The Pharmacy Benefit vs the Medical Benefit

Specialty Pharmacy TimesAugust 2011
Volume 2
Issue 3

Comprehensive pharmacy services would mean having the pharmacy team develop the management strategy for specialty medications used under either the medical benefit or the pharmacy benefit.

Today the specialty pharmacy market is approximately an $87 billion industry, with most specialty pharmacy providers owned by PBMs, health plans, or pharmacy retailers. The true definition of a specialty pharmacy medication is an area of continuing debate. Using URAC’s definition, specialty drugs or pharmaceuticals usually require specialty handling, administration, unique inventory management, a high level of patient monitoring, and more intense support than conventional therapies. Specialty drugs can employ all routes of administration. The top diagnoses treated with these medications include, but are not limited to, multiple sclerosis, rheumatoid arthritis, growth hormone deficiency, hepatitis C, cancer, hemophilia, and immune disorders.

These therapies are managed across different benefit structures for medication reimbursement, including the medical, pharmacy, and separate specialty pharmacy benefits. In 2009, 14% of home health administered agents were managed under the pharmacy benefit only, an 8% increase from 2008; 48% of these agents were managed under the medical benefit. Conversely, in 2009, 76% of self-administered agents were covered under the pharmacy benefit, with only 5% under the medical benefit. 1 The different benefit strategies for these agents are inherently associated with different models of patient care. How a health plan categorizes a drug should not determine who will be the pharmacy provider. The only difference from a pharmacy standpoint is how and where to submit the claims.

For health plans wrestling with the pharmacy vs medical benefit decision in search of reducing costs, there are different strategies to consider. One of the major factors in the decision is whose budget is going to be impacted—that of the medical director or the pharmacy director. One strategy that we have seen implemented successfully is to avoid moving medications from the medical benefit to the pharmacy benefit while having the pharmacy team develop the management strategy for specialty medications used under either benefit.

The advantage here is that the team in the organization that is most knowledgeable about pharmaceuticals is allowed to establish and monitor usage of these expensive medications, without affecting budgets. Also, this strategy allows medications that require additional supplies and services for administration to be billed together. When medications are billed under the pharmacy benefit and nursing services and supplies are billed under the medical benefit, this is called “split billing.” Split billing is not an ideal solution, since it requires the pharmacy provider to generate 2 claims for each date of service. As a result, the health plan must match the pharmacy and medical claims at some point during the payment or audit process. This only adds costs to the claims management process for both organizations.

One point the pharmacy benefit managers use to convince a health plan to move specialty drugs to the pharmacy benefit is that using the National Drug Code number for claims adjudication allows easier identification of specialty medications than do the J-codes used in medical billing. This is an outdated argument that does not have much validity in today’s reimbursement environment. Virtually every new specialty medication approved by the FDA will have a unique J-code. The only exceptions to this would be add-on medications that fall into an old J-code. Given that J-codes are unique, they allow detailed reporting at the product level.

A second area of concern in managing specialty medications under the medical benefit is that it can be easier to perform utilization management with medications under the pharmacy benefit. This is more of a function of how the plan wants to manage a particular specialty medication. There are a couple of specialty pharmacies that have established successful prior authorization programs for specialty medications under the medical benefit. The key to successfully implementing a prior authorization program for specialty medications under the medical benefit is to establish a well-defined process for case review, and to ensure good communication with the providers.

The true pharmacy benefit is generally delivered under a lower-touch patient care model exemplified by community retail pharmacies or mail order pharmacy services. These patient care services are generally limited to medication dispensing and medication therapy management activities required by individual state boards of pharmacy. Medical benefits are delivered under higher-touch service models common to home infusion pharmacies and physician offices. Specialty pharmacies lie in the middle of this scenario, as they offer compliance programs; however, their delivery model is generally low touch, with medications being distributed from a central location and shipped through common overnight shipping services. The complex diseases serviced by these entities may require different levels of service. This creates a continuity of care issue when patients need medication services from multiple pharmacy providers under different benefit structures.

An example of a condition requiring service under multiple drug benefits is common variable immune deficiency (CVID). CVID is a genetic immune disorder that causes a profound reduction in the production of protective antibodies. CVID patients are treated with lifelong immunoglobulin replacement therapy. This therapy can be administered intravenously or subcutaneously; the latter technique is commonly managed under a pharmacy benefit through mail-order distribution. Intravenous immunoglobulin replacement therapy requires in-home nursing, along with an infusion pump and supplies. With CVID, patients may be affected with multiple comorbid conditions requiring services that are not deliverable from mail-order or specialty pharmacies.

The most frequent complication of CVID is recurrent sinopulmonary infections, which often require intravenous antibiotics that cannot be provided by a drop ship model under a pharmacy benefit only. These repeated lung infections may lead to the eventual development of lung disease, requiring supplementation with oxygen. In the case of a severely affected patient, services may be provided by 3 or more pharmacy providers and a DME provider. To mitigate care issues surrounding the break in the care continuum, a provider that can service all pharmacy service levels and DME needs under both benefit structures is suggested.

Another example is Alpha-1 Antitrypsin Deficiency (Alpha-1). This is a rare genetic disorder that may require service under multiple benefit structures and providers. Patients affected with severe forms of this disorder present with severe, early-onset emphysema, with dyspnea, chronic cough and wheezing as common symptoms. The development of severe chronic obstructive pulmonary disease (COPD) may ultimately lead to lung transplantation. Treatment of this disorder may consist of aggressive COPD management with nebulized bronchodilators, oral antibiotics, supplemental oxygen, and intravenous Alpha-1 augmentation therapy. As with the example of CVID, these services could be serviced by 3 or more providers and DME services.

Managing specialty medications is a complex process for health plans that requires coordination between the pharmacy director and medical director to ensure the optimal management of these expensive medications as well as of health plan resources. The specialty pharmacy pipeline for chronic disease will bring many new treatment options to patients that suffer from rare disorders and chronic diseases.

The current strategies to manage expenditures associated with medications designated as “specialty” will funnel patients into a designated benefit structure and ultimately a service provider. There will be patients with more severe or less stable disease that will be directed to a lower-touch pharmacy service model based upon the drug being reimbursed under the pharmacy benefit. This scenario is not the optimal model of a care continuum. These disruptions in care are confusing to patients and may result in medication errors. We believe comprehensive pharmacy services are the solution to the dilemma of managing high-cost diseases and medications. A pharmacy provider that can integrate these services can provide a higher level of care that accommodates different patient needs concurrently. SPT

Coverage of Agents Based on Administration or Provider (2008-2010)

Adapted from reference 1.

Bill Bolgar, PharmD, is Vice President, Clinical Operations, Coram Specialty Infusion Services, and Brian Tonkovic, PharmD, is Director, EyeOn Therapy Management, Coram Specialty Infusion Services


1. EMD Sorono Specialty Digest, 7th edition.

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