Focus on the Medical Benefit: A Manufacturer's Perspective

Dean P. Erhardt
Published Online: Tuesday, March 22, 2011

As more specialty pharmaceuticals products continue to come to the market, the manufacturer's goal should be to understand what will impact payer coverage.  


When looking at launching a new pharmaceutical product, one of the key items to evaluate is how the product will be reimbursed in the market. In the ever changing world of specialty pharmaceuticals, many lines are blurred relative to payer coverage. For those of us who grew up in the traditional “pharmacy benefit” environment, understanding how to attain coverage for a specialty pharmaceutical product can require a very different road to success.

When starting to evaluate the reimbursement process, the pharmaceutical manufacturer’s goal should be to understand certain key elements that will impact payer coverage. To start understanding these elements, the manufacturer might start by addressing some basic coverage questions including:

• Where will the product likely be covered (pharmacy vs medical benefit)?
• Should the manufacturer anticipate utilization management techniques (ie, prior authorization) associated with product coverage?
• What will be included in the coverage requirements (testing, blood work, etc)?
• Who will be the decision makers within the targeted payers, depending on the anticipated coverage benefit?

Pharmacy Benefit vs Medical Benefit
Several factors come into play when determining how a product will be reimbursed. One often overlooked factor is which type of benefit will be utilized to pay for the product. Pharmaceutical products are generally reimbursed in 1 of 2 ways—either via the pharmacy benefit or the medical benefit.

For the majority of medications, the relatively easy distinction is that a) if a product is used in a physician’s office it is generally reimbursed via the medical benefit; and b) if the product is an oral product picked up in a pharmacy or a self-administered (injectable) product delivered to a patient’s home, it is generally reimbursed via the pharmacy benefit. Note, however, that this distinction is not always the case and can be driven by factors such as rare utilization, utilization in conjunction with other medications, uniqueness of the disease, cost, and other factors. As a result, specialty drugs can be covered under the medical benefit, the pharmacy benefit, or both. This unique reimbursement conundrum creates challenges for payers to get a handle on drug spend and makes it difficult for payers and manufacturers alike to value clinical management programs.

As a manufacturer works to understand the reimbursement landscape, it might start with a few basic questions relative to the utilization of the product. Some of the more obvious considerations include:

• What is the route of administration? Oral, injected, infused?
• Does the new product have a direct competitor, and how is the competitor reimbursed?
• How expensive is the product?
• Will there be additional services (eg, nursing) that will be required to support the product?
• Will there be a REMS program?
• Will this product be primarily used by patients who receive commercial or government benefits?

In addition, manufacturers should look at their key payer targets and identify how current products are covered. Many payers publish those products that fall on the pharmacy benefit versus the medical benefit as well as which require prior authorization. Some of the payer-focused questions manufacturers should seek to answer include:

• Which products are currently on the medical benefit vs the pharmacy benefit?
• What type of prior authorization is required for products that are similar to the manufacturer’s new product?
• Is there a standard prior authorization form that is utilized by the plan to start a patient on a new therapy?

Utilization Management
As more specialty pharmaceutical products continue to come to the market, payers are working to find new and creative ways to appropriately manage the drug therapy. While many decry strategies to manage utilization, the fact remains that payers truly desire a process for each unique therapy that provides the right drug to the right patient at the right time. The right techniques to appropriately manage the patient therapy will be debated for years to come, but fundamentally, manufacturers need to be aware of the most basic management techniques. In the 6th edition of the EMD Serono Specialty Digest, several utilization management strategies are identified. All of these practices should be understood by manufacturers providing specialty pharmacy products, particularly if those products are provided within a competitive therapeutic category.

Key utilization management strategies include:

• Utilizing the pharmacy department to manage all specialty drugs.
• Implementation of prior authorization practices under the pharmacy benefit.
• Mandate use of 1 (or a limited number of) specialty pharmacy providers for self-administered products.
• Implementation of prior authorization requirements under the medical benefit.
• Implementation of step edit programs.

Identifying the Decision Maker
A further consideration for pharmaceutical manufacturers is to understand who to call on within a payer to determine the right coverage decision. Many times, this call point will be determined based on the coverage anticipated for the product. Will the call point for the manufacturer be the pharmacy department (ie, pharmacy director) or the medical department (ie, medical director)? If the product is administered via a pump, inhaler, or some other device, will the manufacturer also need to interface with those persons within the payer that are responsible for the DME (Durable Medical Equipment) benefit?

Manufacturers should customize their presentations based on the anticipated benefit coverage and the audience they address. The coverage may include interfacing with different groups within the payer structure including:

• P&T (pharmacy & therapeutics) committee
• Technology assessment committee
• Clinical assessment committee

As outlined in this brief overview, many considerations must be weighed in launching a new specialty product into the US market. Factors such as cost, benefit type, REMS, uniqueness of disease, and other issues continue to make it challenging for manufacturers to understand and attain coverage in a timely fashion. Clearly, from a manufacturer perspective, the faster a manufacturer can attain payer coverage, the more success that manufacturer will have with product uptake.

Small manufacturers and those launching their first product are perhaps more challenged in understanding the nuances in determining the right path to attain product coverage. The answers are out there for those who know the right questions to ask. SPT



Mr. Erhardt is a Principal with D2 Pharma Consulting LLC (D2). D2 provides strategic outsourced solutions for the commercialization, distribution, and marketing of pharmaceuticals, medical devices, and biologic medication, and focuses on providing both distribution channel and managed care support. The author can be contacted at dean.erhardt@d2rx.com or 314-308-2028.



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