We all know that drugs are the fastest growing category of health spending, largely driven by new specialty compounds, but also by increasing prices on brand drugs that often are simple reformulations. Payers and their pharmacy benefit manager agents are trying to figure out how to control this spending, particularly with a wave of additional specialty medications coming through the FDA pipeline. A report from the Tufts center on drug development reports on a new tactic to control drug spending. (Tufts Report) Traditional drug management techniques, like step edits and prior authorization and copay or coinsurance tiers are designed to encourage use of generics and lower-priced brand drugs. Those techniques aren’t working as well to constrain all spending, so now the PBMs and payers have a new and growing tactic, outright exclusion of coverage for some compounds. From 2014 to 2016 the two largest PBMs increased their exclusion list by 65%. But the PBM actions don’t appear to be as simple as covering the cheapest drug. For example, many of the drugs on the exclusion list don’t have comparative clinical or cost-effectiveness studies, making you wonder what evidence the PBMs are using to make their exclusion decisions. They aren’t always picking the least expensive drug, but do seem to swayed by higher rebates in keeping a drug covered. Those rebates may benefit the PBM more than the payer or patient. Excluded drugs often have copay coupon programs offered by manufacturers, which may benefit patients, but do tend to drive up spending. While many of these excluded drugs are simple improvements like extended release, dissolving oral tablets and new isomers of the original drug, which may now have generic status, those improvements may be beneficial to some patients. Be nice to see a little more transparency in the PBM exclusion decisions. In the meantime, this development will also factor into investment decisions by the pharmaceutical manufacturers.
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About this Blog
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
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