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Confronted with the escalating costs of specialty drugs, payers and PBMs have been employing a variety of strategies in an attempt to limit their financial exposure and improve patient outcomes.
Spending on specialty pharmaceuticals has been skyrocketing in the United States, and shows no signs of slowing down. In 2012, the U.S. spent about $87 billion on specialty pharmaceuticals--complex drugs and biologics that target relatively small portions of the population and often require special patient monitoring--and spending is expected to reach nearly $400 billion by 2020, according to a study by United Health's CENTER FOR HEALTH REFORM AND MODERNIZATION.
While long a source of concern in the healthcare insurance industry, the issue drew wider attention earlier this year after sofosbuvir (SOVALDI) was approved for use in the U.S. for the treatment of hepatitis C--at a cost of $1,000 per pill, or $84,000 for a treatment regimen.ilead [Gilead Sciences, Sovaldi’s manufacturer] did the industry a favor by bringing the costs of these drugs to the forefront,” says Bob Taketomo, Pharm.D., president and chief executive officer of VENTEGRA, a managed care contracting service organization. “People in the pharmaceutical and healthcare industries are asking what can we do in terms of ensuring appropriate use of these agents through benefit design and utilization management strategies?”
In mid-September, Gilead Sciences announced plans to sell Sovaldi in India for about $10 per pill. The company also said it had licensed Indian pharmaceutical companies to produce the drug for sale in India and other developing countries for far less than the cost in the U.S.
NEXT: Strategies for controlling costs
The growing costs of specialty pharmaceuticals is driven largely by their increasing availability, which in turn is the result of advances in pharmaceutical science and the economics of the industry.
“I think what we’re seeing is that the categories of blockbuster drugs for the more common disease states, like diabetes and hypertension, have had effective medications that are now coming off patent,” says Michael Zeglinski, R.Ph., vice president of pharmacy operations for pharmacy benefit manager (PBM) Catamaran and director of BriovaRx, Catamaran’s specialty pharmacy. “So the pharmaceutical companies are looking to the next generation of medications. And what they have left are disease states with smaller populations.”
In recent months several new major drugs for treating diabetes have come on the market, such as dapagliflozin (Farxiga), canagliflozin (Invokana), and empagliflozin (Jardiance). Zeglinski notes, however, that these drugs had been in development for the past five to 10 years.
“The current pipeline is filled with new drugs for other conditions, including treatments for orphan diseases that up until now haven’t received much attention or R&D investment,” he says.
Confronted with the escalating costs of specialty drugs, payers and PBMs have been employing a variety of strategies in an attempt to limit their financial exposure and improve patient outcomes, as shown in responses to Managed Healthcare Executive’s State of the Industry survey. The most common response among those surveyed has been to require some form of prior authorization to label (48.5%) or to studies used to gain FDA approval, before agreeing to provide coverage (17.9%).
Payers use prior authorizations for two reasons, says Howard Flushman, MBA, research director for specialty focused payer services for HealthStrategies Group. The first is medical monitoring, which Flushman defines as “ensuring the right doctor is giving the right drug to the right kind of patient for the right diagnosis in the right type of setting.”
NEXT: Requiring the use of specialty pharmacies
The second is product selection control--making sure the product is being used according to label, under the correct protocols, and so on. In addition, he notes, “prior authorizations are the payer’s most significant data source on what the treatment plan for that patient is likely to be.”
Because of the burden prior authorizations impose, plans are experimenting with ways of minimizing them, says Flushman. Primarily these efforts consist of negotiating with a hospital system or physician group to use only agreed-upon medications and protocols for treating certain conditions in exchange for not requiring prior authorizations. “Only when [the treatment] becomes highly predictable to a payer can they negotiate a utilization management program that says ‘Doc, you don’t need a PA because we trust that every one of your breast cancer patients is going to be treated this way,’” Flushman explains.
Requiring the use of specialty pharmacies is another tool payers use to limit their exposure to the cost of specialty drugs. Unlike retail pharmacy chains, specialty pharmacies have the resources to monitor patient adherence and reaction to drugs. That’s especially important in the case of oral oncology drugs, Flushman notes, because of the adverse reactions they produce in many patients. “Patients sometimes say they don’t want to take the [oral oncologics], but it’s life-threatening if they don’t, so someone needs to work with the patient,” he says.
Specialty pharmacies enable a “holistic approach” to patient care while addressing cost concerns, according to Zeglinski. “Most patients who receive specialty pharmaceuticals have numerous comorbidities as well, so we’re not treating just that one disease state but the entire drug portfolio for that patient.”
Like most specialty pharmacies, BriovaRx employs nurses who provide regular clinical counseling to patients using specialty pharmaceuticals. “The nurses walk them through the process and ensure they are taking their medications appropriately, they’re not having any adverse effects and are being as adherent as possible,” Zeglinski explains.
Much of the counseling BriovaRx provides takes place remotely using video technology available on most computers and mobile devices. “It’s very simple, the patient doesn’t have to install anything,” he says.
NEXT: The Pharmacy Benefit
In addition to mandating the use of specialty pharmacies, some payers have begun narrowing their networks of them, says Susan Weber, director of brand access analysis for HealthStrategiesGroup, and requiring split fills of specialty prescriptions. “Payers are saying that a lot of patients have adverse event issues, so let’s cut the fill to a two-week supply and make sure they’re staying on therapy before giving them the other half. This saves them a lot of money, because some of these drugs can cost thousands of dollars per month,” Weber says.
Along the same lines, Weber adds, some payers are negotiating contracts with biopharmaceutical companies, especially producers of oncology drugs, under which the payer will require first-line use of the specialty drug on its formulary in return for receiving a discount from the manufacturer.
“This is the first time we’ve seen traditional pharmacy management tactics applied outside of small-molecule drugs,” says Weber. “Because of the high pricing, plans are starting to apply tactics they’ve used elsewhere to the relatively immune oncology drugs.”
Another way payers are attempting to reduce costs is by covering specialty pharmaceuticals under a plan’s pharmacy benefit rather than its medical benefit. That’s because claims submitted under the pharmacy benefit, unlike those submitted under the medical benefit, include a national drug code number. That provides payers with large quantities of data on prescription drug use among a plan’s beneficiaries, says Flushman, which better enables them to forecast their future expense levels.
The ultimate goal for payers, Flushman adds, should be to collect enough data to measure costs and outcomes for an entire episode of care, rather than just the medication.
“A general rule of thumb is that if plans don’t have a larger unit of cost to measure, they default to managing just individual unit product prices. What everyone’s challenge is today with these oncology and other specialty drugs is to manage the disease, not just its individual elements.”