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How to Save $1.6 Million Bucks: 5 Tips for Cutting Specialty Pharmacy Costs

The trend for specialty drug costs is 14% increase every year to 2025. Worse yet, there is a good chance plan sponsors are significantly overpaying for specialty medications. Don’t fret, there is good news. You have an opportunity to bend the specialty pharmacy cost trend. Consider this recent case study:

Reviewing a high-cost case, one of TransparentRx’s Certified Pharmacy Benefits Specialist and clinical pharmacist identified an unusually high payment for a specialty pharmacy drug. The CPBS notified the client and consulted on appropriate pricing. It was discovered that although the client had performed a medical necessity review, the cost of the drug was not reviewed because an existing discount was already in place. We were able to negotiate with the provider and win both retrospective and future pricing at the CPBS’s suggested cost. Total Annual Savings: $1,623,427.

It is true this is an extreme example yet at the same time it is certainly not unique. The following tips can help brokers, plan administrators and case managers identify and fix overpayments for specialty pharmaceuticals:

Take a proactive approach to prior authorizations.

I’ve been fortunate enough to be a “fly on the wall” listening to the leadership teams of several national specialty pharmacies. And while they preach case management and patient care as the priority if you listen carefully what they really want first and foremost is volume or more prescriptions. I am asking self-funded employers a simple yet very important question. Does it make sense to have the same entity manage and approve specialty Rx claims when that entity stands to benefit when these claims are approved?

If 90% or more of PAs are getting approved you might be a victim of rubber-stamping which leads to what? You guessed it – higher costs. Just because you have a PA or step therapy program doesn’t mean it is efficient. Consider carving out the prior authorization process or at a minimum taking a more hands on approach.

Crosswalk “J” Codes to National Drug Codes (NDCs) to identify specialty pharmacy drugs.

J codes are Healthcare Common Procedure Coding System (HCPCS) Level II and mainly used in infusions, injections, and supply codes. J codes apply to drugs that are administered other than orally, typically indicating injection or intravenous delivery. An NDC is a unique 10-digit, three-segment number that serves as a universal product identifier for human drugs in the U.S. The code is present on all nonprescription (OTC) and prescription medication packages and inserts.

If a medication is paid for under the medical benefit, the claims use J codes — they are part of the Healthcare Common Procedure Coding System (HCPCS) — and J codes are blunt instruments compared with NDC codes. There’s often a lag in assigning J codes, so new drugs may share an “unlisted” designation for months. Brand and generic drugs share a J code, and package size is not included. If you need to track medication use and cost, J code data will give you a fuzzy picture; the NDC codes, a high-resolution one.

Implement a short cycle dispensing program.

Do not approve an initial 30 days or even 14 days supply for high cost specialty drugs. Ongoing oversight and approval requirements ensure ongoing treatment is safe and appropriate for the patient and holds the provider accountable for managing supply, preventing waste, and administering the drug appropriately.

Pay really close attention to cost.

Cost is a function of rebates and everyone wants a piece. If your PBM isn’t acting as a fiduciary, bring manufacturer contracting and rebate management in-house! A fiduciary standard requires the PBM to act in the best interests of its clients “without regard to” their own financial gain.

On May 16, 2017 Express Scripts filed a complaint against drugmaker kaleo. The complaint revolves around the opioid overdose treatment, Evzio, which kaleo manufactures. Express Scripts’ attorneys redacted the complaint, but did not redact some information that Express Scripts has long regarded as proprietary thus not typically made available to the public. In the complaint, it is clear ESI was not working without regard to its own financial gain.

Evaluate your internal resources and pharmacy expertise.

  • Do you have the expertise in your company to manage the PBM evaluation process and negotiate the PBM contracting process, or do you need to use the services of a consultant?
  • How do you want to be involved in the management of the PBM program after it is set up? 
  • Do you have the expertise and resources to manage the pricing arrangement or do you need to build in the incentives for the PBM to manage your program?
  • Who is watching the watcher? No one highly skilled, or without misaligned incentives, was watching Bernie Madoff. 

Ideally, the best time to negotiate cost is before the contract is signed. Work closely with your PBM, account management team, and providers to negotiate a radically transparent arrangement upfront. 

Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

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