definitely not least, planning your legacy American consumer does not clearly understand what means making meaningful contributions to the financial financial planning is, because financial “professionals” have livelihoods of loved ones and/or favorite charities and not clearly disclosed what they do and do not do, much institutions—both while alive and thereafter—without the less how they get paid. decimating erosion of income and estate taxes. So, let’s agree to a standard definition of financial plan- ning: the integrated, coordinated, and ongoing manage- Chart Your Course In the movie “Jerry Maguire” (“Show me the money!!”), Tom Cruise’s character Jerry distributes a “mission state- Wealth and Security Model ment” to his co-workers, one in which he attempts to pull Four Financial Needs the firm back to its roots of caring for its clients above its profits. Of course, he is fired. However, the rest of his life is spent fulfilling that statement and realizing dreams—both for himself and his clients. Similarly, every financial plan centers on your personal financial mission statement, which Legacy in many ways really is a life mission statement. More than the dollars and cents, what we do with money reflects the Freedom core of who we are and our feelings for those we care about. Before any financial planning begins, ask yourself one simple question: “What do I want this money to do for Security me and my family?” Take some time to think about it, and write down your answer. It will have a profound impact on your life and decisions. It provides a benchmark against Protection which all financial decisions are made, and it will help you create strategies that build and protect both wealth and Financial Planning: The integrated, coordinated, and ongoing security for you, your family, and your heirs. In the end, management of your personal financial concerns. you will have the confidence of knowing that all of your

16 america’s Pharmacist | March 2007 www.americaspharmacist.net financial decisions have been made and implemented with der of our days, or will we outlive our money? To answer that goal in mind. In Tom and Karen’s case, their financial this question, you need to be aware of inflation and your mission statement was simply to have a comfortable and expected longevity. Life expectancies in the United States dignified retirement without burdening their children. have been increasing for more than 100 years. A newborn male in 1900 could expect to make it to 47. Today’s 65 Strategy No. 1: Retirement Income Planning year-olds, however, should plan on living well into their Do you have a hard time imagining what retirement might 90s. In fact, the American Society of Actuaries projects be like? Nick Murray, a nationally recognized planner and that for a 65-year old couple, the likelihood of one of them author, tells this story: Have you ever known a 90-year- living to age 92 is 50 percent, while the probability that one old couple? How about two? Imagine a door opening at a of them will live to age 97 is 25 percent (see illustration seniors’ condominium complex, and a 90-year-old woman on page 18.) Are you willing to bet your financial plan on walking out the door (because she can still walk) and living less than that? bending over to pick up her morning paper (because she Over their expected two-person, 30-year retirement, can still bend over). Now, picture at that same moment, Tom and Karen must assume that their cost of living will fully half the other condo unit doors opening, and another more than double. My father’s first auto purchase was a 90-year-old coming out of each one, to get his/her paper. 1961 Pontiac Ventura (389 tri-power V8, dawn-fire mist There is some statistical hyperbole here—half of any large hard top) for $1,600. Today we commonly pay well more sample is never likely to be 90. However, the 30-year, two- than $28,000 for a basic four-door sedan. Over the last 25 person retirement will become increasingly common. years ending with 2005, inflation as measured by the Con- In preparing for this, Tom and Karen’s first priority sumer Price Index has averaged 3.1 percent, according to was to identify their true standard of living. This is difficult the Bureau of Labor Statistics. In other words, in 25 years, for a pharmacy owner to do. Having owned a pharmacy you will need $209,378 annually to buy the same things for more than 20 years, Tom and Karen had become quite that $100,000 buys today if inflation averages 3 percent (see comfortable with salaries, annual profit distributions, and illustration on page 18). Consequently, your investments running various expenses through the pharmacy. Now and income must be able to outpace inflation. they had to live on more limited sources of income. To In spite of the Medicare Part D make sure they would have enough, prescription drug benefit, health care we identified and wrote out a expenses will be a significant portion Age 65 spending plan that showed their of your retirement budget, whether Locations 1 anticipated sources of income, Gross Revenue $4,200,000 now or some time in the future. The expenses, and the surplus or deficit Owner Income $300,000 Centers for Medicare and Medic- (“net profit”). The graphic (right) aid Services (CMS) projects that Investments $1,200,000 summarizes their financial posi- health care costs will increase by Pharmacy $1,000,000 tion. This was the most difficult 7.2 percent per year for the next Real Estate $500,000 task for them to accomplish, but it decade and that by 2015, we will ($2000/mo rental income) was also the most useful. Now they spend one out of every five dollars know exactly what their lifestyle Net Worth $2,700,000 on our health care. Further, several requires. Use the skills that you Annual Lifestyle $120,000 studies indicate that one of every acquired in your years of owner- two 65-year olds will spend time in ship to help you do the same. This a nursing home, with half of those step is crucial in successfully addressing all of the others. staying six months or more. About one in 10 will stay If you spend too much, you run the risk of running out of three years or more. Long-term care costs are not covered money. by Medicare after the first 100 days, meaning that your Tom and Karen now needed to know how long their assets and income will have to pick up the tab. With costs money would last. In other words, if we need $120,000 per ranging from $33,000 per year in Louisiana to $91,000 year to live on, will our money sustain us for the remain- per year in Connecticut, the drain on your assets can be

www.americaspharmacist.net March 2007 | america’s Pharmacist 17 Life Expectancies for 65 Year Olds You May Need Income for 30+ Years

1 out of 2 1 out of 4 Male Age 85 92 100 drawn. Hopefully the projections will not show Age 65 that you run out of money. If they do, it is better 1 out of 2 1 out of 4 Female Age 88 94 100 to know it now instead of later so that adjustments Age 65 can be made. The issues and the math can get com- 1 out of 2 1 out of 4 plicated, and the assistance of a competent financial Couple Age 92 97 100 (Both planner is highly recommended. Age 65) Strategy No. 2: Asset Allocation Life expectancies for 65-year olds in good health from the Annuity 2000 Mortality Table, American Society of Actuaries, as cited in Fidelity Fortunately for Tom and Karen, their projections Investment’s Lifetime Income Planning, 2004, page 9. indicate that the buyout proceeds, existing assets and investments, Social Security, and rental income should sustain them. With long-term care insur- ance in place to help protect their assets, the focus now Inflation Damages Purchasing Power turns to investment strategies. Often, people accumu- late investments and properties over the years, result- $250,000 ing in portfolios with significant diversification and allocation problems. Tom and Karen owned 10 mutual $200,000 funds before they sold their pharmacy, thinking they $209,378 were adequately diversified. However, a closer look re-

$150,000 vealed that eight of the funds were invested in one asset class, large capitalization U.S. stocks. Even worse, many

$100,000 of those eight funds actually owned the same stocks, $100,000 In 25 years, at just a 3% eliminating the benefits of diversification. annual rate of inflation, $50,000 your expenses could more In short, even though Tom and Karen owned 10 differ- than double what they ent mutual funds, their portfolio acted as if they owned are today. $0 one. Each fund grew or lost value at the same time. This meant that they could face serious problems when the next stock market correction (or bear market) Based on a $100,000 today calculated with a hypothetical 3% rate of inflation to show the effects of inflation over time; historical average from occurred. Think back to the bull market of the late 1981 through 2005 was 3.1%; actual inflation rates may be more or less. 1990s and the bear market of the new millennium for a friendly reminder. With the sale of the pharmacy, Tom and Karen severe. Tom and Karen helped insure against this threat by now have $2.7 million ($1 million from the pharmacy purchasing a long-term care insurance policy. Depending and $1.7 million from existing investments and real on the cost of the care that they might need, such a policy estate) that must provide a lifetime income which is not can provide significant asset protection. This was impor- decimated by inflation. Many times people purchase tant for them because they wanted the flexibility to decide investments that performed well in prior years because who provides their care and its location, and they did not of what they see or read in the financial media. The want to burden their children with the cost and duties problem is that those investments performed well in associated with their care. In preparing your financial plan, prior years. They may not do so going forward. History long-term care insurance should be considered as one of is littered with examples of fads that crashed. In 1982, your plan’s key risk management components. it was gold; in 1986, real estate; in 1989, Japan; in 1991, To tie all of this retirement income planning together, high yield bonds; and in 1999, technology. What’s next? projections that include inflation, taxation, and a reason- Nobody knows. As investors try to pick the best perform- able rate of asset growth are essential. They should show ing funds, they tend to “buy high and sell low” instead how your assets grow (or not) as your income is with- of “buying low and selling high.” According to Dalbar’s

18 america’s Pharmacist | March 2007 www.americaspharmacist.net Average Annual Return, 1986–2005 tion, and under-diversification often lead to serious Assuming reinvestment of dividends and capital gains investment problems. So, what will you do to help prevent you from

12.0% outliving your money? The proper asset allocation is 11.9% crucial. This is the mix of stocks, bonds, real estate, 10.0% and cash that is in your portfolio. A landmark study by Gary P. Brinson, L. Randolph Hood, and Gilbert L. 8.0% Beebower found that 93.6 percent of a portfolio’s per- 6.0% formance was determined by its asset allocation, while only 6.4 percent of its performance was driven by the 4.0% 3.9% actual security selection and timing of the investment. 2.0% The allocation decision is one of your most important investment decisions, other than your commitment to 0.0% stick with your plan regardless of market conditions. Standard & Poor’s 500 Index Average Equity Fund Investor In determining their asset allocation, Tom and Karen were asked several questions about their “time horizon” (how long they will need their income) and Dalbar’s “Quantitative Analysis of Investor Behavior” study, cited in “risk tolerance” (how much risk they were willing to InvestmentNews, June 12, 2006, page 14. take to achieve their goals). Obviously they needed their income for life and wanted as little risk as pos- sible. What was not addressed in the questionnaire Estate Tax Thresholds was the potential impact of rising living costs over a two-person, 30-year retirement. We reviewed the history $3.5 of investments in the United States over the last 80 years. $3.0 Interestingly, Tom and Karen learned that bonds have pro- $2.5 vided a modest total return above inflation while affording

$2.0 principal protection. They also found that stocks have his- lions torically generated higher total returns over inflation than

Mil $1.5 bonds, but with more volatility. While recognizing that $1.0 ? past history does not guarantee future results, Tom and $0.5 Karen agreed that their investments should be allocated $0.0 more toward equities and less toward bonds as they faced 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 the realities of their retirement. This differed greatly from much of the advice that they received from friends and the Source: Internal Revenue Service financial press.

Strategy No. 3: Legacy Planning “Quantitative Analysis of Investor Behavior” study, cited With their retirement income plan and investments in in the June 12, 2006, issue of InvestmentNews, the average place, Tom and Karen could turn their attention to what stock investor has earned only 3.9 percent over the last will happen with their money at the end of their lives. 20 years, while the S & P 500 index has returned 11.9 Their main desire was to intervene meaningfully in the percent—almost three times the average investor’s return lives of their sons and grandchildren. Proper wills were (see chart above). And, according to a 2003 Hewitt As- needed to ensure that their directives were carried out. sociates’ study, an individual investor owns an average However, they discovered that approximately 15 percent of of 3.6 mutual funds across only one or two asset classes. their assets—$375,000—would be taxed away at the sec- Clearly, attempting to time the market, poor asset alloca- ond person’s death because of estate taxation, based on the

20 america’s Pharmacist | March 2007 www.americaspharmacist.net …93.6 percent of a portfolio’s performance was determined by its asset allocation, while only 6.4 percent of its performance was driven by the actual security selection and timing of the investment.

current tax rates. Implementing the correct wills alleviated most of the problem. Changing the ownership of certain assets took care of the rest. Unfortunately for Tom and Karen, the current estate tax law will expire at the end of 2010, meaning that higher on, or will you outlive your money? Should you invest this rates and lower thresholds will return unless Congress acts newfound source of wealth? If so, how, and to whom do beforehand. In 2006, the assets of an estate that is more you turn? What would happen to the money—and your than $2 million are subject to the estate tax (including family—if you died prematurely, had a protracted illness, individually-owned life insurance). Rates range from 18 or needed nursing home care? Will you be able to do the percent to 45 percent. In 2011, this threshold reverts to $1 things you want to do, and protect your assets and family at million, and the rates increase (see chart on page 20 for the same time? Do you have a trusted advisor who can put current taxable thresholds). This means that unless the law all of these issues together? changes, Tom and Karen’s estate tax could be much higher These issues are at the tip of the iceberg when one after 2010. The impact on their plan to meaningfully in- considers the financial planning consequences of selling a tervene in the lives of others would be substantially altered pharmacy. Putting it all together may seem overwhelming. if this issue were not addressed. In their situation, invest- However, it does not have to be, especially if you take a step ments would have to be liquidated to pay the tax. Would back and look at the bigger picture: “What do I want this you have to sell a business, land, or some other significant money to do for me and my family?” asset to pay your tax? We decided to keep Tom’s existing life insurance policy in force as an inexpensive way to pay whatever tax would Mike Tarrant is the vice president of Financial Network Associates be due, if any. This shifted the burden to the insurance (FNA), an independent financial planning firm based in Atlanta. He company in exchange for the premium. Alternatively, if provides personal financial planning, customized solutions, ongo- there is no estate tax for Tom and Karen, the insurance ing consulting, and investment advisory and insurance services to adds to the legacy left behind, free of income taxes. Insur- families and businesses. ance policies should be reviewed periodically to make sure you are making the best use of the premium and Editor’s Note: This is an abridged chapter that will be cash value. In their situation, it provided an efficient tool published full-length in the upcoming How-to Guide for multiplying the estate at minimal cost. to Selling a Pharmacy. Other abridged chapters will also appear in upcoming issues of America’s Pharma- Wrapping It Up cist. NCPA will make the complete Guide available The sale of your business is now complete. After investing for purchase at a later date. your life’s work in this wonderful profession, you have now traded the fruit of your labor for an installment note or a

R ichard M orris H unt illustration: lump sum payment. Will you have enough money to live

www.americaspharmacist.net March 2007 | america’s Pharmacist 21 Patient Tax Benefits and Pharmacy F

Health savings accounts and other programs designed to provide tax benefits to consumers may create opportunities for independent pharmacists

By Kent N. Schneider, JD, CPA

22 america’s Pharmacist | March 2007 www.americaspharmacist.net Example 1: Heidi had adjusted gross income (AGI) for 2006 of $40,000. During the year, she paid $3,000 in medical insurance premiums, $2,000 for dental work, and $1,000 for prescrip- tion drugs. Although she did not have dental insurance, she did receive a reimbursement check from her insurance or decades, Congress has been attempting to ad- company in the amount of $1,200. dress the problem of escalating health care costs by using tax policy. In fact, the Internal Rev- Her total qualifying medical expenditures, after reimburse- Fenue Code currently includes no fewer than 10 different ment by the insurance company, were $4,800: provisions for providing tax benefits for health expenses. Medical insurance premiums $3,000 Although the focus of much legislation has been to aid the Dental bills $2,000 consumer, the consequences often have a profound effect Prescription drugs $1,000 on pharmacy practice. For most taxpayers, the assistance comes in the form of Total medical expenses $6,000 Less: Insurance reimbursement ($1,200) either an income tax deduction or a reimbursement from a tax-favored account or arrangement. This article will pro- Total unreimbursed expenses $4,800 vide a brief overview of the three most common reimburse- ment schemes and explain how they are more beneficial to However, due to the 7.5% of AGI threshold, her medical taxpayers than the deduction approach. Additionally, the expense deduction is reduced to only $1,800: implications for retail pharmacy practice will be explained. Total unreimbursed expenses $4,800 Less: 7.5% of AGI ($3,000) Deduction of Medical Expenses Since 1942, taxpayers have been permitted a limited deduc- Medical expense deduction $1,800 tion for unreimbursed expenditures for medical care. This deduction still exists under current law; however, it is of recreational drugs, and drugs purchased over the Internet little use to most taxpayers. The problem for pharmacy from non-U.S. sources will not qualify either. purchases is two-fold. First, the types of drugs that qualify for deduction are very narrowly defined. Secondly, the tax Tax Treatment of Deductible Medical Expenses treatment for qualifying expenditures is not very beneficial. Taxpayers who have made qualifying expenditures for pre- scription drugs and insulin frequently discover that their Qualifying Expenditures vision of tax savings was just a mirage. To obtain a tax “Medical care” is broadly defined in the Internal Revenue benefit for medical care, you must overcome two signifi- Code as expenditures “for the diagnosis, cure, mitigation, cant obstacles. treatment or prevention of disease, or for the purpose of First, medical expenses are deductible only to the affecting any structure or function of the body.” Thus, pur- extent that they are considered to be unusually large, given chases of medical supplies, such as crutches and diagnostic the taxpayer’s means. Under current law, a taxpayer may devices, typically will qualify for deduction. deduct only the portion of the qualifying medical expenses On the other hand, drug purchases must meet a more in excess of 7.5 percent of the taxpayer’s “adjusted gross stringent standard. Specifically, the Internal Revenue Code income.” Consequently, the higher your income, the less allows a deduction only for “prescribed drugs” and insulin. likely you will be able to deduct medical expenses. As illus- As a result, purchases of over-the-counter (OTC) drugs trated in Example 1 (above), a taxpayer’s income does not clearly are not deductible. The regulations further require have to be very high to be adversely affected by this rule. that qualifying “medicine and drugs” must be “legally Along with surmounting the 7.5 percent of AGI obsta-

illustration:rick smith illustration:rick procured.” Consequently, purchases of diverted drugs, cle, a taxpayer also must be able to “itemize” deductions to

www.americaspharmacist.net March 2007 | america’s Pharmacist 23 Example 3: Using the same facts as in Example 2, assume that Heidi Example 2: does not own a home and does not pay property taxes or Using the same facts as in Example 1, assume that Heidi is home mortgage interest. Now, Heidi’s itemized deductions a single taxpayer who is neither blind nor age 65. Heidi’s for 2006 were only $4,800, as shown: itemized deductions for 2006 were $6,300, as shown: Medical expense deduction (from Example 1) $1,800 Medical expense deduction (from Example 1) $1,800 Charitable contributions $2,000 Property taxes on her home $1,000 Home mortgage interest $1,500 Total itemized deductions $3,800 Charitable contributions $2,000 As her total itemized deductions do not exceed $5,150, Total itemized deductions $6,300 Heidi will elect to take the standard deductions. Under this scenario, Heidi receives no tax benefit at all from her yield a tax benefit from medical expense deductions. The qualifying medical expenditures. ability to itemize deductions hinges on a comparison of the taxpayer’s total itemized deductions and his standard on the taxpayer’s AGI, filing status, and the amount of his deduction. In addition to the deductible portion of medi- other itemized deductions. cal expenses, itemized deductions are comprised of a wide variety of expenses and losses, including such common Reimbursement from Tax-favored items as real estate property taxes, home mortgage interest, Accounts and Arrangements and charitable contributions. For most taxpayers, the sum Since the medical expense deduction has done little to help of these items is their total itemized deductions. taxpayers cope with spiraling medical and pharmaceutical Once total itemized deductions are determined, this costs, Congress has enacted three other vehicles for provid- amount is compared with the taxpayer’s “standard deduc- ing tax-favored treatment of health care expenses—the tion,” and the larger amount is deducted when calculating health flexible spending arrangement (FSA), the health re- taxable income. The taxpayer’s standard deduction is de- imbursement arrangement (HRA), and, most recently, the termined primarily by the taxpayer’s filing status, and the health savings account (HSA). Although there are signifi- amounts are adjusted for inflation annually. In 2006, the cant differences among these provisions, all three provide base standard deduction for a single taxpayer was $5,150, vastly improved tax treatment for pharmacy purchases. while the standard deduction for married taxpayers filing a joint return is $10,300. Additional standard deduction Qualifying Expenditures amounts are available for taxpayers who are legally blind Although only prescription drugs and insulin qualify for or are 65 or older. the medical expense deduction, this restriction does not Due to this comparison of itemized deductions with the apply to drug expenditures qualifying for reimbursement standard deduction, some taxpayers will find that the benefit from FSAs, HRAs, and HSAs. In Revenue Ruling 2003-102, from their medical expenses is further reduced (see Example the Internal Revenue Service held that the purchase of 2, above), and many will discover that their medical expenses OTC drugs, such as antacids, pain relievers, and cold medi- yield no tax savings at all (see Example 3, above). cines qualified for reimbursement from a health FSA. Note As a single taxpayer, Heidi’s standard deduction is that these drugs are intended for the treatment of a specific $5,150. Since her total itemized deductions exceed her ailment. Expenditures that benefit the general health of an standard deduction, she will elect to itemize her deduc- individual, such as multiple vitamins, will not receive any tions. Note, however, that her total itemized deductions of type of tax benefit. $6,300 exceed her standard deduction by only $1,150. In effect, Heidi will enjoy a tax savings from only $1,150 of Tax Treatment her $1,800 medical expense deduction. Along with covering a broader array of drug purchases, To summarize, the tax benefits from deducting expen- FSAs, HRAs, and HSAs provide far greater tax savings than ditures for pharmaceuticals are difficult to obtain and are that afforded by the medical expense deduction. A taxpayer limited in amount. Only purchases of prescription drugs who claims a medical expense deduction is paying the medi- and insulin qualify for the deduction. The amount of the cal expense with after-tax dollars and attempting to obtain a tax savings from qualifying medical expenses is contingent tax benefit after the fact. Consequently, as illustrated earlier,

24 america’s Pharmacist | March 2007 www.americaspharmacist.net Example 4: Heidi elected to contribute $2,000 of her 2006 salary to an Example 5: FSA. During the year, her only medical expenditures were In 2006, Heidi’s employer contributed $2,000 to an HRA $1,200 for prescription and OTC drugs. After submitting on her behalf. As in Example 4, Heidi’s only medical expen- the proper documentation to the FSA plan administrator, ditures were $1,200 for prescription and OTC drugs. After Heidi receives a $1,200 reimbursement check. submitting the proper documentation to her employer, Heidi will not have to pay tax on either the $2,000 Heidi receives a $1,200 reimbursement check. contributed to the FSA or the $1,200 reimbursement from Heidi will not have to pay tax on either the $2,000 the FSA. contributed to the HRA or the $1,200 reimbursement from Unfortunately, since Heidi’s medical expenses were less the HRA. than the amount she contributed to the FSA, she will forfeit Even though Heidi’s medical expenses were less than the remaining $800 in the FSA. the amount contributed to the HRA, she does not forfeit the remaining $800 in the HRA. She can carry this amount the taxpayer typically receives little or no tax savings. forward and use it in future years. On the other hand, a taxpayer utilizing an FSA, HRA, or HSA pays for qualifying medical expenditures using most significantly, FSAs are subject to the “use it or lose it” before-tax dollars. As a result, the taxpayer can enjoy tax rule. Amounts contributed to an FSA during a taxable year savings from the entire amount of these expenditures un- can only be used to reimburse qualifying medical expendi- conditionally. tures made during that same year. Any unused amounts in Under a health flexible spending arrangement, an a taxpayer’s FSA cannot be carried forward. Instead, these employee elects to have a portion of his compensation amounts are forfeited. paid into the FSA, instead of to the employee (see Example Health reimbursement arrangements are very similar 4, above.) The contributions to the FSA escape not only in- to health FSAs, with only a few significant differences (see come taxation, but also Social Security taxes (FICA). Thus, Example 5, above.) First, the contributions to the HRA are the full amount of these before-tax dollars are available for made by the employer, instead of the employee. Second, reimbursing qualifying medical expenditures. Moreover, unlike Health FSAs, HRAs are permitted to reimburse when the amounts in the FSA are disbursed to the em- employees for health insurance premiums paid for other ployee in reimbursement for qualifying medical expenses, coverage. Most importantly, HRAs are not subject to the the reimbursements also escape taxation. “use it or lose it” rule. Unused amounts in an employee’s Although there are significant advantages to an FSA, HRA can be carried forward to reimburse medical expenses there are a few disadvantages. To obtain reimbursements, in later years. the taxpayer must provide the FSA plan administrator with Although participants in an HRA avoid the annual documentation for the medical expenditures. Also, even “use it or lose it” dilemma faced by those with FSAs, it is though deductible as a medical expense, premium pay- still possible to lose the unspent accumulations (see Ex- ments made by the taxpayer for other health coverage do ample 6, page 26.) The HRA is a reimbursement arrange- not qualify for reimbursement from an FSA. Finally, and ment and not an account that is owned by the employee.

Table 1: A Comparison of the Medical Expense Deduction With the FSA, HRA and HSA Medical Expense Health Flexible Spending Health Reimbursement Health Savings Account Deduction Arrangement (FSA) Arrangement (HRA) (HSA) Qualifying expenditures: Prescription drugs Yes Yes Yes Yes OTC drugs No Yes Yes Yes Characteristics: Subject to annual “use- Not applicable Yes No No it-or-lose-it” rule? Forfeit unused amount Not applicable Yes Yes No when changing employers?

www.americaspharmacist.net March 2007 | america’s Pharmacist 25 Example 7: Example 6: Heidi has a HDHP with a $2,000 deductible. Heidi’s cur- As in Example 5, Heidi received a $1,200 reimbursement rent employer made tax-free contributions to her HSA from the HRA for medical care received in 2006. The un- during 2006 totaling $2,000. During 2006, Heidi incurred used balance of $800 is carried forward for use in 2007. $1,200 of medical expenses and obtains a tax-free reim- In February of 2007, Heidi resigned to take a job with bursement from her HSA. a different employer. At the time of her resignation, Heidi In February of 2007, Heidi resigned to take a job with had not made any medical care expenditures in 2007. Un- a different employer. At the time of her resignation, Heidi der these circumstances, Heidi forfeits the unused balance had not made any medical care expenditures in 2007. Since in her HRA. Heidi is the owner of her HSA, she does not forfeit the unused balance. Instead, she can roll over the balance into a Consequently, if a participant ceases to be an employee, new HSA. the unused amounts in the HRA will be forfeited. Although the recently enacted health savings account Amounts contributed to the HSA can be used to reim- (HSA) has a similar sounding name and offers tax benefits burse qualifying medical expenditures tax-free. Distribu- comparable to those provided by FSAs and HRAs, the tions for non-qualifying purposes, however, are both tax- HSA is a very different vehicle. First of all, the HSA has able and subject to a 10 percent penalty tax. Unlike the FSA much more rigorous requirements. Most notably, an HSA and HRA, there is no need to provide documentation to an is available to taxpayers who only have a “high deductible employer or plan administrator to obtain a reimbursement. health plan” (HDHP) and other “permitted coverage.” The Instead, the taxpayer need only keep the documentation in deductible of an HDHP for 2006 must be at least $1,050 the event of an IRS audit. Finally, like the HRA, the HSA is for an individual policy, or $2,100 for a family policy. not subject to the “use it or lose it” rules. Even better, like an These amounts are adjusted annually for inflation (see IRA, the taxpayer can roll it over to another HSA tax-free Example 7, above.) and transfer it to his or her heirs at death. In addition to the HDHP, a taxpayer with an HSA is permitted to have other “permitted coverage,” including Implications for Retail liability insurance, insurance for a specified disease, and Pharmacy Practice hospitalization insurance that pays a fixed per diem benefit As summarized in Table 1 (page 25), participants in FSAs, amount. The HDHP can provide preventative health care, HRAs, and HSAs can qualify for reimbursement of pur- including prescription drugs (such as statins to prevent chases of OTC drugs and devices intended to treat specific heart disease), without a deductible. However, a policy medical conditions, some patients will be requesting more covering prescriptions and medical services for treatment detailed documentation for these purchases. Obviously, this of existing medical conditions cannot provide benefits may require modifications to a pharmacy’s cash register until the HDHP deductible is met. system. Self-employed taxpayers, who have the qualifying On the other hand, this also presents a marketing op- HDHP, are permitted to make deductible contributions portunity. As participants in FSAs are subject to the “use to their HSA. Unlike the conventional medical expense it or lose it” provision, retail pharmacies can serve their itemized deduction, this qualifying contribution is fully de- patients by reminding them to check their FSA for unused ductible even if the taxpayer does not itemize deductions. amounts. Additionally, the pharmacy could set up a display As with HRAs, HSA contributions made by an employer on of qualifying OTC drugs and medical supplies that a pa- behalf of an employee with an HDHP are excluded from tient could stock up on using the last of their FSA funds. the employee’s taxable income. The amounts that may be contributed to FSAs and HRAs are limited only by the plan agreement; the tax code imposes no limits on these Kent N. Schneider, JD, CPA, is professor of accountancy with arrangements. On the other hand, Congress has established the East Tennessee State University College of Business and limits for contributions to HSAs. For 2006, the HSA con- Technology, Johnson City, Tennessee. He can be reached at tribution could not exceed the lesser of: (1) 100 percent of 423-926-6306. the annual HDHP deductible or (2) $2,700 (individual) or $5,450 (family). Taxpayers 55 or older can make additional “catch-up” contributions each year, as well.

26 america’s Pharmacist | March 2007 www.americaspharmacist.net pharmacy Marketing

The Secret to Direct Mail By Bob Owens

The good news is is not an offer. If you have niche products and services or that direct mail marketing a series of interesting events, present them, but tell people can be one of the most ef- why. Most people don’t understand the real value of com- fective marketing methods pounding, for example. you can use to build your Try a combination of offers. A very strong “offer” might business. But if you are be a health-related event, combined with some relevant reluctant to use direct mail information that the patient can take home, combined with is because of the cost, you good prices on related products. should know that even though the cost per piece One thing to keep in mind, however, is that many states and per impression of direct-mail is usually higher prohibit offers that apply to prescriptions. Check with your than with other media, direct mail is much more local officials to make sure you’re in compliance. efficient in reaching the customers who will find it convenient to visit your store. (By direct mail, we There are some “tricks of the trade” in direct-mail marketing: are referring to “solo” direct mail pieces, not the 1. Restate your offer on the direct-mail piece inside a cou- envelopes of “marriage mail” stuffed with 20 or pon-type border. more coupons). 2. Create a sense of urgency for your offer. Words and phrases such as “Hurry! Limited Time Offer…While Sup- Your List and Your Offer plies Last” have all stood the test of time. Direct mail experts will tell you that the two most 3. Be sure to include all details necessary for your custom- important factors in direct mail are the list and the ers to find you. These include your address, your land- offer. There are many good sources of mailing mark line, telephone number, Web site and e-mail. lists, but for the best results you’ll have to do the 4. Your copy, (the text) of the direct mail message should tedious work of selecting the individual postal car- be personal, because direct-mail is essentially one-to- rier routes surrounding your store that represent one communications. Use the first person: “I am person- the closest households (your immediate trading ally inviting you to visit my store.” area, or ITA). The whole point of using direct mail is to avoid Graphic Design Is Important blanketing the city with your advertising. Depend- Use color (it’s a lot less expensive than it used to be) and ing upon postal regulations, you can address have your graphic design done professionally. Remember, your direct mail piece, either by “to the friends and your image is at stake! family at...,” or you may have to actually buy the names of the residents in those carrier routes. Once you have a good mailing list, you’ll Bob Owens is an independent marketing consultant to pharmacies need to create an attractive offer that will entice and other small businesses. Owens is on hand to answer your ques- people to come into the pharmacy. tions and you can contact Owens or sign up for his FREE marketing Our belief is that as an independent pharmacy newsletter by sending an email to [email protected]. you should trade upon your strengths and present them assertively, but be specific. “Good Service”

www.americaspharmacist.net March 2007 | america’s Pharmacist 27 continuing education

The Incretin Pathway and Therapeutic Targets for Diabetes Mellitus By Kerri DeNucci, PharmD

pon successful completion of this Pathophysiology of Useful Web Sites article, the pharmacist will be able to: Diabetes Mellitus 1. Review the impact of diabetes Diabetes mellitus is a condi- ■ www.diabetes.org mellitus. tion that occurs when there is A great tool for health care professionals 2. Review glucose homeostasis. a mismatch between blood and patients alike, this is the American U3. Review pathophysiology of type 1 and type 2 glucose and insulin. Either Diabetes Association’s main Web site. diabetes mellitus. insulin cannot be secreted or Here you can find information about the 4. Highlight common therapies used to treat does not work effectively, and disease, get diabetic recipes, subscribe diabetes mellitus. blood glucose levels there- to newsletters and more. 5. Explain the incretin pathway. fore remain elevated. Chronic ■ www.diabetes.niddk.nih.gov 6. Review current and future drugs involving the elevations in blood glucose Sponsored by the National Institute of incretin pathway. result in many macrovascu- Diabetes and Digestive and Kidney Dis- lar complications such as eases of the National Institutes of Health, Diabetes mellitus is a widespread disease coronary artery disease, and this Web site is a great information page for patients. that can lead to serious health consequences. It microvascular complications ■ www.emedicine.com is estimated that in 2005, 20.8 million Americans, such as retinopathy and Using eMedicine’s diabetes resource or 7 percent of the population, had diabetes, nephropathy. Thus, it is of the center, professionals can keep up to and nearly a third of those patients were undiag- utmost importance to limit date on diabetes related topics, includ- nosed. In 2002, the last year for which statistics elevations in blood glucose for ing those involving the incretin pathway. are available from the American Diabetes As- diabetes patients. Information sociation (ADA), total health care costs topped from the United Kingdom Prospective Diabetes Study has $132 billion for diabetes related illnesses, and shown that tight glycemic control results in a substantial de- diabetes was listed as the sixth leading cause of crease in the microvascular complications of the disease. death in the United States. However, tight glycemic control does not slow the disease’s A myriad of complications arise from diabe- progression. Unfortunately, as many diabetes patients will tes, including cardiovascular disease, retinopa- attest, tight glycemic control is difficult to achieve and even thy, nephropathy, neuropathy, complications harder to sustain. with pregnancy, and lower limb amputation. A review of glucose homeostasis is necessary to An astounding 65 percent of deaths in patients understand the pathophysiology and treatment of diabe- with diabetes are attributed to cardiovascular tes. When a meal is ingested, glucose is absorbed into the disease and stroke, and diabetic retinopathy is bloodstream though the gastrointestinal tract. This glucose responsible for as many as 24,000 new cases stimulates the release of insulin from the beta cells of the of blindness annually. Nearly 70 percent of pancreas. Insulin decreases blood glucose by three main patients with diabetes have some form of neu- actions: it regulates the uptake of glucose by peripheral tis- ropathy, ranging from peripheral to autonomic sues, decreases the manufacturing of glucose by the liver neuropathy. (gluconeogenesis), and inhibits the breakdown of glycogen

www.americaspharmacist.net March 2007 | america’s Pharmacist 29 into glucose (glycogenolysis). In healthy patients, rising in- of insulin. As a compensatory mechanism, the sulin levels result in decreasing blood glucose levels. Thus, body produces more insulin to overcome this insulin is most important during the time immediately after resistance. This hyperinsulinemia initially works to a meal, or the postprandial state, as it corrects high blood maintain near-normal blood glucose levels; with glucose levels back to normal. time, however, beta cell function declines and To prevent an over-correction in insulin-mediated the pancreas can no longer produce adequate blood glucose reduction, the alpha cells of the pancreas insulin amounts. release glucagon, a hormone whose release is normally It has been estimated that at the time of suppressed immediately following a meal. Glucagon is diagnosis, patients with T2DM have lost nearly 50 the counter-regulatory hormone for insulin. Its effects are percent of their beta cell secretory function. opposite those of insulin, as it stimulates gluconeogen- There is a loss in first-phase insulin response esis and glycogenolysis to make glucose available for the during the initial stages of T2DM. This phase body’s needs. Therefore, glucagon is most important in the describes the rapid elevation of insulin within fasting state where it helps keep blood glucose at appropri- minutes of ingesting a meal. The first-phase ate levels. Disruptions in this balance between insulin and response causes a suppression of hepatic glu- glucagon can alter glucose homeostasis. cose production; its loss results in postprandial Diabetes mellitus is commonly divided into two main hyperglycemia. It is thought that these changes categories: type 1 diabetes mellitus (T1DM) and type 2 may actually be occurring prior to the diagnosis diabetes mellitus (T2DM), although other forms of diabe- of T2DM, during the period known as impaired tes (including gestational diabetes) do exist. T1DM is a glucose tolerance. Eventually, there is a decrease disorder in which there is destruction of the pancreatic beta in the second-phase insulin response that is cells, often due to an autoimmune process, which results responsible for basal insulin secretion. Fasting in the body’s inability to produce insulin. Type 1 affects only hyperglycemia ensues. While oral hypoglycemic about 5–10 percent of patients with diabetes, and it is most agents may initially improve some defects seen often diagnosed at a young age. However, patients may be in T2DM, often these patients become insulin diagnosed with a type of T1DM, latent autoimmune diabe- dependent as the disease progresses. tes in adults (LADA), later in life. T1DM must be treated with Many other changes also occur in the body insulin replacement therapy. as T2DM develops. Early on in the disease, there T2DM is much more common, and is conventionally is an acceleration of gastric emptying that is re- thought of as an adult disease. Up to 95 percent of people sponsible for glucose dumping after a meal. This with diabetes have T2DM. Unfortunately, the incidence in complicates the problem of postprandial hyper- adolescents appears to be increasing. T2DM has been glycemia. It is not until later in the disease, when linked to genetics, a sedentary lifestyle, poor eating habits, autonomic dysfunction occurs, that gastroparesis obesity, increasing age, and certain ethnic groups. It has results in delayed gastric emptying. Additionally, been noted that African Americans, Hispanic Americans, there is an inappropriate increase in glucagon, American Indians, native Hawaiians and other Pacific which can lead to both postprandial and fast- Islanders are at the highest risk for T2DM. ing hyperglycemia. Type 2 diabetes patients T2DM’s pathophysiology differs greatly from that of also have lower concentrations of glucagon-like T1DM. The two main defects in T2DM are insulin resistance peptide 1 (GLP-1), an incretin hormone, which is and a decline in pancreatic beta cell function. Early in the largely responsible for first-phase insulin secre- disease, patients can still produce insulin. However, the pe- tion. These additional changes are the focus of ripheral tissues and liver no longer respond well to the insu- the new pharmacologic agents for diabetes. lin that is produced. As a result, glucagon is inappropriately secreted, and glucose production by the liver continues Diabetes Therapy Success despite already high blood glucose levels. Furthermore, Measures With Hemoglobin A1C blood glucose levels remain elevated despite the presence The most common measure of chronic hypergly-

30 america’s Pharmacist | March 2007 www.americaspharmacist.net cemia is the hemoglobin A1C Table 1. Insulin Products Available in the United States (A1C) test, which measures gly- cosylated hemoglobin. Glucose Type of Insulin Generic Name Brand Name irreversibly binds to hemoglo- bin in red blood cells when it Single products is released into circulation. By measuring this hemoglobin- Rapid-Acting Insulin glulisine Apidra® bound glucose, providers can Insulin aspart Humalog® estimate glucose concentra- Insulin lispro Novolog® tions over time. Specifically, the A1c test measures glucose Short-Acting Regular insulin Humulin R, Novolin R® levels over the lifespan of the Inhaled Regular insulin Exubera® red blood cell, which is approxi- mately 120 days. Intermediate-acting NPH insulin Humulin N®, Novolin N® The ADA recommends, in general, a target A1C of less Long-acting Insulin glargine Lantus® than 7 percent, whereas the Insulin detemir Levemir® American College of Endocri- nology has set the standards Combination products 30% insulin aspart, Novolog Mix 70/30® higher, with a target A1C of less 70% insulin aspart protamine than 6-1/2 percent. It is estimat- 25% insulin lispro, Humalog Mix 75/25® ed that A1C values of 7 percent 75% insulin lispro protamine represent an average blood glu- cose measurement of 150 mg/ 50% Humulin N, Humalog 50/50® 50% Humulin R dL, and an A1C of 9 percent represents an average of 210 70% NPH, 30% regular Humulin 70/30®, Novolin 70/30® mg/dL. The ADA does stress, however, that individual patient goals should be for an A1C as close to normal involves providing basal insulin coverage with an interme- (less than 6 percent) as possible without causing diate or long-acting product, and covering postprandial hypoglycemia. Unfortunately, only 36 percent of excursions with a shorter-acting product. Listed in Table 1 adult patients with diabetes ever achieve a target (above) are insulin products still manufactured in the United A1c of less than 7 percent. It has been estimated States. that every one percentage drop in A1C results in Therapy for T2DM may take many different facets. a 40 percent reduction in microvascular compli- Of utmost importance are lifestyle modifications, includ- cations. Therefore, facilitating patients to achieve ing changes in dietary and exercise habits. While some their A1C goals is of paramount concern to health patients can be controlled on lifestyle modifications alone, care professionals. many patients with T2DM will need the assistance of medi- cations to achieve their A1C goal. Eventually, most patients Management of Diabetes Mellitus will require combination therapy with oral agents and may There are a number of current therapies that are progress to requiring exogenous insulin injections. Unfor- utilized to treat diabetes. Patients with T1DM tunately, the pressure to achieve goal A1C values comes must use exogenous insulin as a replacement at the expense of side effects caused by the agents use to for their own. Insulin comes in many forms; there meet such goals. are rapid-acting, short-acting, intermediate-acting The common medicinal therapies used in T2DM either and long-acting agents. Typical therapy for T1DM increase peripheral tissue sensitivity to insulin, increase

www.americaspharmacist.net March 2007 | america’s Pharmacist 31 insulin secretion from the pancreatic beta cells, decrease chosen as a first line therapy because it causes hepatic glucose production, or decrease glucose absorp- no weight gain and can improve both fasting and tion. These agents, along with newer agents that affect the postprandial hyperglycemia. Additionally, it can incretin pathway, are shown in Table 2 (below). One of the have benefits on triglyceride, LDL cholesterol and most substantial limitations of these usual agents is their in- HDL cholesterol levels. Its use may be limited by ability to control blood glucose over time. Additionally, none gastrointestinal side effects, especially diarrhea. of these medications address the many other hormonal However, slow upward titration of the drug limits irregularities that exist in T2DM. these side effects. Metformin may be linked to Sulfonylureas are insulin secretagogues that stimulate lactic acidosis. Thus, patients with renal insuf- the beta cells of the pancreas to release insulin. They bind ficiency, exacerbations of chronic heart failure to ATP-dependent potassium channels of the beta cells, (CHF), sepsis, surgery, hypoxia, or those with causing an intracellular shift of calcium that stimulates any underlying condition that predisposes them exocytosis of insulin. These agents typically work well early to decreased perfusion of the kidneys should in the disease; however, as pancreatic beta cell numbers avoid metformin therapy. It is for that reason decline and the pancreas loses its ability to produce insu- that patients receiving intravenous contrast dye lin, the sulfonylureas lose efficacy. The most common side should withhold metformin therapy for at least 48 effect of sulfonylurea therapy is hypoglycemia. Patients tak- hours following the procedure. In fact, metformin ing sulfonylureas may also experience weight gain, which is should not be restarted after contrast dye until an unfavorable side effect for a population that is typically renal function has returned to baseline. overweight. Thiazolidinediones bind to peroxisome Metformin is the only biguanide available for use in the proliferator-activated receptor (PPAR) gamma to United States. Its main effect in T2DM is to reduce hepatic increase insulin sensitivity of skeletal muscle and glucose production. It also improves insulin sensitivity of adipose tissue. Safety concerns with thiazolidin- both the liver and peripheral tissues. Metformin is often ediones were raised after troglitazone, the first

Table 2. Therapies for Type 2 Diabetes Mellitus, Excluding Insulin

Drug Class Mechanism of Generic Name Brand Name Average Potential Adverse action Decrease in A1C Reactions Sulfonylureas Insulin Glyburide Diabeta® 1–1.5% Hypoglycemia, secretagogue Glipizide Glucotrol® weight gain Glimiperide Amaryl® Biguanides Decrease hepatic Metformin Glucophage® 1–1.5% Gastrointestinal production of disturbances, lactic glucose, acidosis Insulin sensitizer Thiazolidinediones Insulin sensitizer Pioglitazone Actos® 1–1.5% Edema, Rosiglitazone Avandia® exacerbations of chronic heart failure, liver dysfunction Meglitinides Insulin Repaglinide Prandin® 0.5–1.5% Hypoglycemia, secretagogue Nateglinide Starlix® weight gain Alpha Glucosidase Delay intestinal Acarbose Precose® 0.5–1% Flatulence, diarrhea Inhibitors nutrient absorption Miglitol Glyset® Incretin Mimetics GLP-1 receptor Exenatide Byetta® 0.5–1% Nausea, agonist Vomiting

DPP-IV inhibitors Inhibit GLP-1 Sitagliptin Januvia® 0.5–1% Nasopharyngitis breakdown by Rhinitis DPP-IV

32 america’s Pharmacist | March 2007 www.americaspharmacist.net thiazolidinedione to be approved by the Food levels, the oral route provided a greater insulin response. and Drug Administration (FDA), was withdrawn This increased level of insulin in response to oral glucose from the market after liver toxicity. As a result, it administration was termed the “incretin effect,” and the hor- is generally recommended that patients taking mones involved in causing this effect were coined “incretin thiazolidinediones have their liver transaminase hormones.” It has been estimated that up to two-thirds levels monitored. Additional side effects include of the insulin released after meals is due to the influence weight gain and edema, which is especially prob- of incretin hormones. As these hormones are released in lematic for patients with CHF and left ventricular response to gut nutrient absorption, their main effect is to dysfunction. combat postprandial hyperglycemia. Meglitinides, like the sulfonylureas, are insulin While both GLP-1 and glucose-dependent-insulinotro- secretagogues. In comparison to the sulfonyl- pic polypeptide (GIP) are identified as incretin hormones, ureas, they have a much quicker onset and most of the emphasis has been on GLP-1 as a new drug shorter duration of action. As is expected, the target for diabetes. This is largely because there appears most common side effects are hypoglycemia and to be inconsistent changes in GIP levels in T2DM. GLP-1 is weight gain. a hormone that is cleaved from proglucagon in the alpha Alpha-glucosidase inhibitors help to dimin- cells of the pancreas. It is secreted by the distal intestinal ish postprandial glucose excursions by delaying L cells after consumption of oral nutrients. Levels of GLP-1 carbohydrate absorption from the gastrointestinal rise substantially within minutes of nutrient ingestion, but tract. The enzyme alpha-glucosidase is present quickly decrease as a result of degradation by dipeptidyl in the brush border of the small intestine and hy- peptidase IV (DPP-IV), a membrane-bound serine protease drolyzes various carbohydrates. Its inhibition will that cleaves the NH2 terminal from GLP-1 to inactivate it. retard the breakdown of complex carbohydrates GLP-1 increases cyclic AMP levels to result in increased and minimize simple glucose molecules available intracellular calcium and an exocytosis of insulin-containing for absorption from the gut. Gastrointestinal side granules. GIP is likewise secreted within minutes of nutrient effects such as flatulence and diarrhea are com- ingestion, although it is secreted by the K cells of the intes- mon and contribute to patient noncompliance. tinal epithelium. It, too, is rapidly degraded by DPP-IV. GIP An important note is that patients who experience causes insulin secretion by the same mechanism as GLP-1. hypoglycemia while taking alpha-glucosidase GLP-1 has many glucose dependent actions in the inhibitors will need to ingest simple carbohy- pancreas, brain and gastrointestinal tract. It binds to a G- drates, such as pure glucose tablets, instead of protein coupled receptor on the beta cells of the pancreas foods high in complex carbohydrates, such as to increase glucose-mediated insulin secretion, induce orange juice, because there will be a delay in the pancreatic beta cell proliferation and islet neogenesis, and breakdown and absorption of the sugars found in inhibit glucagon secretion. Lower glucagon concentra- the complex carbohydrates. tions can result in decreased gluconeogenesis with a net decrease in insulin demand. With respect to the brain, GLP- Exploring the Incretin Pathway 1 is implicated with increasing satiety, likely due to nerve Additional hormones have been identified as transmission from the gut to the either hypothamamus or playing a role in glucose homeostasis. These the area postrema when initial levels of GLP-1 are present. include incretin hormones such as GLP-1, This satiety may lead to clinical weight loss. Lastly, GLP-1 and other glucoregulatory hormones such as delays gastric emptying, providing a more consistent and amylin. Incretin hormones are those that are regulated release of glucose from the gastrointestinal tract. secreted by the gut in response to food. The And, being an incretin hormone, the effects of GLP-1 only incretin hormones were discovered in the 1960s occur in the presence of ingested nutrients, minimizing the when a simple study revealed that if glucose risk of hypoglycemia. These mechanisms are reviewed in was given by the oral and intravenous routes in Table 3 (page 34). doses that would provide similar blood glucose As previously mentioned, GLP-1 is thought to have

www.americaspharmacist.net March 2007 | america’s Pharmacist 33 significant effects on pancreatic beta cells. Literature cites same therapeutic actions as GLP-1. Exenatide is proliferation of beta cells, islet neogenesis and cell differen- actually a synthetic form of exendin-IV, a protein tiation, and a reduction of apoptosis as methods by which isolated from the gila monster lizard (Heloderma GLP-1 preserves or improves beta cell function. However, suspectum). While it was initially thought that these effects have only been demonstrated in animal stud- exendin-IV was venomous, it is now believed ies and whether they occur in human beings remains to be that it is an endocrine hormone that revs up the seen. Obviously the most striking possibility is that through gastrointestinal tract when the animal ingests manipulation of GLP-1, drugs could possibly reverse the a meal. Exendin-IV is a 39 amino acid peptide damage to pancreatic beta cells in T2DM. that shares 53 percent of the GLP-1 amino acid When exploring GLP-1 as a drug target for diabetes, the sequence. Most notably, exendin-IV resists main problem was its rapid degradation by DPP-IV, which degradation by DPP-IV; its in vitro half-life is ap- resulted in a half-life of less than two minutes. Initially, pa- proximately six hours. Exendin-IV has more than tients were given continuous infusions of GLP-1 to confirm a 1,000-fold in vivo potency, when compared its therapeutic benefit. However, the utility of a continu- to GLP-1. ous agent for this patient population was limited. Instead, Exenatide improves both the first- and science has developed two main methods to overcome second-phase insulin response in T2DM. Not the problem of a short half-life: make a molecule that is only does it enhance insulin secretion from the similar to GLP-1 but resists degradation by DPP-IV, or inhibit pancreatic beta cells in response to blood glu- the action of DPP-IV. The former class of drugs is called cose elevations, but it also suppresses glucagon the incretin mimetics, while the latter is called the incretin secretion during this period. It slows gastric emp- enhancers, or DPP-IV inhibitors. tying and can increase satiety to minimize food until recently, the incretin pathway was left untouched consumption. This can lead to weight reduction. as a therapeutic target for treating diabetes. Then, in 2005, Exenatide is approved for the treatment of Byetta (exenatide), an incretin mimetic, was approved by T2DM in combination with metformin, a sulfonyl- the Food and Drug Administration (FDA). The following urea, a thiazolidinedione, or combination of either year saw the approval of Januvia (sitagliptin), a DPP-IV in- metformin and a sulfonylurea or metformin and a hibitor. Additional agents in these categories are expected thiazolidinedione. to be approved in the near future. One distinct advantage Exenatide is administered by a subcutane- of these agents over conventional therapies such as sul- ous injection into the abdomen, thigh or upper fonylureas is that their actions are glucose-dependent and arm. The starting dose is 5 mcg twice daily therefore carry little risk of hypoglycemia. within the 60 minutes prior to the morning and evening meals. The dose can be titrated up to Incretin Mimetics 10 mcg twice daily after one month if goal A1C Exenatide values are not attained. This titration also helps Byetta (exenatide), the first FDA approved agent in its to minimize the common side effect of nausea. class, is a GLP-1 receptor agonist also categorized as Blood concentrations of exenatide peak within an incretin mimetic. This means that it has a chemical two hours, and its half-life is approximately two structure similar to that of GLP-1 and thus has many of the and one-half hours. There is currently a once- weekly extended released product, exenatide- Table 3. Clinical Effects of GLP-1 LAR, under development. A number of review articles and trials have Stimulate insulin secretion been published regarding exenatide therapy. Inhibit glucagon secretion In trials that brought the drug to market, nearly Slow gastric emptying 1,500 patients were randomized to therapy with Suppress appetite either exenatide or placebo in combination with Increase beta cell mass either metformin, a sulfonylurea, or both, for

34 america’s Pharmacist | March 2007 www.americaspharmacist.net a period of 30 weeks. Mean initial A1C values Patient Counseling Corner ranged from 8.2 percent to 8.7 percent. Changes in A1C ranged from -0.4 percent in patients Byetta (exenatide) treated only with the 5 mcg twice daily dose of What did your doctor tell you this medication is being used to treat? exenatide in combination with metformin alone, Exenatide is a drug used to treat T2DM. It helps to lower blood sugar levels, and can be used in combination with some other and up to -0.9 percent in patients treated with oral medications for diabetes. While exenatide is an injection, it the 10 mcg twice daily dose of exenatide and a is not insulin. sulfonylurea alone. The trials also demonstrated a statistically significant decrease in mean fast- How did your doctor tell you to take this medication? ing and postpradial glucose, with more patients Exenatide is to be given by subcutaneous injection into the thigh, achieving an A1C goal of less than 7 percent abdomen or upper arm within 60 minutes prior to your morning and evening meals. If you miss a dose, skip it, and take the next when using exenatide compared to those using scheduled dose. You will start off with a lower dose of the medi- placebo. Additionally, patients lost between 1.6 cine. This helps to minimize side effects of the drug. After one kg and 2.8 kg of body weight at the 10 mcg twice month, if your blood sugar numbers are still high and you tolerate daily dose. the medicine, your doctor may increase your dose. You may One hundred sixty-three patients from the need to space out some of your other medicines from exenatide. placebo-controlled trials who had finished 52 Be sure to ask your doctor or pharmacist if this is the case. weeks of therapy with the 10 mcg twice daily What did your doctor tell you to expect? dose of exenatide were evaluated in a cohort With improved glucose control, you should see a drop in your study. The analysis showed sustained A1C re- hemoglobin A1C values. Common side effects you may experi- ductions of approximately 1 percent with weight ence are nausea, vomiting and diarrhea. Nausea usually occurs losses up to 3.6 kg. An open-label extension when starting therapy, but should decrease over time. You may trial lasting 82 weeks has shown a sustained experience low blood sugars if you are taking exenatide in combi- nation with other diabetes medications. Signs of low blood sugar A1C reduction of approximately one percent- include headache, weakness, irritability, sweating or feeling jittery. age point, with a mean weight loss of 4.4 kg. An You may notice a decrease in appetite while using exenatide. This additional post-hoc analysis of body weight after is normal and is an expected effect of the medication. You may 82 weeks of therapy showed that weight reduc- even lose weight. Be sure to notify your health care provider if you tions were not the result of gastrointestinal side become or are intending to become pregnant. effects. Improvements in cardiovascular risk fac- Januvia (Sitagliptin) tors, demonstrated by surrogate markers such What did your doctor tell you this medication is being used to treat? as triglyceride levels and blood pressure, have Sitagliptin is a drug used to treat T2DM. It helps to lower blood also been identified. Beta cell index and beta cell sugar levels, and can be used in combination with some other secretory function have been noted to increase oral medications for diabetes. with exenatide therapy. More recently, data from a 16-week trial with How did your doctor tell you to take the medication? Sitagliptin is to be taken by mouth with or without food once the addition of exenatide to thiazolidinedione daily. Try to take your medicine at the same time each day. If therapy, with or without treatment with metformin, you miss a dose, take it as soon as you remember. If you do has shown a reduction in A1C of approximately not remember until it is time for your next dose, skip the missed 0.8 percent from a mean initial value of 7.9 per- dose and continue with your regular schedule. Do not double cent. Over half of the patients achieved an A1C up on your doses of sitagliptin. goal of less than 7 percent, and weight loss aver- What did your doctor tell you to expect? aged 1.5 kg. With improved glucose control, you should see a drop in your Studies have revealed that exenatide is elimi- hemoglobin A1C values. Common side effects of sitagliptin are nated by glomerular filtration with a subsequent upper respiratory tract infections, stuffy or runny nose, and head- proteolytic degradation. Therefore, patients with ache. Sitagliptin should not lower your blood sugars to danger- severe renal insufficiency defined as a creatinine ous levels because it does not work when blood sugars are low.

www.americaspharmacist.net March 2007 | america’s Pharmacist 35 clearance less than 30 mL/min should not use exenatide. tide antibodies. In studies it was noted that ap- There is no data regarding patients with liver dysfunction; proximately 40 percent of patients using the drug however, due to the drug’s renal route of elimination, liver developed low titers, while six percent developed insufficiency is not expected to influence the pharmacoki- high titers. There appears to be no clinical impli- netics of the drug. cation for low titers. However, nearly 50 percent Exenatide has not been studied in pediatric patients. of those with high titers saw an attenuated There appears to be no changes in pharmacokinetic pa- response. If high levels of anti-exenatide antibod- rameters based on body weight, gender or race. There are ies develop, or the patient’s glycemic control no specific drug-drug interactions identified for exenatide. worsens while on exenatide therapy, alternative However, due to its effect on gastric emptying, the drug medications should be considered. may decrease the extent and rate of absorption of some Prescribing information is very clear that orally administered drugs. The package insert recom- exenatide is not a substitute for insulin and is mends that patients taking oral medications that require not appropriate therapy for T1DM. Additionally, rapid absorption should take them at least one hour prior exenatide has not been studied in patients with to exenatide administration. Such medications include oral gastrointestinal diseases such as gastroparesis. contraceptives and antibiotics. Additionally, agents with Due to its adverse effect profile, the drug is not a narrow therapeutic range, such as digoxin or warfarin, recommended for use in that population. Any should be taken at the same time each day in relation to severe abdominal pain should be investigated in exenatide to minimize variation in drug levels. Exenatide is patients taking exenatide. a pregnancy category C drug, and animal models suggest Exenatide is supplied in cartridges with an it is excreted in breast milk. It is therefore unadvisable that injector pen. Prefilled pens are available to deliver nursing mothers use this medication. 60 doses (or 30 days worth) of medication in ei- The most common adverse effects of exenatide include ther the five or 10 microgram dosages. The pens nausea and vomiting, with incidences as high as 44 percent must be refrigerated and should be discarded in some studies. Nausea appears to be dose related and 30 days from initial use. Pen needles are not diminishes with time. Hyperhydriosis has also been noted. provided and must be purchased separately. Hypoglycemia has been reported with the combination of exenatide and sulfonylureas. In fact, patients appeared to Liraglutide and Other Incretin Mimetics be at an increased risk for hypoglycemia if the combination Liraglutide is an incretin mimetic still in phase three was used when compared to a sulfonylurea-placebo combi- clinical trials. It shares 97 percent of the GLP-1 nation. Therefore, it is recommended that patients have their amino acid sequence and is joined to a fatty acid. sulfonylurea dose reduced by 50 percent upon exenatide Due to the chemical structure of the drug, it binds initiation. There is only a slightly increased risk of hypogly- to albumin and slowly leaches from the albumin cemia in patients receiving the thiazolidinedione-exenatide into the circulation. Liraglutide resists DPP-IV combination when compared to placebo, and the risk of degradation and has a half-life of approximately hypoglycemia for exenatide with metformin is similar to that 12 hours, allowing for once daily administration. of the placebo-metformin combination. As with exenatide, liraglutide has been shown to In a clinical trial, three patients experienced an over- increase insulin secretion and decrease glucagon dose of 100 mcg of the medication. These patients had secretion after a meal. It, too, slows gastric empty- severe nausea, vomiting and hypoglycemia; one patient ing. Animal studies have revealed an increase required the administration of parenteral glucose. However, in beta cell mass with therapy, and the drug has all three patients recovered without complications. Thus, been shown to improve beta cell function as mea- if a patient overdoses on exenatide, blood glucose mea- sured by the homeostasis model assessment-B surements should be monitored closely and symptomatic analysis and proinsulin to insulin rations. management should ensue. As with exenatide, liraglutide’s glucagon sup- Patients who take exenatide may develop anti-exena- pression only occurs in the presence of elevated

36 america’s Pharmacist | March 2007 www.americaspharmacist.net blood glucose, negating the concern for hypogly- of the substance. This is likely due to a negative feed back cemia. Its most common side effect is nausea. loop. Interestingly, these agents appear to be most benefi- Like exenatide, it appears to cause some weight cial in patients with the most poorly controlled diabetes. reduction, although this has not been clearly Studies using DPP-IV inhibitors have shown both a defined from available information. reduction in glucagon levels and show more appropriate in- Additional incretin mimetics in the pipeline are sulin levels after meals. Unlike the incretin mimetics, DPP-IV utilizing albumin as a way to extend the half-life inhibitors do not delay gastric emptying or stimulate weight of the product. With CJC-1131, it is covalently loss. In fact, they appear to be weight neutral. Trials have bound to albumin and actually exerts its physi- demonstrated increases in insulin secretory rate suggesting ologic effect while in the bound state (unlike most an improvement in beta cell function. protein-bound drugs that only exert their physi- While sitagliptin is the only DPP-IV inhibitor approved ologic effect in the free state). Thus, its half-life at this time, a number of other DPP-IV inhibitors are on is expected to mirror that of albumin, which is the horizon. Of them, vildagliptin has completed clinical approximately 10–14 days. This will likely allow development and is awaiting approval from the FDA. The for once weekly administration. This compound distinct advantage the DPP-IV inhibitors have over the is of considerable interest because it demon- incretin mimetics is their oral formulation. Additionally, they strates that very large molecules can access the seem to have minimal side effects as a whole. Hypoglyce- GLP-1 receptors and that they may do so without mia was seen at the same rate as placebo in clinical trials, internalization. Like the other incretin mimetics, and, unlike with incretin mimetics, there appears to be no improvements in glycemic control are seen at the substantial gastrointestinal side effects with these agents. expense of gastrointestinal side effects. However, it is prudent to note that these agents do not yet Decreases in A1C with the incretin mimetics have long-term safety data. This is a concern because are largely due to minimization of postprandial DPP-IV is a ubiquitous enzyme responsible for degrading glucose excursions as a result of delayed gastric nearly 40 other substrates in vitro. These include peptide emptying. There is a more moderate decrease in YY, neuropeptide Y, growth-hormone releasing hormone, fasting hyperglycemia, which is probably due to and vasoactive intestinal polypeptide. The long-term the inhibition of glucagon. As the incretin mimet- implications of inhibiting these enzymes remain unknown. ics are injectable products, they are apt to be However, it is thought that few of these substrates are sig- viewed as less favorable treatment options during nificantly cleaved by DPP-IV in vivo. the initial management of the disease. However, Perhaps most worrisome is that DPP-IV is also known if it is demonstrated in human beings that beta as CD26 and is involved in T cell activation. While no ad- cell proliferation and differentiation occurs, these verse immunologic complications have occurred in clinical agents could become first line treatments with trials thus far, the theoretical possibility exists. Finally, these their ability to slow the progression of T2DM. products must be specific for DPP-IV inhibition, as studies have revealed that inhibition of other DPP allo-isomers such Dipeptidyl Peptidase IV Inhibitors as DPP-VIII and DPP-IX can cause thrombocytopenia and The DPP-IV inhibitors exert their pharmacologic multiple organ failure. Therefore, careful post marketing action by indirectly increasing the levels of en- surveillance of adverse effects caused by these agents will dogenous GLP-1 through inhibition of its break- be key to determining their long-term safety. down. Thus, the maximum level of GLP-1, and likely the maximal effect seen by these products, Sitagliptin depends on the amount of GLP-1 the body is Sitagliptin is the first FDA approved DPP-IV inhibitor, or able to produce. This could explain the flat dose incretin enhancer. Sitagliptin selectively inhibits the DPP-IV response curve of these drugs. An additional enzyme to prevent the breakdown of GLP-1. There is no note is that these agents appear to decrease the inhibition of DPP-VIII or DPP-IX in vitro at concentrations ap- secretion of GLP-1 despite elevating the levels proximating those from therapeutic doses.

www.americaspharmacist.net March 2007 | america’s Pharmacist 37 By elevating levels of GLP-1, sitagliptin enables the There appears to be no changes in pharmacoki- effects of the hormone. These include increasing insulin netic parameters based on body weight, gender synthesis and secretion from pancreatic beta cells and sup- or race. Sitagliptin is a pregnancy category B pressing glucagon secretion from pancreatic alpha cells. drug. No information is available regarding excre- The half-life of sitagliptin is approximately 12-1/2 hours, tion into human breast milk. Caution should be resulting in 24-hour DPP-IV inhibition with once daily admin- used when administering sitagliptin to nursing istration. There is a two to three fold increase in circulating mothers. levels of active GLP-1 and GIP with sitagliptin. Sitagliptin is Sitagliptin is primarily excreted unchanged in 87 percent bioavailable and food ingestion has no effect the urine. It is a substrate of human organic anion on the drug’s absorption. Sitagliptin has a low affinity for transporter-3 (hOAT-3) and p-glycoprotein. These plasma proteins. Peak concentrations result between one may be involved in the renal elimination of the and four hours after the dose. agent, though this has not been confirmed. Cyclo- Sitagliptin is approved as an adjunct to diet and ex- sporine, a p –glycoprotein inhibitor, did not reduce ercise to improve glycemic control in patients with T2DM the renal clearance of sitagliptin, decreasing the either as monotherapy, or for patients already taking met- likelihood that p-glycoprotein is involved in is renal formin or a thiazolidinedione. elimination. There are no known documented The usual dose of sitagliptin is 100 mg orally once daily significant drug-drug interactions for sitagliptin. with or without food. Patients with renal insufficiency may re- The most common adverse effects include quire lower doses. Those with a creatinine clearance 30–49 upper respiratory tract infections, nasopharyngitis mL/min, men with a serum creatinine between 1.8 and 3 and headache. When used as monotherapy, or in mg/dL, or women with a serum creatinine between 1.6 and combination with a thiazolidinedione or metformin, 2.5 mg/dL, should only take 50 mg once daily. Patients with the rates of hypoglycemia with sitagliptin were more severe renal dysfunction, as denoted by a creatinine similar to those of placebo. Sitagliptin has not clearance less than 30 mL/min, patients on dialysis, or men been studied in combination with agents known to with a serum creatinine greater than 3 mg/dL or women cause hypoglycemia, such as sulfonylureas. with a serum creatinine greater than 2.5 mg/dL, should In clinical trials, doses of up to 800 mg of take no more than 25 mg of sitagliptin daily. Sitagliptin can were administered. Patients experienced QTc be administered without regard to the timing of hemodialy- prolongations of 8 msec. This increase is consid- sis. Because the medication requires renal adjustments, ered clinically insignificant. If a patient overdoses patients should have their renal function monitored prior to on sitagliptin, an EKG should be obtained and initiation of the agent and periodically thereafter. As the route supportive measures should be taken. As with ex- of elimination is predominantly renal, there is no need for enatide, prescribing information clearly states that dose adjustments in mild or moderate hepatic insufficiency. sitagliptin is inappropriate for patients with T1DM. There is no data for patients with severe hepatic dysfunc- Sitagliptin is available as 25 mg, 50 mg and tion, defined as a Child-Pugh Score greater than nine. 100 mg tablets. It should be stored at room tem- Data from four double-blind, placebo-controlled clinical perature. trials helped bring sitagliptin to market. These trials exam- ined more than 2,000 patients with T2DM, and sitagliptin Vildagliptin was shown to significantly improve A1C values. Interest- Vildagliptin is awaiting approval by the FDA. ingly, these trials demonstrated that patients with higher Unlike sitagliptin, vildagliptin is primarily metabo- baseline A1C values, or those with poorer initial diabetes lized by the liver. A number of trails, some lasting control, showed the greatest improvements as measured up to 52 weeks, have evaluated the agent as by A1C decreases. Additionally, the monotherapy trials monotherapy or in combination with other agents showed that higher doses (such as 200 mg of sitagliptin) for the treatment of T2DM. Vildagliptin appears did not further improve glycemic control. to decrease A1C values by approximately one Sitagliptin has not been studied in pediatric patients. percentage point, with greater decreases seen

38 america’s Pharmacist | March 2007 www.americaspharmacist.net CONTINUING EDUCATION QUIZ in patients with higher initial A1C values. Ad- Select the correct answer. ditionally, there is some data that suggest that it may be used in combination with insulin therapy. Vildagliptin has been shown to increase beta cell 1. Which of the following oral diabetes agents decreases mass in studies. It is expected that vildagliptin will the hepatic production of glucose? have once daily administration. a. Metformin Complications from T2DM cause substantial b. Rosiglitazone morbidity and mortality at a huge expense to c. Glipizide the patient and the health care system. Despite d. Acarbose knowledge of the benefits of tight glycemic con- trol, it often remains elusive to patients and health 2. Which of the following oral diabetes agents is an insulin care providers alike. With the number of diabetes secretagogue? patients in the United States expected to top 50 a. Starlix million in 2025, there is an obvious need to find b. Amaryl new treatment options to help fight this disease. c. Prandin While current therapy with oral hypoglycemics d. All of the above helps to target the problems of insulin sensitiv- ity and decreased insulin secretion, there are 3. In 2002, diabetes mellitus was listed as the ______obvious holes in this treatment paradigm. These leading cause of death. agents do not remedy the other hormonal abnor- a. Second malities, including the changes with the incretin b. Fourth hormones, and do not prevent further beta cell c. Sixth deterioration or loss. As a result, hyperglucago- d. Eighth nemia persists, glucose dumping after meals occurs, and the disease continues to worsen as 4. The effects of insulin on the body include: beta cell function declines. a. Regulation of glucose uptake by peripheral tissues Agents such as the the incretin mimetics and b. Decrease in hepatic glucose production DPP-IV inhibitors offer new avenues by which c. Inhibition of glycogenolysis medicine can attempt to control this disease. d. All of the above Undoubtedly, the possibility that these agents may preserve beta cell mass and function or 5. Insulin is secreted from these types of cells in the pan- cause a reversal of the disease is of the great creas: interest. a. Alpha b. Beta c. Delta Kerri DeNucci, PharmD, is a clinical pharmacist at Cabell d. Gamma Huntington Hospital in Huntington, West Virginia. 6. The counter-regulatory hormone for glucagon is: a. GLP-1 Editor’s Note:To obtain the complete list of refer- b. GIP ences used in the article, contact Chris Linville c. Insulin at NCPA (703-838-2680), or at chris.linville@ ncpanet.org. d. Cortisol

www.americaspharmacist.net March 2007 | america’s Pharmacist 39 7. A long-acting form of insulin is: 13. The American Diabetes Association recom- a. Insulin glulisine mends a target A1C of less than ____, while the b. Regular insulin American College of Endocrinology recommends c. Insulin detemir a target A1C of less than _____. d. Insulin aspart a. 5.5 percent, 8 percent b. 8 percent, 5.5 percent 8. The actions of GLP-1 include: c. 6.5 percent, 7 percent a. Enhancement glucagon secretion d. 7 percent, 6.5 percent b. Delay of gastric emptying c. Decrease in pancreatic beta cell growth 14. GLP-1 may preserve or increase the function d. Reduction in satiety of pancreatic beta cells by this method: a. Stimulating proliferation of the cells 9. GLP-1 levels normally decrease very rapidly in the body b. Promoting islet neogenesis and cell because: differentiation a. It is chemically changed into insulin. c. Reducing apoptosis b. It is immediately eliminated by the kidneys. d. All of the above c. The body forms antibodies to GLP-1. d. It is degraded by DPP-IV. 15. Which of the following is the most common adverse effect of exenatide? 10. Incretin hormones were discovered when a study a. Nausea showed that the insulin release after oral ingestion of b. Rhinitis glucose: c. Hypoglycemia a. Did not occur in healthy adults d. Thrombocytopenia b. Was less than the insulin release after intravenous ad- ministration of glucose 16. This is the pregnancy category of exenatide: c. Was equal to the insulin release after intravenous admin- a. A istration of glucose b. B d. Was greater than the insulin release after intravenous c. C administration of glucose d. X

11. This type of diabetes mellitus is more common in young 17. Exenatide is typically dosed in the following patients and is often the result of autoimmune destruction manner: of pancreatic beta cells: a. 10 mcg BID PO within 60 minutes before a. Type 1 diabetes mellitus morning and evening meals b. Type 2 diabetes mellitus b. 10 mcg BID PO within 60 minutes after morn- c. Mature onset diabetes of the young ing and evening meals d. None of the above c. 10 mcg BID SQ within 60 minutes before morn- ing and evening meals 12. Sitagliptin is this type of agent: d. 10 mcg BID SQ within 60 minutes after morn- a. GLP-1 analog ing and evening meals b. Alpha-glucosidase inhibitor c. DPP-IV inhibitor d. Thiazolidinedione

40 america’s Pharmacist | March 2007 www.americaspharmacist.net 18. Incretin mimetics in the pipeline are using this The Incretin Pathway and Therapeutic Targets as a way to prolong their half-life: for Diabetes Mellitus a. Intravenous administration March 1, 2007 (expires March 1, 2010) b. Albumin bound complexes FREE ONLINE C.E. Pharmacists now have online access to NCPA’s c. Sustained release capsules CE programs through Powered by CECity. By taking this test online— go to the Continuing Education section of the NCPA Web site (www. d. Combination formulations with long-acting ncpanet.org) by clicking on “Professional Development” under the insulin Education heading you will receive immediate online test results and certificates of completion at no charge.

19. Clinical trials of sitagliptin showed that 200 To earn continuing education credit: ACPE Program 207-000-07-003-H01 mg of sitagliptin once daily: A score of 70 percent is required to successfully complete the CE quiz. a. Did not significantly improve glycemic control If a passing score is not achieved, one free reexamination is permitted. when compared to 100 mg once daily Statements of credit for mail-in exams will be available online for you to print out approximately three weeks after the date of the program b. Significantly improved glycemic control when (transcript Web site: www.cecerts.ORG). If you do not have access to a compared to 100 mg once daily computer, check this box and we will make other arrangements to send c. Caused unacceptable rates of nausea you a statement of credit: q d. Caused unacceptable rates of severe Record your quiz answers and the following information on this form. hypoglycemia q NCPA Member License NCPA Member No. ______State ______No. ______q Nonmember State ______No. ______

20. JS leaves his dialysis center and comes next All fields below are required. Mail this form and $7 for manual processing to: door to your pharmacy to fill his new prescription NCPA CE Processing Ctr.; 405 Glenn Drive, Suite 4; Sterling, VA. 20164 for Januvia. JS has a known history of coronary ______Last 4 digits of SSN MM-DD of birth artery disease status post stent placement in ______Name 2005, diabetes mellitus type 2, benign prostatic ______Pharmacy name hyperplasia (BPH) and end stage renal disease. ______The prescription from the doctor reads “Januvia® Address ______100 mg po q day for diabetes.” Before filling the City State ZIP ______prescription you call the doctor because: Phone number (store or home) ______a. Sitagliptin can worsen BPH symptoms. Store e-mail (if avail.) Date quiz taken b. All patients with coronary artery disease and Quiz: Shade in your choice T2DM should be treated with insulin only. a b c d e a b c d e q q q q q q q q q q c. Sitagliptin needs to be renally adjusted for 1. 11. 2. q q q q q 12. q q q q q hemodialysis patients. 3. q q q q q 13. q q q q q d. None of the above 4. q q q q q 14. q q q q q 5. q q q q q 15. q q q q q

6. q q q q q 16. q q q q q 7. q q q q q 17. q q q q q 8. q q q q q 18. q q q q q 9. q q q q q 19. q q q q q 10. q q q q q 20. q q q q q Quiz: Circle your choice 21. Is this program used to meet your mandatory C.E. requirements? a. yes b. no 22. Type of pharmacist: a. owner b. manager c. employee 23. Age group: a. 21–30 b. 31–40 c. 41–50 d. 51–60 e. Over 60 24. Did this article achieve its stated objectives? a. yes b. no 25. How much of this program can you apply in practice? a. all b. some c. very little d. none

How long did it take you to complete both the reading and the quiz? ______minutes

NCPA® is approved by the Accreditation Council for Pharmacy Education as a provider of continuing pharmacy education. NCPA has assigned two contact hours (0.2 CEU) of continuing education credit to this article. Eligibility to receive continuing education www.americaspharmacist.net November 2006 | america’s Pharmacist 41 credit for this article expires three years from the month published. Rx law

Succeed in Competitive Bidding By Denise M. Fletcher, Esq.

The Medicare Modernization each item in each area, equal to the median of Act of 2003 (MMA) requires the the bid prices of the winning bidders. Centers for Medicare and Medic- To improve its chance of being a successful aid Services (CMS) to replace the bidder, the supplier must understand its opera- current durable medical equipment tion. Realistically, what products can the supplier (DME) payment methodology for provide and what geographical area can the certain items with a competitive supplier cover? What direct and indirect costs acquisition process. The MMA does the supplier have in its products? How ef- requires bidding to occur in 10 of the largest Metropoli- ficient is the supplier’s operation? tan Statistical Assets (MSAs) in 2007, in 80 of the larg- In preparing to submit a bid, the supplier est MSAs in 2009, and in additional areas after 2009. should take the following steps: According to CMS, all providers billing Part B within the • Determine if it is located in a probable competi- first 10 MSAs must be accredited by spring 2007; all tive bid area. providers billing Part B within the next 80 MSAs must be • Understand the bid selection process. accredited by spring 2008; and all providers nationwide • Understand the product and service must be accredited within the next three years. Addi- requirements. tionally, suppliers must meet recently released quality • Be accredited. standards to furnish any DME for which Medicare Part B • Pick the products it can provide. makes payment. • Determine the percent of the market that There will be a “grandfathering” process by which it can handle. rental agreements for covered items and supply arrange- • Understand its “numbers” (financial and ments with oxygen suppliers entered into before the start operation data). of a competitive bidding program may be continued. This • Develop a bid for each Healthcare Common would only apply to those suppliers that began furnishing Procedure Coding System (HCPCS) code. the item prior to the program’s implementation. Beneficia- • Determine the amount of a discount (off its ries traveling from one competitive bid area to another will usual and customary charge) that it can give. be required to obtain items from another contract supplier. • Gather bid package forms and information. Beneficiaries traveling from a competitive bid area to a non- competitive bid area will only be required to obtain items from a supplier with a valid supplier number. Denise M. Fletcher, Esq., is with the Health Care Group The MMA authorizes CMS to phase in competitive bid- of Brown & Fortunato, P.C., a law firm based in Amarillo, ding beginning with the “highest cost and highest volume Texas. Fletcher is board certified in health law by the items or those items that the secretary determines have Texas Board of Legal Specialization. She represents du- the largest savings potential.” Suppliers will submit bids on rable medical equipment companies, pharmacies and other health care providers throughout the United States individual products in a product category, CMS will calcu- and Puerto Rico. She can be reached at 806-345-6318 or late a weighted composite bid for each bidder from the [email protected]. individual product bids, and will award contracts based on the composite bids. CMS proposes to set a single price for

42 america’s Pharmacist | March 2007 www.americaspharmacist.net 7.125” x 5” American Pharmacist Special Service CMYKTo Our Readers

Meadowbrook Insurance Co...... 13 NCPA Foundation...... 19 National Legislation and Government Affairs Conference...... Inside Front Cover, 1 Pharmacy Ownership Workshop...... 28 North American Bancard...... 43 Reliant Pharmaceuticals, Inc...... 5, 6 ScriptPro Pharmacy Automation...... Back Cover Top Rx...... 43 United States Pharmacopeia...... Inside Back Cover

*+(' Notes from capitol hill

Our 2007 Legislative Agenda

CPA is focusing most of its government affairs efforts in the 110th Congress on Medicaid, Mark Your Calendar Medicare Part D, and business negotiation Don’t miss NCPA’s 39th Annual Conference on National Legislation and Government Affairs. F S rights. If the issues seem familiar, it’s because W T M T Washington, D.C., May 14–16, 2007. S 5 6 3 4 1 2 they are. NCPA made great strides in these 12 13 For more information, call 800-544-7447, 10 11 8 9 7 19 20 same areas in the last Congress, but we all have much 17 18 or visit www.ncpanet.org. 15 16 N 14 26 27 25 23 24 more to do to get them written into law. 21 22 30 We are encouraged because of the change of leader- 28 29 ship in the House and Senate. NCPA is bipartisan, but let’s On Medicare Part D, reintroduction of prompt be blunt. Leaders in the last Congress were usually hostile pay legislation is a top priority. At press time, we to community pharmacy’s concerns. were still working on revisions to make it attrac- Our huge TRICARE victory—blocking mandatory mail tive to more members. Given the changes in order and higher copays at community pharmacies—came leadership, which blocked it last year, we are about through the grassroots efforts of our initiative with the optimistic that this finally will come up for a vote. National Association of Chain Drug Stores, the Coalition Our third priority is reintroduction of busi- for Community Pharmacy Action. It was not because those ness negotiations legislation, which would permit congressional leaders suddenly saw the light. groups of independent pharmacies, including But some of our past opponents did, at least in part chains that do not issue public stock, to negoti- because of our election-year campaign activity. We were ate with pharmacy benefit managers. Simply put, working hard to get a “community pharmacy majority” in this would end the stranglehold PBMs currently the 110th Congress, and our efforts were noted. So were exploit with take-it-or-leave-it contracts protected the results: more than 90 percent of the candidates we by federal antitrust laws. supported won and two of our high profile opponents were Fortunately, our principal bipartisan advo- not reelected. cates of this legislation, Reps. Anthony Weiner That said, the road ahead for the next two years is not (D-N.Y.) and Jerry Moran (R-Kan.) were reelected pothole free. Presidential politics make enactment of any and we look forward to working with them again controversial legislation “iffy” in 2008, so we’re focusing on their new bill, H.R.971, the Community Phar- hard on this year. macy Fairness Act. It was introduced Feb. 9. For Medicaid, we were extremely disappointed with the We also look forward to seeing them and definition of average manufacturer’s price (AMP) that the you at our 39th Annual Conference on National Bush administration issued for generic drug reimburse- Legislation and Government Affairs. It starts ments. Community pharmacists would be losing an aver- Monday, May 14. (See "Mark Your Calendar" age of $3 to $4 for every generic prescription dispensed above.) after July 1. We are taking a two-track approach: a legislative fix of the definition in Congress to at least cover product acquisi- tion costs and an increase in state-paid dispensing fees. For the latter, we’ve crafted model dispensing fee legislation and targeted groups of states for the initial effort.

44 america’s Pharmacist | March 2007 www.americaspharmacist.net