CVS Caremark's View of Specialty Pharmacy Management

Author: Troyen A. Brennan, MD, MPH, JD

In Part 1 of his article, Dr. Brennan discusses the company's changing management strategies and spells out critical factors and new programs in specialty pharmacy. 


Part 1: A Historic Overview and What the Future Hold

As a leading retail pharmacy chain, pharmacy benefits manager, and specialty pharmacy, CVS Caremark has long been involved in developing programs that improve the quality of pharmacy care and thereby lower costs for our clients. We recognize, however, that pharmacy care actually has 3 parts that have been somewhat distinct historically.

First, there is the so-called “small molecule area,” the traditional oral medicines that have been dispensed through retail pharmacies and mail pharmacies operated by pharmacy benefits managers. Medications dispensed through these channels can be moderately expensive, but they are generally safely taken by patients at home.

Second is the specialty medication area, which has developed over the last 30 years. These medications are very expensive, possess significant side effect profiles, are often for rare diseases, and can be injectable, infusion, or oral formulations. They require greater clinical oversight and attention—leading to the emergence of the “specialty pharmacy” that dispenses these medications, using mail or distributing them through physician offices.

Only recently have some of the techniques used to improve quality in the small molecule area, such as advanced utilization management, or preferred products, been introduced into the specialty area. We believe— given the challenges with financing our health care system—that quality is our first priority, but that given high quality, cost must be considered a key factor.

Third, there are the pharmaceuticals distributed through, and paid for through, the physician channel commonly referred to as “physician buy and bill.” Physicians purchase the medications from specialty distributors, administer them, and then with a markup, bill the medications to the insurer.

The physician buy and bill approach has provided some efficiencies in that physicians were often changing dosing or regimens based on clinical conditions and had greater ability to tailor therapies. The physician buy and bill program often involves expensive medications, the most prominent of which are oncology medications. Unfortunately, physician buy and bill also presents a good deal of moral hazard for physicians—the more costly the medication, the more the physician can earn on the markup. There has been little management of physician office–administered medications.

Changing Community Oncology Practices

That is starting to change. The increase in specialty drug costs associated with oncology, in particular, has caused insurers to take notice and seek programs that can maintain quality and reduce costs. Factors influencing oncology drug costs include price increases, increased utilization, and new drug approvals, especially for oral oncology drugs. Insurers generally place oral oncology drugs under a patient’s pharmacy benefit and as such they are dispensed by retail or, increasingly, specialty pharmacy. Injectable or infused oncology drugs are generally placed under a patient’s medical benefit—effectively rendering the drug under the physician drug buy and bill model.

From an insurer’s viewpoint, specialty pharmacy provides a broad array of utilization management programs that ensure its appropriate and cost-effective use. Specialty pharmacy also provides personalized patient interventions that improve adherence to prescribed therapies. For injectable or infused oncology medications, insurers recognize that it is better to have medications administered in community-based oncology practices than more expensive hospitals or academic centers that command premium pricing and add facility fees on top of the infusion costs.

Yet the economics of the community oncology practices are changing. While there was very rapid increase in oncologist income over the past 2 decades as physician buy and bill became more prominent, this has moderated, largely influenced by the passage of the Medicare Modernization Act (MMA) of 2003. MMA 2003 introduced Average Sales Price drug reimbursement, causing physician drug income erosion and challenges in paying related practice overhead costs. So there is much talk in the oncology community about integrating with hospitals and their cancer center—accelerated by the accountable care organization momentum. Yet for costs of care, the integration may be deleterious.

CVS Caremark Strategies

So, what does this all mean for a company like CVS Caremark, which is interested in improving care and lowering costs for its clients? Several factors are critical for us.

The key to high quality is to follow evidence-based guidelines. In much of specialty medication use, and certainly in the buy and bill regime, there can be a great deal of treatment variation with low levels of adherence to evidence-based guidelines that may lead to the use of higher cost medications. So our most important effort is to promote use of medicines that are demonstrated through good evidence to work for particular diseases.

Physicians and their office staff are very busy and getting busier. In many specialties, the workforce outlook is not good—for example, we are headed to an oncologist shortage. Therefore, any solutions we develop have to speed the office work flow, not slow it down through unnecessarily burdensome prior authorization. That means we have to emphasize electronic communication and straightforward presentation of our view of the evidence base and recommended treatments.

We have to begin to choose preferred agents, so that we can drive competition among drug manufacturers. This has occurred successfully in the small molecule arena. The specialty drug literature indicates many places where drugs are essentially interchangeable.

There is a long-term move to more oral agents in the specialty area. We want to ensure that these are increasingly delivered through the traditional specialty pharmacy channel. It is much more efficient than distributing medications through the physician buy and bill model.

We have to promote more closed network use by employers and health plans. An open market essentially converts all players into distributors, with perverse dynamics to move medication rather than to ensure that the highest quality, lowest cost solutions are used. We recognize that any willing provider laws can sometimes hamper this effort.

Promoting biosimilars, and ensuring that intellectual property protection over specialty medications is not overly long, will also be critical. We need good generics in the specialty space to ensure that all patients can have access to affordable medications.

We need more expert input. Our Pharmacy and Therapeutics committees at CVS Caremark are made up of world-class experts, but we have to add to that as we become more deeply involved with the rare and often deadly diseases that are treated with specialty medications. To that end, we are developing new scientific advisory boards made up of world-class experts who are free of conflicts of interest with pharmaceutical manufacturers.

In this light, CVS Caremark is moving forward quickly with our most clinical programs in specialty—specialty guideline management and preferred product solutions. In both cases, we are studying the evidence base and then making sure that providers adhere to reasonable guidelines. This eliminates waste and ensures cost-effective care. We also continue to promote closed networks where these programs can be operated most effectively.

We are developing new programs for medical benefit drug management because more than 50% of specialty pharmaceuticals are managed under a patient’s medical benefit. Key targeted diseases or conditions include oncology, rheumatoid arthritis, Crohn’s, and multiple sclerosis. These programs signal a new frontier of advanced utilization management that works in concert with physicians and their respective insurers to produce optimal clinical and financial outcomes.

Some providers may resist such approaches, but we believe that in a health care system where we want everyone to have access to the best possible care, we must take out the waste that is represented by unnecessarily expensive treatment. SPT


About the Author

Troyen A. Brennan, MD, MPH, JD, is executive vice president and chief medical officer of CVS Caremark. Prior to joining CVS Caremark, Dr. Brennan was chief medical officer of Aetna Inc. From 2000 to 2005, Dr. Brennan served as president and chief executive officer of Brigham and Women’s Physician’s Organization. In his academic work, he was professor of medicine at Harvard Medical School, and professor of law and public health at Harvard School of Public Health. Dr. Brennan received his MD and MPH degrees from Yale Medical School and his JD degree from Yale Law School. He completed his internship and residency in internal medicine at Massachusetts General Hospital. He is a member of the Institute of Medicine of the National Academy of Sciences