How can employers tackle rising specialty drug costs?
Employers are struggling to get a grip on the rapid growth of the cost of specialty drugs in the face of expectations that an increasing share of their benefit dollars will be consumed by those pharmaceuticals in the years ahead. Lucky for them, the National Business Group on Heath has issued a detailed call for changes in federal policies that could, over time, provide some relief, as well as immediate recommendations for employers.
“[President] Trump has spoken about the problem of affordability of drugs both during his campaign and since becoming president,” says Steve Wojcik, NBGH’s vice president of public policy. “There is definitely a receptivity in Washington, including in Congress, to examining policy obstacles to more reasonable prices, and encouraging more competition in the pharmaceutical industry.”
Employers are facing a triple-whammy on specialty drugs. These “biologicals” are:
· Inherently costly because the relatively small market for many of them requires that development costs be spread over a smaller customer base,
· Expensive to consume because often they must be administered in a controlled medical office setting, and
· Being developed in greater and greater varieties thanks to advances in the technology that is required to create new ones.
“A class of drugs once thought of only in the context of rare and life-threatening diseases is today utilized for an expanded population and to treat more and more common conditions,” states the NBGH report. In 1990, only 10 specialty drugs were on the market. Today that number exceeds 300.
What’s more, prices of many newly developed specialty drugs have risen even after they were brought to market, suggesting their cost of development isn’t necessarily the primary basis for price-setting. “Along with patients and other payers, employers remain mystified by the incomprehensible prices of certain specialty drugs,” according to the report.
The recognized clinical benefits of many specialty drugs make using them a medical necessity in many cases. But even with the resulting diminished price sensitivity at the consumer level, specialty drug manufacturers “are taking a closer look at affordability,” Wojcik says. Several specialty drug price shocks have garnered much press attention and Congressional hearings.
Top cost management tactics
Last year the NGBH’s annual health benefit design survey ranked the most common specialty pharmacy benefit management techniques being employed by its members. The top six are:
· More aggressive utilization management protocols, 74%;
· Specialty medications must be obtained through a specialty pharmacy, 69%;
· Pharmacy plan includes a specialty tier, 38%;
· High-touch case management, including medication coaching programs, 35%;
· Prior authorization for specialty medications billed under the medical benefit (as opposed to through the drug plan), 35%; and
· Ensuring that drugs are administered in appropriate settings, 30%.
Less common measures, used by fewer than 10% of surveyed employers, include providing incentives for using lower-cost administration sites, and exclusion of non-cancer specialty drugs from coverage.
Although employers have been “stepping up their utilization management for specialty medications, they haven’t been able to do so quickly enough to mitigate the rapid growth in drug expenditures,” according to the NBGH.
The NBGH’s Institute on Health Care Cost Solutions has developed the following set of recommendations for employers to consider, even as the group pushes ahead with higher-level recommendations for policy changes at the federal level.
· Implement a comprehensive utilization management strategy grounded in medical necessity/eligibility criteria,
· Implement a prior-authorization strategy dictated by medical necessity/eligibility criteria,
· Implement a step therapy program, encouraging the use of lower-cost generics as first lines of treatment,
· Consider putting quantity limits in place to ensure proper dosage as well as patient tolerance and adherence,
· Consider formulary exclusions or "exclude at launch" strategies,
· Consider adding additional specialty drug tiers to your formulary to incentivize the use of lower-cost alternatives,
· Explore the savings potential behind shifting certain specialty drugs from the medical to pharmacy benefit to allow for greater visibility, better tracking data, more creative cost control strategies and increased oversight,
· Maximize savings by working with a narrow network of specialty pharmacies or by channeling patients through the most cost-effective specialty pharmacy network, and
· Ensure that your PBM is keeping you apprised of potential changes and/or developments in the pipeline.
NBGH’s recommendations for federal policymakers include removing uncertainties surrounding risk-based and value-oriented contracting, reforming “permissive” patent and exclusivity protocols that shut out market competition for too long, encouraging uptake of “biosimilar” drugs that approximate the efficacy of highly priced ones, and changing certain Medicare drug coverage policies that have spillover effects on the private sector.
Some of the NBGH recommendations will require legislative action, and others can be adopted without new laws, according to Wojcik.