New utilization tools versus tried-and-true

The growth in the number of specialty drug launches, combined with their growing share of total drug spend, is making it imperative for pharmacy benefits managers (PBMs) and payers to refine existing tools and adopt new ones to manage utilization.

While prior authorization (PA) continues to be an effective technique, creating narrow networks, optimizing sites of service, managing formulary and better balancing of the pharmacy and medical benefits are the up-and-coming tools today. 

There are 907 drugs and vaccines in various stages of development in the current drug pipeline as of March 2013, according to the Pharmaceutical Research and Manufacturers of America. Specialty drugs have accelerated in the pipeline, a trend that has continued since 2011. 

With the strong pipeline, price inflation and expanded indications, specialty spending will increase from $290 per-member per-year in 2012 up to $845 by 2018, reports Artemetrx, a healthcare data analysis company. Payer costs are expected to exceed spending for traditional drugs in time.

Traditional and new management techniques

Mike Ellis, corporate vice president, enterprise specialty for Walgreens, believes there will be more scrutiny around specialty drugs and their costs as the market keeps generating new medications. 

“Payers need to be cognizant of the pipeline and use sophisticated predictive analytical tools to better understand their member populations and to effectively deploy benefit designs,” he says. 

Alan Lotvin, executive vice president, CVS Caremark, a pharmacy benefits manager, says the growth of specialty drugs will affect the way payers design their benefits. 

“We are already seeing an expansion of traditional drug management tools, such as prior authorization, and more aggressive formulary approaches, such as exclusions and step therapy, to mitigate the impact of manufacturers’ copay cards,” he says. “These cards don’t steer patients to the most cost-effective drugs.”

Coupons for specialty drugs might offset patient costs, but they don’t reduce total outlay for payers. In fact, they often encourage utilization of more costly drugs.

“As specialty spending grows, it will drive payers to increase management, restrict coverage of specialty pharmacy products and demand more focus on true outcomes in order to rein in costs,” says Patrick Gleason, director of health outcomes for PBM Prime Therapeutics. “Evidence-based medicine will flourish in this environment, and products that are unable to provide significant benefit will be subjected to greater restrictions. Additionally, as categories become more competitive, the ‘unique’ nature of many specialty products will be gone, and more competitive opportunities will arise.”

Gleason is concerned that there will be less opportunity to use generic savings from traditional small-molecule drugs to offset total rising drug expenditures. Prime predicts specialty spending to reach 50% of all drug costs by 2018. 

For the remainder of this year, the PBM will continue developing, medical drug review; medical drug formulary development; physician fee schedule management; medical drug claim outlier identification and management; and site-of-care drug administration strategies.

Prior authorization tools

Prior authorization (PA) will become standard for virtually all specialty products and specialty pharmacies will be called upon to assist patients with therapy, while coordinating with doctors and payers in helping guide therapy. It’s especially true as new oncology therapies demand more management.

However, Diane Verrilli, vice president and general manager, payer and revenue cycle services for McKesson Specialty Health, has some reservations about PA:

• An increased number of procedures, services and drugs require PA;

• Incongruous third-party vendors managing online drug PAs could be burdensome;

• PA vendors’ pathways are limiting and exclude common cancers for most patients; and

• Delays in approvals can compromise patient care and lead to increased medical costs.
  

OptumRx has had success with a PA/medical necessity program applied to a variety of specialty conditions covered under the medical benefit, such as hepatitis C, growth hormone deficiency and oncology. With the program, annual savings for growth hormone treatment has been 60%, and 22% for hepatitis C, says Suzanne Tschida, vice president, specialty benefit and outcomes for OptumRx.

Pharmacy/medical benefits

Although specialty drugs span both the pharmacy and medical benefits, CVS Caremark has found that the majority of oral and subcutaneous/intramuscular injections for specialty conditions fall under the pharmacy benefit, while most IV drugs are under the medical benefit, administered in a physician’s office, outpatient center at the hospital or in-home. 

Because drugs for some conditions lend themselves to coverage under both benefits, Lotvin emphasizes the importance of looking at each patient holistically by integrating care managers into pharmacy management to support disease progression, comorbidities and symptoms and, ultimately, reduce ER and hospital admissions. 

By looking across the pharmacy and medical benefits for highly utilized categories of specialty drugs, plans could place more competitive pressure on manufacturers. For example, if all of the drugs for a particular condition-despite which benefit they fall under-could be considered as one drug market, competition would increase. 

Lotvin foresees that PA can be extended to the medical benefit-especially for conditions that call for polypharmacy. 

“By identifying editing and repricing opportunities prior to paying claims, we could manage drug utilization with the same specificity as handled under the pharmacy benefit,” he says.

Ruth Opdycke, president, TPG Healthcare Consulting LLC, in Glastonbury, Conn., agrees that unlike the pharmacy benefit adjudication systems, medical claims adjudication processes do not provide the level of granularity to optimally track or manage specialty drug utilization.

She foresees that this year, more plans will look at ways to better manage specialty drug spend under the medical benefit by optimizing provider fee schedules and service site selection, which she says are common techniques. 

Optimizing sites of care

One of the newer tools for utilization management, Ellis says, is modifying benefit design to encourage the use of the lowest cost sites of care, such as moving the administration of infused drugs from a physician’s office to an outpatient facility.

Although he says the technique proves effective, only 7% of respondents in a Pharmacy Benefit Management Institute survey of 337 employers representing 14.3 million lives say they are modifying their benefit design to encourage use of lower cost sites of care. 

Ellis points out that the home setting could be six times less expensive than a costly hospital for administering specialty drugs. 

Narrowing networks

Restricting networks to only the most cost effective channels is another trend picking up steam among payers and with good reason. 

“These networks provide better control,” Lotvin says.

Verrilli says that narrow networks are becoming more popular as a way to improve quality and lower drug costs, especially as payers focus on maintaining medical loss ratios. 

“Although there may be fewer providers, not only are out-of-pocket costs more predictable, but also patients will be steered toward less-costly sites of care,” she says.

Restricted networks could provide additional patient volume to specialty pharmacies able to deliver high service with aggressive discounts.

Mari Edlin is a freelance writer based in Sonoma, Calif.