Lee Goldberg, MBA

In an effort to minimize the cost curve, payers have been adjusting their utilization management policies, spurred by the approval of several costly new hepatitis C medications.

It’s no secret that payers continue to increase their attention on specialty pharmaceuticals. The reasons behind this trend have been well identified in industry press. Stakeholders expect utilization and costs to rise over the next 5 years, with the specialty category consuming a majority of drug spend. Similarly well known are the management interventions payers implement to ensure appropriate utilization and minimize the cost curve: prior authorization (PA), 4-tier cost-sharing, and distribution limits, to name a few. Less obvious, perhaps, are the ways in which payers have fine-tuned their utilization management (UM) operations and the tools they employ, and how these changes present an opportunity for their specialty pharmacy partners.

Reflecting on the management dynamics of the past several years within the rheumatoid arthritis and multiple sclerosis categories (and also the human growth hormone and erythropoiesis-stimulating agent categories) can help one to foretell payers’ strategies for the future. Management of these specialty categories has become decidedly less special; contracting for preferred status is the norm and serves to restrict access to newer agents through prior failure requirements. The rise of contracting (where practicable within specialty categories) indicates that the severity of the conditions treated by these agents does not (and will not) preclude payers from making financially motivated formulary decisions. Indeed, such arrangements have already taken hold in select oncology subtypes. However, if contracting-enabled prior failure represents the ultimate UM intervention (short of formulary exclusion), it goes without saying that the dynamics that allow contracting among anti-tumor necrosis factor agents or growth hormones or interferons don’t exist in each specialty category. Specifically, some categories don’t contain therapeutically equivalent agents and others don’t have willing contracting partners. In these categories, and especially for the newer agents therein—most oncology subtypes, hemophilia, immunoglobulins, HIV&mdash;payers are maximizing UM.

This maximization manifests itself along 2 paths. As alluded to in the opening paragraph, on the financial side of the UM ledger, payers implemented significantly more 4-tier plans in their commercial lines during the plan year 2014 than they had the year before. Coupled with deductibles, the 20% coinsurance typically adjudicated on the fourth tier can quickly drive out-of-pocket costs into the thousands of dollars, particularly early in the plan year. Payers are not immediately moving established agents to these tiers, possibly out of concern for patient pushback, but are rather establishing a “start as you mean to go on” policy, placing new agents on higher levels of patient cost-sharing immediately upon launch.

But it’s on the clinical side of the ledger where payers’ approaches to UM developed most interestingly this year. The development is not strictly clinical, but rather operational, in nature. Traditionally, payer policies had allowed relatively open access to new agents for the first 6 to 12 months post approval. Employing omnibus new drug launch policies, payers reviewed claims individually until development and implementation of the formal, final PA criteria. These new drug policies provi-ded manufacturers the opportunity to build market share among physicians, thereby influencing payers to allow broader access in deference to those very same doctors.

Recently, however, we’re seeing evidence that the launch policy window may be closing for manufacturers. Shortening the timing of formal policy adoption makes sense for payers for 2 reasons. First, in the absence of preferred contracting, PA language most likely corresponds to label, so by shortening the timing of formal policy adoption, payers can unilaterally ensure appropriate utilization without courting the controversy of contracting. Second, and by extension, because these agents are expensive, plans can more consistently control costs.

The prime example of payers’ speedy UM decision making can be seen in their recent handling of costly new hepatitis C drugs. Payers were so attuned to HCV policy development that within 1 month of publication of the American Association for the Study of Liver Diseases’ recommended guidance about Olysio and Sovaldi, 94% of payers that had forbid concomitant use reformulated their PA documents. Just as rapid was the payers’ reaction to the recent approval of Harvoni. In this instance, 30% of payers covering 43% of lives had their policies ready within the first month of launch, compared with 20% of payers covering 22% of lives for Sovaldi. In addition, Blue Cross and Blue Shield of Kansas, Alabama, and Montana have already published a policy for the as yet unapproved AbbVie combination therapy. During a conversation in October, a major national pharmacy benefit manager and specialty pharmacy explained to us they have an operational process in place to have policies ready at launch.

It’s important not to overstate the dynamic our research has identified. New drug launch policies will not disappear overnight. Not all payers manage access according to the same philosophy. Some payers may not have the operational expertise, or staffing headroom, to plan policies in advance of launch. Finally, although we think it will, select payers’ behavior regarding costly new HCV therapies may not spread to other payers, or translate to UM developments in other therapeutic areas. It is important to recognize the trend, however, because this dynamic may offer a chance for specialty pharmacy providers to provide key guidance to payers on how to balance the growing costs of specialty with the value these agents bring to patients. 

, is director, syndicated research, at Zitter Health Insights. He previously worked as a senior financial analyst at Medco. Lee earned a Master of Business Administration in finance from Rutgers, The State University of New Jersey—Rutgers Business School.

Articles

Rapid Deployment of Prior Authorization Policies

With the recent approval of new hepatitis C treatments, payers are increasingly concerned with controlling costs in this category through policies that may affect treatment decisions.

Given the recent evolution of hepatitis C virus (HCV) treatment, starting with the 2011 introduction of Incivek and Victrelis and continuing with the late 2013 approval of Olysio and Sovaldi, it’s no surprise that payers now consider the HCV category nearly as important a management priority as cancer, rheumatoid arthritis (RA), or multiple sclerosis (MS) (Online Table 1). These are all high-spend disease states, and have become more so recently. They are all recipients of recent approvals with novel mechanisms of action, oral routes of administration, and improved clinical outcomes. In each category, payers have more to think about with greater financial consequences riding on each treatment decision.

But just because payers prioritize the management of therapeutic categories for similar reasons doesn’t mean they’ll end up managing them similarly. Access restrictions in cancer look nothing like those in RA. Patients with HIV do not face the same hurdles as patients with MS. Utilization management is not a unilateral pursuit. It’s an ongoing negotiation among payers, doctors, specialty pharmacies, and manufacturers that takes place within limits set by the FDA label and best clinical practices.

As researchers at Zitter, we wanted to find out how these parties would react to the expected steady, almost rhythmic approval of hepatitis C agents expected between 2014 and 2018. In January of this year, we began by surveying 100 payer representatives about their attitudes and management expectations for the category. We also surveyed 150 specialist physicians and 50 primary care doctors to gather their attitudes and reactions to the new entrants and payer decisions. Finally, we conducted interviews with a handful of practice managers at infectious disease and gastroenterology practices to get the story behind how payer policies impact treatment decisions and day-to-day operations.

To start, we were surprised at the speed with which payers developed their formal, final policies for Olysio and Sovaldi, approved within 2 weeks of each other between November and December of 2013. By the end of January 2014, 36% of plans already had written policies. By the end of July 2014, another 32% expected to be finished (Online Table 2). Surprisingly, the rate of policy adoption has been even faster. Our analysis of prior authorization (PA) policies from commercial plans covering 190 million lives shows 75% of plans developed Sovaldi policies within 6 months of launch and 80% created documents for Olysio. In contrast, at 6 months after launch only 48% had policies in place for Xeljanz. Payers were likely in a hurry because they expected patients who deferred treatment to arrive, en masse, at the beginning of the 2014 plan year. Recently, UnitedHealth Group announced it spent “multiple” times what it had expected in Q1 to cover Sovaldi.

Some portion of that spend is attributable to the combination use of Sovaldi with Olysio. Taken together, the drugs obviate the need for treatment with interferon. However, neither is FDA approved for use with the other (although Janssen, the manufacturer of Olysio, recently applied). Early analysis of PA policies and a survey of payers without extant policies at the time revealed a focus on preventing this particular off-label use. Forty-four percent of payers (representing 35% of covered lives) explicitly forbade combination use of Olysio and Sovaldi (Table 3). Among payers that had not yet written a formal policy, fully three-fourths thought there was no likelihood at all or that it was more unlikely than likely that their organization would cover the 2 together (Table 4). In the end, this is not how coverage played out at all.

On January 29, 2014, the American Association for the Study of Liver Diseases (AASLD) released treatment guidance for use of the new agents. Somewhat surprisingly, it endorsed the concomitant use of Sovaldi and Olysio for patients intolerant to interferon. Practically overnight, payers reversed their existing prohibitions and those writing new policies were not so eager to implement utilization management counter to the AASLD’s recommendation (Table 3).

As new drugs enter the market in the next 6 to 12 months, the AASLD will continue to update its treatment recommendations. A recent, quick pulse check of payers (n = 21) that participated in our original research indicates that plans intend to follow along (Online Table 5). Analogies to the role the National Comprehensive Cancer Network’s guidelines play in influencing payer management of oncology come to mind. But unlike oncology’s situation, the new direct-acting antiviral agents to treat HCV promise a cure. And unlike the majority of oncology subtypes, the market will soon see multiple, directly competitive therapeutic options.

Table 5: Policy Alignment with Future AASLD Guideline Updates

By the time 3 of these new options receive approval, payers expect contracting for preferential treatment to evolve in the market. More specifically, payers believe it’s more likely than not that contracting will evolve at the genotype level, allowing them the option to circumscribe utilization tightly while limiting their contractual exposure with manufacturers (Online Figure 6). Of course, stakeholders’ ability to contract will rest on the breadth of treatment options endorsed by the AASLD, or, conversely, payers’ willingness to define best practices more narrowly. Finally, manufacturers will have to want to participate as well.

Perhaps surprisingly, specialists are on board with (or maybe resigned to) preferential contracting as a determinant of access. Of specialists surveyed in January, 73% were okay with payer/manufacturer contracting as long as 3 options were on the market, and a majority (53%) were satisfied with 2 choices (Table 7).

Doctors are more critical, however, of some common criteria within payers’ prior authorization policies. Specialists indicated that reauthorization timelines within the recommended treatment duration or liver biopsy requirements would be most burdensome to them (Table 8). Recent analysis of PA documents shows both have already found their way into Olysio and Sovaldi policies.

The processing and administration fall predominantly to practice managers and nurses. Conversations with practices located in New Jersey, New York, Florida, and Texas (so far) uncovered wide consistencies about how practices will navigate the treatment advances and the associated payer policy updates.

Universally, each of the offices has a strong relationship with 1 or 2 specialty pharmacies (SPs). These nearly personal connections have developed over years, built on the backs of attentive customer service by the pharmacies starting at the account management level. Practices rely on their SPs for benefits verification, PA submission, PA appeal, patient assistance support, patient education, and adherence initiatives, among other services. Moreover, practices are dedicated to using their preferred SP without regard to network status. Each practice told us that if their preferred pharmacy finds itself out of network, it simply determines the closest in-network pharmacy and forwards the prescription. Inasmuch as the prior authorization process creates an administrative burden for the practice, for each of these 4 offices it is a burden shared more than equally by the specialty pharmacy.

Assuming the 3 near-term treatments from Gilead, Bristol-Myers Squibb, and AbbVie win approval over the next 12 months, hepatitis C may become payers’ top management priority. With multiple options to play off each other, it is likely payers will try to move just as quickly as they did initially to firmly define the boundaries of appropriate utilization. But with 3 interferon-free treatments, it is arguable that the role of the AASLD will be even more important than it was in January. Ultimate responsibility for managing the category may fall by proxy first to the AASLD and then rest on manufacturers’ willingness to contract for position (should the treatment guidance permit). The only definite here is that the category will stay interesting and dynamic for a while longer. 

For further information on the HCV Zitter study, please contact Michala Jeberg, mjeberg@zitter.com.

, is director, syndicated research, at Zitter Health Insights. He previously worked as a senior financial analyst at Medco. Lee earned a Master of Business Administration in finance from Rutgers, The State University of New Jersey-Rutgers Business School.