Health plans have been plagued by challenges on the pharmacy side of their benefits for years, and they don’t expect them to disappear in 2016.
At the top of the list are challenges associated with escalating drug unit costs across the board, including specialty pharmacy and everyday brand name and generic drugs, says John Bennett, president and CEO of Capital District Physicians’ Health Plan (CDPHP).
BennettAccording to SelectHealth, pharmacy, as a percent of total expense, including outpatient, inpatient and professional services, has grown from 13% in 2010 to 17% in 2015. When asked why there has been such a dramatic rise in drug costs, Bennett says, “Because drug companies can
charge those prices.”
Recently, Valeant Pharmaceuticals received heavy criticism when it raised prices of Nitropress and Isuprel, both used in cardiac care, by 525% and 212%, respectively, after purchasing the drugs from Marathon Pharmaceuticals.
Branded drugs that have been on the market for years have also skyrocketed in price. A pack of EpiPen for anaphylaxis, which cost $94 in 2001, jumped to $533.20 in 2015, a $488% increase. HumulinR U-500, an insulin product, increased in price by 380% from 2010 to 2015. First marketed in 1952, U-500 from Eli Lilly is the only drug in the concentrated insulin space in the United States.
“These drugs have remained the same so we are not even talking about R&D costs,” Bennett says. “The only research manufacturers are doing is to figure out how to sell these drugs at a higher price.”
Next: Generic drugs are no exception
Generic drugs are no exception
Even generic drugs, formerly considered the low-cost alternative to branded drugs, have not dodged price increases.
Scott Schnuckle, senior vice president, pharmacy and business development, HealthPartners, says rising generic drug costs might be due to consolidation among pharmaceutical drug manufacturers, which knocks out competition and enables cost increases.
Bennett agrees. “Where else are monopolies allowed when providing an essential life resource?” he asks.
Sarah Marche, vice president, pharmacy markets for Highmark, says that generics were "a no-brainer" in the past, but they are no longer always the lowest cost option.
While they were always on the lowest formulary tier, Marche says Highmark is moving some of them to higher tiers because of higher costs. She points to drug price inflation as astronomical, from an expected annual 9% to 10% nationally to 20% to 25%, with specialty drugs playing a role in that increase.
Next: Addressing the problem
Addressing the problem
In the face of rising drug prices, what can plans do to contain costs while ensuring members have access to the medications they need?
Marche says one solution may be tailoring benefit designs to different patient populations. Highmark claims, for instance, revealed that after the Medicaid expansion due to the Affordable Care Act, it became clear that this newly insured population was sicker and had higher utilization rates than commercial members.
As a result, Highmark developed different formularies and benefits for this population that better manage risk and provide less access to higher cost drugs unless members choose to assume more cost sharing, Marche says. “Highmark is not restricting the use of higher cost drugs but promotes trying cost-effective and more appropriate treatment before moving onto more costly alternatives,” she says.
In addition, Highmark educates Medicaid beneficiaries on best practices for managing their benefits, provides incentives for selecting lower cost options and steers members toward more appropriate settings for specific services, such as designated centers or clinics instead of hospitals for infused specialty drugs. The insurer also emphasizes the use of mail order drug delivery,
HealthPartners is also working to address the problem. In 2014, it brought together PharmDs and pharmacy techs to form a medical optimization team that works to finds gaps in care for members taking high-cost medications, such as the new hepatitis C drugs. The team uses medication therapy management consultations, data and digital applications to improve adherence, while decreasing overall cost trends below benchmarks published by CVS and Express Scripts—roughly 13% vs. 8.9% for HealthPartners, according to Schnuckle.
HealthPartners is also steering patients to lower-cost sites for filling their prescriptions, and encouraging utilization of drugs with the best overall value in terms of quality and effectiveness.
Next: An ongoing quest for transparency
An ongoing quest for transparency
Bennett also cites lack of transparency on drug pricing by manufacturers as a primary challenge. To keep drug costs in check, he recommends educating all stakeholders (including physicians and members) about drug pricing.
CDPHP, for instance, relies on in-house pharmaceutical representatives to educate doctors about the most efficacious and cost-effective drugs available. As a provider-sponsored health plan, CDPHP works closely with doctors to develop suitable drug protocols for patients. And, it educates its members through care management and utilization management programs.
In an effort to increase cost transparency, the health plan also hosts a website where individuals can show their support and receive information on drug price trends and legislative efforts to control costs, and works with local regulators to promote transparency.
Next: Aggressive marketing and rising drug costs
Aggressive marketing and rising drug costs
John Bennett, president and CEO of Capital District Physicians’ Health Plan (CDPHP), says aggressive marketing tactics used in the pharmaceutical industry make the challenge of controlling drug costs more difficult for health plans.
He points to a TV commercial that suggests that a certain cancer drug could cure the disease, when it really only offers an extra three months of survival.
“From a moral standpoint, I can’t conceive of how a manufacturer can do that and look someone in the eye with cancer,” Bennett says.“Patients will ask for it and put pressure on a health plan to put it on formulary. If an insurer denies coverage of such a drug, we are seen as profiteering, as villains.”
But in reality, says Bennett, non-profits such as CDPHP, are only realizing profits of 2% in a good year.