The growth of the pipeline has led to increases in insurance carriers’ specialty plan spend.
The pipeline of specialty medications continues to grow. In looking at the approvals by the FDA for January 2019 through mid-December 2019, 42 new drugs were approved with an estimated two-thirds related to specialty conditions or specialty distribution channels.
A report from the Center for Drug Evaluation and Research shows there were 59 novel therapies and biologics approved. Of these, more than half were for rare or orphan diseases,14 were designated breakthrough therapies, and 16 were to treat different cancers.
The growth of the pipeline has led to increases in insurance carriers’ specialty plan spend. Supplemental indications on existing specialty therapies has led to an increase in use, as well as an aging population of baby boomers contributing to the increased use or volume of specialty drugs being prescribed.
In 2020, spend will nearly double and specialty will represent half of all drug spend. The market estimated to grow from $336 billion in 2018 to a predicted $475 billion to $505 billion by 2023 across developed markets.
As the fastest growing, most expensive segment of pharmacy spend, specialty drug trend is driven by the number of units, or utilization, and the cost per unit. Both utilization and prices are increasing in specialty. To break down what’s driving utilization, multiple factors such as a booming novel pipeline, expanding indications, and an aging population are causing an increased use of specialty products.
Also driving trend from an increasing cost perspective are unprecedented launch prices for innovative drugs, brand-name drug price inflation, and challenges associated with bringing biosimilars to market. The high costs of specialty drugs do not lend consumerism-driven purchasing. Pharmaceutical manufacturers offset co-pays with co-pay coupons and discount cards.
The sites of care for drug administration with injectable and infused medications are often not optimized and lead to variable pricing reimbursement. Inappropriate drug utilization contributes to increased spend and the risk for adverse events (AEs).
Examples of unsuitable use include a diagnosis or age not suitable for the drug, first-line therapy not attempted, duplicative or excessive therapy, lack of relevant genetic testing in relation to certain therapies, contraindications, and insufficient lab testing completed to ensure the patient is an appropriate candidate for the drug.
There is no silver bullet for managing specialty spend and a multidisciplinary approach is necessary to address the key factors driving specialty cost trends. Strategies for mitigating and managing costs with specialty pharmaceuticals can be broken down into several key categories.
First, payers need to invest in prospective programs aimed at reducing waste, while promoting patient safety and ensuring the appropriate use of drugs through evidence-based guidelines and drug reviews.
Prospective programs and edits that review a claim prior to being dispensed helps to prevent AEs and waste associated with specialty medications that are not appropriate, safe and/or effective for the patient. Evidence-based criteria include FDA-approved indications and other use of drugs that are sufficiently supported by accepted compendia, national practice guidelines and medical evidence.
Examples of prospective edits include prior authorization (PA), which requires select prescriptions meet defined criteria before they are covered by the plan. The clinical assessment may include a diagnosis/age review, safety review, lab data validation, and pharmacogenomic protocols. Prescriptions are flagged at point-of-sale and prescribers are required to confirm that the use of an affected drug is medically necessary.
A different example of prospective review includes step edits, which promote safety and cost savings by encouraging patients to try a first-line agent, before coverage is provided for a second-line, more costly drug. This could include a non-specialty to specialty step edit in which the patient needs to try and fail with an appropriate non-specialty drug before accessing a specialty medication.
A second common step edit involves specialty generic step edits, which require the trial and failure of a lower-cost specialty drug option(s) before accessing the brand drug. Another prospective edit to consider is utilization management review from the first day of drug launch.
This will ensure safe, effective, and appropriate drug utilization in accordance with FDA-labeling for all new-to-market specialty drugs. New drugs would reject for PA upon launch and be reviewed in accordance with FDA-labeling, bridging the gap until drug-specific criteria are available.
Specialty starter fill programs are aimed at reducing waste and apply to a defined list of specialty medications with a high prevalence of AEs and potentially poor tolerability, which can lead to high discontinuation rates at the initiation of therapy. The goal of the specialty starter fill program is to minimize medication waste, while managing patient adherence and AE management, thereby potentially improving care and providing savings for patients and payers.
Plans should also look at strategies for patients to play a more proactive role in selecting cost-effective medications that provide increased consumerism in health care. Benefit designs can be structured to drive consumerism.
For example, many insurers have introduced high-deductible plans to encourage members to make better decisions by creating specialty drug tiers and using coinsurance for cost sharing. Specialty formularies are important tools that drive lowest net cost.
With a plan design approach applied to specialty drugs, insurers can set separate tiers for formulary drugs, allowing for generics to be covered at the lowest co-pay tier and brand drugs to be covered at either a preferred or non-preferred tier. More expensive drugs, based on total net cost, are usually placed on the highest non-preferred tier or may require step therapy with a lower cost agent before the drug is approved.
We have the ability today to leverage robust formulary alternatives since many of the major specialty therapeutic classes have numerous alternatives available. Although specialty co-pay cards may reduce an individual patient’s immediate costs, payers can experience overall higher plan costs.
The intent of any tiered benefit design can be compromised and a patient’s responsibility and engagement are reduced when accumulators, such as deductibles and/or out-of-pocket (OOP) maximums, are reached with third-party dollars. Some insurance plans today have mechanisms in place to capture the specialty co-pay card adjudication and can limit the amount that goes toward an OOP accumulator.
Insurers should establish a comprehensive management strategy that addresses total cost of care across pharmacy and medical benefits. Many have developed comprehensive site of care and drug benefit alignment programs that help ensure consistent clinical and cost management of select specialty pharmaceuticals currently under the medical benefit.
Drug benefit alignment focuses on select self-administered and non-infused clinician-administered agents. Under this program, patients are transitioned from provider buy-and-bill under the medical benefit to being dispensed by a specialty pharmacy provider under the pharmacy benefit.
A second component of the program focuses on site of care alignment, whereby clinician-administered agents in the hospital outpatient setting are addressed. Patients are transitioned to, and their drugs are dispensed by, a specialty pharmacy provider. Patients are also offered alternate lower-cost sites of infusion care, including home or ambulatory infusion suites.
Insurers need to align specialty pharmacy channels and contracts to enhance their management of specialty pharmaceuticals. Because of the complexity associated with monitoring, handling, and administering specialty drugs, the patient experience can be inconsistent if managed by an array of pharmacies.
More importantly, patients often require education and follow-up care to help manage their specialty drug use and their associated health conditions. An exclusive specialty pharmacy provider and channel is designed to help optimize value and simplify management for payers and patients by consolidating access to specialty medications.
Exclusive specialty channel management offers insurers better utilization control and spend, as well as clinical program quality and oversight, resulting in improved outcomes for specialty patients. Insurers can also achieve more consistent pricing and potential for unit cost savings due to the volume that can be channeled through an exclusive specialty network pricing arrangement versus pricing through an open specialty network.
In an era of high-priced drugs, health care stakeholders are now expanding on alternative pricing models that focus on the concept of value-based drug purchasing models, in which the price of a medicine is directly linked to the value it provides to patients, payers, and the health care system. These models align a drug’s price to the efficacy and clinical outcomes it provides.
It’s essentially a risk sharing arrangement between stakeholders, which are attractive to payers in that they reduce the risk associated with the uncertain performance of new therapies. The manufacturer then goes at-risk and provides greater discounts if a drug underperforms.
These arrangements also benefit the manufacturer, in that it receives greater access for having a product preferred, which it may not have otherwise achieved if it was unwilling to go at-risk for their drug. From an optics perspective, value-based agreements can offer a stage to show that high-cost drug therapies have a credible value and provide a value proposition in the form of appropriate guarantees.
Reimbursement management is among the most recent strategies to evolve in the management of specialty drug costs. New payment and financing models for curative, regenerative medicines have spawned an opportunity to create reimbursement management and alternative payment models.
This includes annuity or amortized payments that spread the cost of expensive drugs over a period of time. Stop-loss insurance products have been designed specifically for new gene therapies. Re-insurance limits an insurer’s exposure to the risk of an unexpected price or volume threshold of high-cost treatments.
Some reimbursement models function much like a risk pool, in which the model is designed to alleviate high cost-sharing for patients and prevent shock claims for employers and plan sponsors. Having robust reimbursement management ensures that claims are paid accurately and at the contracted rate.
Lastly, insurers need to stay informed and current on what’s coming through the specialty drug pipeline. It is critical to implement robust pipeline management and trend forecasting.
Partnering with the pharmacy benefit managers and other industry experts can provide visibility into the specialty pipeline and their analytic tools help forecast potential budget impact and spend. Proactively conducting consultative discussions on management strategies can help create a comprehensive strategy for mitigating high specialty pharmacy spend.
In conclusion, specialty therapies have moved from being a minor issue to being among payers’ greatest concerns. Specialty payers have looked to budget their specialty spend more proactively through monitoring the pipeline and applying forecast modeling using pipeline estimates as the basis for their projected spend.
Although prospective management is paramount, concurrent and retrospective management strategies play a critical role in helping to manage spend. With a dynamic specialty landscape, payers need to be nimble and receptive to adding new strategies and changing their existing strategies.
About the Author
Brandeis Seymore, RPh, earned her Bachelor of Science Pharmacy degree from the Duquesne University School of Pharmacy and is currently enrolled in the Master of Pharmacy Business Administration (MPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines. She has spent the past several years working as a senior clinical manager assisting employers with their pharmacy benefit management strategy. Prior to these experiences, she has held roles of increasing responsibility, most recently as a Strategic Account Executive to support client’s marketplace needs and demands.