Despite being used by only 1% to 2% of the population, specialty drugs accounted for 37% of U.S. drug spend in 2015 and are projected to reach 50% by 2018, according to the Express Scripts 2015 drug trend report, released in March 2016. While high drug prices will continue to plague the industry in 2017, the following four factors will exacerbate the problem:
1. Missing link between cost and outcomes
There is a lack of outcomes-based contracts with manufacturers but if you want physicians to buy into value-based reimbursement, payers need to put pressure on manufacturers to demonstrate value and look at outcomes differently.
Payer organizations are thinking about total cost of care, not just the price of single products, she says. They are looking at the continuum and range of medical and pharmacy costs tied to outcomes. One drug may be more expensive than an alternative but positively affects the total cost of care.
Outcomes-based contracting is more aligned with better health and lower costs. “We need a combination of strategies to create accessibility and affordability and align healthcare delivery and reimbursement based on value, not volume. We must hold manufacturers more accountable in contracts, creating large unit cost discounts day one and unique components to stand behind performance. If drugs don’t perform as promised, there should be more discounts.”
2. Sparse competition
“The challenge is timing in some therapeutic areas,” Fleming says. “For example, when Sovaldi came on the market 2014, as a treatment for hepatitis C, it was the only drug but by the end of the year, there were many more. The same thing is expected to happen with Alzheimer’s. There is the notion of competition to mitigate increases; with competition, payers and PBMs are able to negotiate with manufacturers, as well as improving clinical outcomes with more choices.”
Unfortunately, if some drugs don’t lose patent protection, Fleming warns there might be double-digit annual price increases. Bradbury also is concerned that the lack of competition in specialty drugs due to patent protection and too few drugs on the market for specific conditions are driving drugs to a higher price point.
Numerof says there is a lack of collaboration between payers and providers—a relationship which traditionally has bred animosity and lack of trust. “But we have to get beyond that,” she says, acknowledging that physicians are more aligned with payers than ever before.
Bradbury agrees that collaboration could better ensure compliance among physicians and payers. He points out that clients using Cigna as a plan, specialty pharmacy, and PBM has resulted in a savings of $77 per member per year.
4. Crippling policies
Fleming cites another problem: Existing federal policies hinder the ability of Medicare Advantage (MA) plans to fully leverage drug management tools to achieve lower costs for beneficiaries and the Medicare program.
These polices do not allow utilization management tools, such as step therapy and prior authorization, on Medicare Part B covered drugs, he says. Instead, they require MA plans to provide the same drug coverage as fee-for-service Medicare to members in MA plans, which means that even when the evidence base supports the use of generic or therapeutic drug alternatives, MA plans have limited tools to encourage prescribers to utilize high-value drug treatments.
The next step, he says, is looking at drug approval policy set by the FDA and drug management policy established by CMS. Furthermore, the age-old problem of lack of transparency in pricing and concern about PBM transactions is still under wraps.