At an average monthly outlay of $3,000, specialty drugs cost 10 times the average non-specialty drug, according to Strategic Benefit Advisors. And it’s only expected to get worse. CVS Caremark estimates that specialty drugs could account for about half of the total pharmacy spend in 2018, which is up from one-third two years earlier.
“The pharma world is unnecessarily complex,” says Kim O’Leary, a managing consultant who leads all pharmacy-related projects at SBA and co-authored “The Specialty Drug Challenge: An Executive Overview” with the firm’s founding partner Michael Deneen.
When employers manage specialty drug costs without outside expertise, she warns they “often leave a lot of money on the table.” Brokers and advisers can help their employer clients find the right partnerships, she adds.
SBA has prescribed six strategies to manage what has become the single largest driver of a rising healthcare cost trend. She describes it as a multifaceted approach that starts with “blocking and tackling on the pharmacy contract and ends with thinking outside the box” on risk factors across workforce demographics.
1) Contracts – It’s important to first understand how specialty drugs are priced and pharmacy benefit managers negotiate those costs. Contracts build on the initial agreement and should incorporate aggregated specialty guarantees. This will ensure that the PBM is negotiating inflation caps with pharma manufacturers and any inflation cap recoveries are passed on to plan sponsors
2) Formularies – Assessing the PBM’s formulary and clinical management program is another crucial step. All PBMs have pre-built solutions to help maximize rebate value, favoring drugs that have inflation protection included in their agreement. Employers need to confirm their existence and also hold the PBM accountable for providing quarterly, or at least annual, updates on the different solutions they’ve created.
3) Case management – Another critical component involves case management, including a reliance on nurse case managers through the health plan, PBM or even on site. In some cases, there could be an in-house pharmacy and has nurses or pharmacists specialty case managers or nurses who manage only specific conditions, such as multiple sclerosis, with knowledge about the side effects of MS drugs and comorbidities of the disease. Clinicians find much higher adherence to a drug regimen, outcomes and overall satisfaction when patients are engaged with those case managers.
4) Manufacturer coupons and incentives – Nearly all specialty pharmaceutical manufacturers offer coupons and financial incentives for choosing certain specialty drugs totaling anywhere from several hundred to several thousand dollars a month. Substantial co-pay assistance may be available, and in some cases, zeroed out to make the medications easily accessible and drive better outcomes. One strategy being rolled out involves a variable co-pay design that still applies, say, a $100 co-pay to a drug that costs $1,100. The thinking behind this approach is to maintain the integrity and intent of the plan design – ensuring that each member meets all the out-of-pocket amounts.
5) Site-of-care alignment – The point of service can drive hundreds of thousands of dollars in savings on individual patients. Infusion clinics or a home infusion option, for example, may be perfectly appropriate and far less costly than an inpatient infusion office or outpatient center.
6) 340B strategy – Named for Section 340B of the Public Health Service Act, this drug pricing program was created by the federal government in 1992. It requires drug manufacturers to provide outpatient drugs at significantly reduced prices to eligible healthcare organizations and covered entities. Most communities have a 340B provider, which usually is a hospital that serves a disproportionate share of Medicare and Medicaid patients and, therefore, receive lower reimbursements. Such discounts can be leveraged by establishing an arrangement with a hospital pharmacy or using the PBM as a contract provider in their specialty pharmacy with that hospital.