The Forces Driving Specialty Drug Spending

Eric McKinley

Carly Rodriguez

Healthcare executives should continue to monitor specialty medical pharmacy claim information and trends, according to Eric McKinley, PharmD, director, specialty clinical solutions at Magellan Rx Management.

“The five-year trend for specialty drugs on the medical benefit is 68% and 22% respectively for commercial and Medicare lines of business, yet visibility into this spend generally has been limited for a variety of reasons, including: complex benefits, numerous places of service, varied payment models, bundled claims, and complicated data,” said McKinley in his March 28 presentation, “Strategies for Staying Ahead of Specialty Drug Trends: Focus on the Medical Pharmacy Benefit” at the Academy of Managed Care and Specialty Pharmacy Annual Meeting 2019 in San Diego.

“This fast increase, as well as the payer concerns, emphasizes the importance of developing strategies to stay ahead of the trend and pipeline,” he said.

Spend for drugs on the medical benefit has been identified as allowed amounts of $29.97 per-member-per-month (PMPM) for commercial members and Medicare PMPM allowed amounts of $52.19 which has increased 18% and 12%, respectively over the last year; driven by inflation, utilization, drug mix, and shifts in site of service, according to McKinley.

In 2018, the FDA approved 25 specialty medications that would be billed under the medical benefit, according to McKinley. “This, along with the increase of independent physicians moving into employment under health systems, has led to more patients having their medical pharmacy medications billed under the hospital outpatient setting, which is a more expensive setting than alternatives such as independent provider offices or home infusion,” he said.

“It appears that specialty drug costs will continue to be a leading driver of overall drug trends. It is critical for payers to stay current with the evolving management strategies and marketplace conditions impacting medical pharmacy utilization and spend. Understanding medical benefit drug spend, trend, pipeline, and impact is imperative to formulating innovative solutions for managing specialty drug costs,” McKinley said.

The top five medications in commercial medical pharmacy spend are:

• Remicade

• Neulasta

• Rituxan

• Herceptin

• Avastin

“All five medications have an approved FDA biosimilar,” McKinley said. “Hopefully, in the next few months, all of the biosimilars will be available on the market.”

McKinley’s presentation was presented in two sections. The first section of the presentation covered the medical pharmacy trend data from the recent “Medical Pharmacy Trend Report,” from Magellan Rx Management.

“The last 12 months saw significant changes to many provider-administered specialty medications,” he said. “Novel oncology therapies and immunotherapies continue to drive the highest increases in medical specialty drug spend. Along with the high increases in medical pharmacy trends, we saw that costs for the same specialty medical pharmacy medications varied greatly by the site of where the medication was administered. Specialty medical pharmacy claims administered through the hospital outpatient site of service were consistently two times higher than claims for the same medication through the physician or home administration setting.”

Related: The Promise of Specialty Drugs

The second section of the presentation was in collaboration with Carly Rodriguez, PharmD, pharmacy director, clinical innovation at Moda Health, who presented their approach to management strategies for specialty medications processed through the medical pharmacy benefit. The presentation included numerous unique strategies and an emphasis on their implementation of a mandatory site of care program. The health plan implemented a mandatory site of service program in 2017, with an average successful shift rate of 86%.

“The health plan was able to obtain significant savings from the program over a 12-month period,” Rodriguez said. “This savings was achieved even with the health plan being able to treat 30% more patients on these medications. The average allowed drug cost per patient decreased from $19,985 (pre-implementation) to $13,346 in the last quarter of the program review period.”

Specialty insights

As specialty drug costs continue to be a leading driver of overall drug trends, it is critical for payers to stay current with the evolving management strategies and marketplace conditions impacting medical pharmacy utilization and spend, according to McKinley.

“Understanding medical benefit drug spend, trend, pipeline, and impact is imperative to formulating innovative solutions for managing specialty drug costs,” he said. “A number of specialty medications cannot be self-administered and have to be administered by a healthcare professional. This leads to a number of specialty medications being billed under the medical benefit. There are thousands of specialty medications in the pipeline which are expected to drive a significant portion of future medication costs and inflationary trends.”

Innovative targeted programs and working collaboratively are a few strategies that healthcare executives can implement to help slow the medical pharmacy trend, according to McKinley. “These programs and collaborations can lead to optimized medication use which can minimize waste and lower costs,” he said.

“Medical specialty medication trends will continue to soar,” McKinley said. “Specialty pipeline medications are being created with amazing biotechnology and gene altering techniques to treat our most complex, high-cost healthcare conditions such as cancer, rheumatoid arthritis, and unique rare diseases.”