Specialty Pharmacy: What to Do Now to Control Costs and Utilization
In the United States, spending on specialty pharmacy medicines has nearly doubled in just the past five years. Overall, the prescription dispensing revenue from specialty drugs at retail, mail, long-term care and specialty pharmacies in the U.S. reached $146 billion in 2018, an increase of 6% from 2017.1 And spending on specialty medications, which accounted for 44.7% of
total spending, was up 3.9% in 2018 compared with the previous year.2
Specialty medicines were 2.2% of prescription drug volume in 2018, but grew at more than double the rate of traditional medicines.3 It is projected that by 2020, specialty medications for diseases such as cancer, autoimmune disorders, neurological issues, viral hepatitis, and HIV will account for 50% of all drug spend in the U.S.2 And with thousands of potential new drugs in development, there appears to be no end in sight to this exponential growth.
Given the unsustainability of these trends, it is imperative that employers, working with their PBMs as necessary, be proactive and aggressive in managing both the costs and utilization of specialty pharmacy products.
Thankfully, there is opportunity to hone in on the problem using the following nine pharmacy benefit management strategies.
1. Focus first on managing appropriate use of specialty pharmacy drug products.
Then focus on managing specialty pharmacy drug unit cost. It is not uncommon for some specialty pharmacy drugs to be prescribed by the physician for off-label use (i.e., non-FDA approved indications). Make sure your prior authorization (PA) criteria and medical policy coverage language is current enough to address this. You may want to revise your medical policy to state that such off-label uses not be covered under the specialty pharmacy drug benefit under any circumstances. Or, you may decide instead to prior authorize the drug and approve payment only if the prescribing physician can first provide evidence of medical necessity. If you choose the PA route and use a PBM, hold your PBM accountable: ask them to share lab results or other evidence of medical necessity provided by the physician. This way you will know they are not simply rubber-stamping specialty pharmacy approval requests.
2. Make sure your specialty pharmacy coverage and PA criteria align with national clinical guidelines.
This also will ensure that you are not paying for specialty drugs that are prescribed
for non-indicated uses or if the drug is being administered to the patient prematurely. A good example involves drugs for hepatitis C. Make sure any PA or coverage criteria require that the patient be deemed clinically eligible for the drug based on METAVIR scores. These clinical scores are typically used by clinicians show the extent to which liver disease has progressed, and therefore, which patients would clinically benefit the most from using these drugs. Push back on PBMs if they are hesitant to implement these criteria or if they threaten to reduce your rebates on these drugs if you want more stringent PA rules in place.
3. Know where specialty pharmacy drugs are being administered.
Then adopt a strategy to shift referral patterns to the lower-cost care settings. Today about half of all specialty pharmacy drugs are covered under the pharmacy benefit (lower cost setting); the remaining half are covered under the typically more expensive medical benefit setting
(i.e., those administered in hospital clinics or physician offices). Review claims data to identify referral and site of care patterns. What percentage of drugs being shipped by your specialty pharmacy are going to the physician’s office or hospital versus the patient’s home? Conducting a thorough financial analysis can help you figure this out. You may have to rework benefit coverage language to drive specialty pharmacy usage patterns away from costlier outpatient settings and toward the pharmacy benefit side where costs can be better managed.
4. Align your PA approval criteria for consistency on both the medical benefit and pharmacy benefit side.
This is especially important for autoimmune drugs used for diseases such as rheumatoid arthritis and ulcerative colitis. Consider that 90% of claims for infused specialty pharmacy products like Remicade® occur on the medical benefit side. By contrast, 100% of claims for competing product Humira® fall on the pharmacy benefit side, because the drug is self-injected. You or your PBM should be monitoring claims and how your PA rules are set up and adjust accordingly. Otherwise, some physicians will game the system to get higher reimbursement on the medical benefit side for specialty pharmacy products.
5. Re-contract your providers at more aggressive rates.
A very large, self-insured employer may save money by carving out the specialty pharmacy drug benefit separately from the PBM. Stand-alone specialty pharmacy companies will often give deeper discounts. You will need to conduct a thorough financial analysis to determine if this option would benefit you financially or not.
6. Re-evaluate member cost-shares and maximum out-of-pocket limits.
Changing the member-cost share structure for specialty pharmacy drugs can also help drive utilization to the least costly care setting. For example: a member or employee needing a specialty drug may have a 20% coinsurance obligation for the drug under the pharmacy benefit. But that same member may have no cost share for the same drug if obtained through the medical benefit. This is especially true if the patient has already met his or her annual deductible on the medical benefit side. This incentivizes the member to obtain the drug in the physician’s office or hospital infusion center, which may be more costly to the employer. You will need to carefully evaluate the various scenarios before modifying the benefit design and cost-share structure.
7. Maximize rebates for all types of specialty pharmacy drugs.
This applies to both self-administered drugs dispensed by a specialty pharmacy, and provider- administered injectables or infused drugs. You will need to carefully review and understand all rebate terms in your PBM contract. You may also need to devise new formulary tiering structures to drive greater usage of preferred specialty pharmacy products, which in turn, will drive higher rebates.
8. Take advantage of new, emerging specialty pharmacy rebate opportunities.
The challenges posed by specialty drug costs are driving new, innovative approaches in the market that you may be able to capitalize on for the first time. For example, some manufacturers — in exchange for having their specialty pharmacy products receive preferred formulary status — will tie rebates to specific clinical outcomes, such as cure rates among patients receiving the drug. This essentially gives you performance guarantees that would not otherwise be available. Conversations are also starting to occur around giving employers rebates for specialty drugs dispensed on the medical side — something that has not traditionally been available. It’s important to be aware of these emerging market opportunities or work with a consultant who is so you can take advantage of them.
9. Define your biosimilar strategy.
Although only a handful of less expensive biosimilar agents are currently FDA- approved, it is important to think about what approach to take as more of these specialty pharmacy products become available. The typical biosimilar agent will be priced at about 10% less than the originator specialty brand name product. However, that doesn’t automatically mean these drugs will cost less. You will need to know whether the biosimilar manufacturers will offer rebates on their products. And you will need to do a careful financial analysis of any rebates you currently receive on the originator specialty product — as these may make these drugs more cost-effective than the biosimilars.
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1Data from Drugchannels.net
2Data based on Express Scripts 2018 Drug Trend Report
3Data from IMS Institute for Healthcare Informatics.