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Specialty Drug Trends

By July 28, 2016Commentary

EMD Serono’s 2016 edition of the Specialty Digest is based on a survey of 58 commercial health plans covering 140 million members.  (Spec. Dig.)   Managing specialty drugs is complicated for most payers because they are split between drug benefits and medical benefits.  As these more complex drugs continue their march to accounting for more than half of all medication spending, health plans and their PBM vendors have become more focused on how to control costs.  Plans identified their major challenges as ensuring clinically appropriate use, ensuring appropriate sites of service for infusions and managing oncology in particular.  Plans said that on average 29% of their pharmacy spending and 11% of their medical spending was going toward specialty drugs.  54% of specialty medication costs were under the pharmacy benefit and 46% under the medical benefits.  The four primary strategies used to manage specialty costs include network management and reimbursement, utilization and clinical management, benefit design and distribution  arrangements.

47% of specialty spend was in physician offices, 29% in hospital outpatient departments and 17% at home.  The most common reimbursement methods were AWP, ASP or % of billed charges based, and use of those methods varied widely across sites of use.  Hospital outpatient was flagged by respondents as a particular problem, with 58% saying pricing in that setting was not competitive, compared to 68% who said specialty pharmacies did have competitive pricing.  And hospital outpatient was reimbursed 47% of the time on billed charges, which almost certainly means higher reimbursements.  In response plans have begun to direct patients or incent patients to use certain lower cost sites.  Some plans are also using episode of care reimbursement for cancer treatment to help manage specialty drug spending.

Prior authorization is used for the vast majority of specialty drugs, but a surprisingly low number of plans use electronic, automated prior authorization tools.  Doing so would eliminate many physician and patient complaints.  Few plans currently have outcome-based pricing, but many say they intend to adopt the technique, which requires more collection and analysis of data.  Partial fill or limited supply has become a more popular strategy for limiting drug use and waste, particularly for oncology treatments.  Most plans have at least one specialty pharmacy vendor, but less than half report being satisfied with the reporting and utilization management performed by these vendors.  As is often the case today, patient cost-sharing is a heavily relied on tool to limit specialty drug spending.  A majority of plans have separate cost-sharing requirements for specialty drugs, often with high deductibles and use of coinsurance as opposed to copayments.  Suffice it to say that patients can get socked with very high bills for specialty medications.  Some plans are beginning to lower cost-sharing for use of less expensive sites of service or for biosimilars.

As the drug pipeline has become dominated by specialty drugs, many for cancer, but some for high-prevalence conditions, plans are very anxious about ongoing cost challenges.  For the coming year, plans said the most likely steps they would be taking to better manage specialty drug spending were continuing to improve coordination across benefit types and enhancing prior authorization processes to focus on clinical appropriateness.  A number are also beginning to designate one preferred drug in areas where multiple compounds are available, for example, hepatitis C treatment.  The report gives the sense that specialty drugs will continue to be a problem for which plans do not have a clear answer.

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