Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Courtesy of Avalere Health

pricing is a sustainable and justifiable trade-off if patient outcomes are improved, I believe that a major point is being ignored: without cooperation between the system’s essential stakeholders, our health care system’s potential will never be fully realized. While costs should be scrutinized, they should not be the sole factor in determining a patient’s access to therapy. This article will describe emerging viewpoints of key stakeholders to illustrate how specialty is segmented by price and offer insight into how this can be changed to help ensure a better scenario for all involved.

According to Express Scripts, Inc (ESI), the country’s largest pharmacy benefit manager, “US spending on specialty prescription drugs—those used to treat chronic, complex diseases, such as cancer, multiple sclerosis, and rheumatoid arthritis—is projected to increase 67% by the end of 2015.”  While there are many reasons why this is occurring, manufacturers have no doubt shifted their focus when it comes to drug development. 

In a general sense, pharma has transitioned from creating “me-too treatments” and drugs that improved patient conditions to the point where they became more manageable to creating high-value transformative medications that are just shy of being called curative. Some manufacturers believe that their products should be priced at a premium to reflect their innovation and that a patient pool exists that is willing to pay top dollar for the best the market has to offer. While an argument can be made justifying premium pricing, pharma’s stance has created another marketplace response that may be squeezing patient access to medications even tighter. 

Last year marked a significant change for the payer community. Payers, whose primary mission is to ensure lower drug costs for the system, felt that pharma was moving in an uncomfortable direction and resorted to aggressive cost containment protocols to regain price control. There were instances when payers like ESI voiced displeasure at products they believed were overpriced without being justified by peer-reviewed, evidence-based data. It seemed as though the payer community abruptly began to shift the system from one that was product-focused to one that is data-driven and values newly manufactured drugs based on clinical distinction and economic factors. 

After halting coverage for many active ingredients found in ointments, creams, and powders used by compounding pharmacies due to cost concerns, ESI escalated its policy of forcing the lowering of product costs by negotiating a market-moving deal with AbbVie for its newly approved hepatitis C virus (HCV) treatment. 

Months after spearheading a national coalition to force Gilead’s high-priced HCV treatment Sovaldi out of the market, ESI announced it had negotiated a better price for competitor AbbVie’s Viekira Pak. Additionally, ESI announced that they would no longer cover Gilead’s HCV treatment. It didn’t matter that Viekira Pak’s original price was only slightly lower than Sovaldi’s; what mattered was that AbbVie significantly lowered Viekira Pak’s price in order to be included in the formulary. 

Many were left wondering if this would prompt other payers to respond in a similar fashion and seek to achieve better patient outcomes via a pricing war. Surprisingly, the answer to date is no. Both CVS Caremark and Anthem decided to include Gilead’s Harvoni (Sovaldi’s more widely prescribed successor) on their formularies as a way to combat HCV, while Prime Therapeutics decided it could save its beneficiaries’ money by including both Gilead and AbbVie’s HCV treatments on its formulary. 

After taking all of this into account, it seems as though payers have been putting too much of their resources toward cost containment without a balanced approach to achieving better patient care. However, the fault doesn’t lie entirely with the payers. In order to achieve the ultimate goal of patient access, it must be understood that neither pharma nor the payer community has fully realized the resources that the specialty provider community has to offer. I’ll illustrate the potential benefits of a comprehensive approach that is dedicated to preserving patient access: 

See more at www.pharmacytimes.com.

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

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Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

That additional growth from “non-traditional” drugs represents the emergence of specialty drugs in a matter that will act as a primary cost driver for employer health plans moving forward, as 65 percent of new drug spending over the past two years was for specialty medication. Industry projections assume that 80 percent of the top ten drugs sold in the United States will be specialty drugs by 2016.

While estimates of growth have varied mildly, general consensus in the pharmacy management industry suggests specialty costs will quadruple to around $400 billion by 2020. This estimate seems to be supported by observations that the drug-manufacturing development pipeline is ramping up efforts in the specialty fields. Currently, 50 percent of drugs in development are considered specialty in nature and around 70 percent of new drugs that will be approved to hit the market in the near-term will be defined as specialty drugs.

Until recently, most employers looked at pharmacy costs by observing two sectors: name-brand drugs and generic drugs. Current projections indicate that specialty drug spend will eclipse 33 percent of total drug spending for a health plan by 2016. Before that occurs, employers must begin looking at drug spend in three sectors in how they analyze, determine plan-guidance and build strategy: 1) Specialty drugs 2) name-brand drugs and 3) generic drugs.

What qualifies as a specialty medication?

• Generally speaking, a specialty medication meets one or more of the following criteria:
• Costs per script are greater than $750 per month
• Treats a rare and/or intensive condition not typically associated with chronic diseases
• Requires specific handling or monitoring processes
• Used in a limited distribution network

As of 2013, cancer, multiple sclerosis, rheumatoid arthritis, hepatitis C and growth hormone accounted for more than 60 percent of the specialty market. Given the investment in this drug category, costs in the specialty pharmacy arena will be diversified to include further drugs developed for HIV, hemophilia and other costly conditions that normally fall outside of the scope of typical disease management treatments for diabetes, hyperlipidemia and the like.

More than half of specialty drugs in the developmental pipeline are high-cost oral medications that intend to act as a substitute for other treatments, such as injectable drugs typically provided in physician practices, outpatient centers or through infusion treatment.

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What conditions are typically associated with specialty drugs? While this list is expansive, it will change and grow as further research and development occurs around other disease states and approval is provided. The percentages represent that condition’s estimated percent share of the specialty drug market:

• Oncology/Cancer: 30%
• Rheumatoid Arthritis: 12%
• Multiple Sclerosis: 10%
• HIV/AIDS: 8%
• Inflammatory Bowel Disease: 3%
• End Stage Renal Disease: 3%
• Intravenous Immunoglobulin: 4%
• Hemophilia: 3%
• Hepatitis C: 2%
• Growth Hormone: 3%
• Cardiovascular:3%
• Transplant: 1%
• Other: 19%

Since a small percentage of an employer population (generally less than 3 to 5 percent) will have any of the conditions that qualify for specialty drug treatments in the major areas of research and development, drug spend management will skew traditional per member per month (PMPM) metrics. A large share of medical spend will be isolated in a particularly small set of members who have these conditions.

How can an employer prepare for this significant change?

Basic observations on specialty drug spend will likely mirror an often under-emphasized, yet obvious trend that commonly occurs in medical spend: most costs are pooled in a small percentage of the population (generally far less than 10 percent of total membership) that have exceptional needs that cannot be addressed through lifestyle changes. These will quickly exceed the maximum out-of-pocket employee expenditures. In those instances, personalized and coordinated care has to exist for members to:

• Get the highest quality medical care as it relates to their needs
• Maintain medical compliance and adhere to evidence-based guidelines for treatment
• Gain assistance in navigating the medical continuum to offset costs related to waste, mismanagement and improper treatment

Since specialty pharmacy costs will mimic these resource demands, employers should be prepared to build metric-driven tactics to effectively address how specialty drug coverage is engaged at both the member level and how the costs are appropriately staged to minimize unnecessary cost.

Funding questions to consider:

1. How does an employer create an opportunity to ensure specialty drugs are accessed only in situations where they are the best option?
2. How does an employer build a process to ensure they are getting to most cost-effective method of delivery for specialty medications?
3. How does the employer design their benefit plan to distribute the specialty medications effectively without creating an overall plan burden that will result in increased costs for the employer and overall membership base?
4. How will an employer’s comprehensive plan design interact and impact this particular cost? Conversely, how will specialty drug usage interact and impact comprehensive plan design?
5. How does an employer engage the specialty pharmacy process? Should it be directly through the carrier/TPA or through a vendor relationship?
6. How does an employer ensure they are getting the best arrangement for specialty medication as it relates to overall medical costs?

Given the climate regarding this expansive market change, employers should prepare in a constructive manner by analyzing current risks within their population’s medical and pharmacy spend. They should work with experienced consultants and other health plan stakeholders that understand the progression in order to determine proper benchmarks and strategy for the next five years –the precise timeframe this specialty medication boom will occur.

by Chris Davis
Chris Davis, MPH, ACSM
Director of Health Mgmt & 
Claims Informatics
Regions Insurance Inc

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

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Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Potential Solutions in Reducing Specialty Pharmacy Costs

1. Care coordination – Care coordination is key not only between providers and payers but also between medical and pharmacy benefits. Currently, specialty pharmacy benefits are provided both under medical and under pharmacy programs and these tend to be done within their individual silos. In some instances, the cost to the patient is less with pharmacy benefits than medical while others the opposite is true. Integration between pharmacies and medical records can increase the coordination of care and provide higher quality care to patients and ultimately lower healthcare spending.
2. Patient education – patient education is essential in particular with the administration of specialty pharmacy drugs. These drugs can be in the form of injectables and are often administered by a provider, which can be quite costly. Providing education to the patient as well as their family can enable these to be taken in the comfort of the patient’s home. This can help reduce healthcare spending as the cost of a doctor’s visit may not be necessary, no appointment needs to be made, and no billing/coding needs to occur.
3. Providing care in the appropriate place – If assistance is required to administer these drugs, it is much cheaper to administer for example in a primary care setting than an emergency room or outpatient clinic which may be associated with a hospital. It is the same medication, but education as to the less expensive alternative is critical.
4. Changes to the payment policy/reimbursement – under current fee-for-service model, providers are incentivized to prescribe more expensive medications, whether the patient really needs those particular drugs or not. Additionally, some providers are incentivized based on the total cost of the drug, in which they are reimbursed a percentage. There is also a trend of providers to purchase specialty pharmacy drugs from manufacturers and then sell them at a premium price. These incentives are not aligned to decrease healthcare spending and should be reviewed and revised.
5. The use of bundled payments has become a trend as of late. The idea is to control the total cost of care through bundling certain services, thus lowering healthcare spending.
6. Transparency in pricing is critical to controlling healthcare costs as well. Providers, payers and consumers should know the price, what that includes, and how the price was determined.