Specialty Pharmacy: Examine, Optimize, and Manage...Drugs for oncology represent 30% of 900 biologic medication in development for 2013. Nearly three times as many drugs for rare disease

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Specialty Pharmacy: Examine, Optimize, and Manage

Kathryn Canaday, Pharm.D.Chief Clinical Officer Pharmaceutical Strategies Group Plano, Texas

Jane LyonsPractice LeaderPharmaceutical Strategies Group Plano, Texas

© 2013 Pharmaceutical Strategies Group, LLC. Proprietary and confidential.

4A-1

Agenda

What is a specialty drug and specialty pharmacy?

Why do we need to focus on specialty?

What can we do to control specialty trend?• Four key areas:

−Plan design.

−Vendor performance.

−Reimbursement management.

−Clinical management.

Final thoughts.

4A-2

Specialty Drug—Characteristics

Four key components of a specialty drug

Method of Administration—usually injected, oral chemotherapy

Nature of the Disease—chronic, debilitating, no other treatments

Cost—Average national cost $3,400 per month, trend 20% per year

Location of Administration—self-administered or

physician’s office

SPECIALTYDRUG

4A-3

Specialty Spend, 2012

4A-4

Differences Between Medical and Rx Benefits

MEDICAL BENEFIT PHARMACY BENEFIT

Administration Intravenous infusions, injections. Self-administered injections.

Dispensing channel Physician, infusion center, home health. Specialty pharmacy dispenses drug and delivers to patient.

Billing term “Buy and Bill” – purchase, administer and then bill based on contract terms within the medical network contract.

“Bill and Dispense” purchase, dispense and then bill based on pharmacy network contract terms.

Drug pricing Wide variety of prices - Average Wholesale Price (AWP) or Average Sales Price (ASP).

Discounted Average Wholesale Price (AWP).

Claims submission Provider submits claims in batch or real time using HCPCS codes.

Claims adjudicated online using 11-digit NDC.

Utilization management Hit or miss prior authorization/ precertification/medical review process.

Prior authorization, step therapies, concurrent drug utilization review, formularies.

Member cost-share Copayment for office visit, some plans have coinsurance for drug product.

Copayment or coinsurance for drug.

Payer awareness Usually hidden from view in standard health plan reports. Lack pharmacy information.

Visible but lacking complete picture because of diagnoses and lab information.

4A-5

What Benefit Specialty Drugs Fall Under

86%92% 89%

5% 3% 3%

10%27% 26%

5%1% 5%

77% 79% 79% 28% 45%

58%

9% 7% 6%17% 18% 18%

19% 42%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Commercial(n=80)

MA-PD(n=71)

Medicaid(n=62)

Commercial(n=80)

MA-PD(n=71)

Medicaid(n=62)

Commercial(n=80)

MA-PD(n=71)

Medicaid(n=62)

Pharmacy Benefit Only Medical Benefit Only Both Pharmacy and Medical

EMD Serono Digest 2013, 9th edition

Self Administered Agents (SAAs) Office Administered Agents (OAAs) Home Infusion Specialty Drugs

Coverage of Agents Based on Administration or Provider (2011-2012)

Q. Describe how SAAs, OAAs and home health specialty drugs are typically covered for your most common benefit structure.

% of

Pla

ns

4A-6

Why Do We Discuss Specialty Pharmacy?

Unique Uses ● Number of Drugs ● Cost of Those Drugs

4A-7

Uniqueness

Treat diseases previously untreatable.

Prevent progression of diseases previously not possible.

Treat orphan diseases.

Drives potential for advances in treatment.

Focus of the media.

Always very costly.

Initially directed at narrow indications, with possibility of expanding indications to new uses.

Often approved with limited evidence.

Unknown safety implications, especially long-term.

Immunogenicity, infection risk, malignancy risk, etc., warrant focused vigilance.

4A-8

Specialty Pipeline

Specialty utilization growth will continue due to new product launches and expanded indications.

Potential first-in-class medicines make up 70% of the pipeline.

Drugs for oncology represent 30% of 900 biologic medication in development for 2013.

Nearly three times as many drugs for rare disease (orphan drugs) are in the pipeline compared to a decade ago.

4A-9

New Drugs Traditional vs. Specialty

0

5

10

15

20

25

Traditional Specialty Total

20082009201020112012

FDA Approvals: 2008 through 2012Through 9/30 Each Year

Source: FDA Web site

4A-10

Specialty Cost Projections

Specialty pharmacy spend is the fastest growing line item of healthcare expenditures at an annual rate of 20%.

Forecasted specialty drug spend will grow from $290 PMPY (per member per year) to $845 in 2018. • Strong pipeline.

• Price inflation.

• Expanded indications.

Specialty utilizers account for only 1% of claims but 20% of plan spend.

2012 specialty drug trend of 18.4% was driven by 18.7% in increase in unit cost and -0.4% in utilization.

Specialty drugs already represent 30% of total drug spend when medical and pharmacy claims are evaluated.

4A-11

Specialty and Traditional Drug Spend

$665 $675 $694 $722 $751 $789 $836

$290 $348$425

$514$612

$722$845

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2012 2013 2014 2015 2016 2017 2018

Traditional Specialty

FORECASTED PMPY NET DRUG SPEND ACROSS THE PHARMACY AND MEDICAL BENEFIT FOR COMMERCIAL PLAN SPONSORS

Source: Artemetrx Specialty Drug Trend Study, 2013

4A-12

An Approach to Management

4A-13

Four key areas of investigation:

Plan Design

Vendor Performance

Clinical Management

ReimbursementManagement

4A-14

Management Approach

Plan Design

Vendor Performance

Clinical Management

ReimbursementManagement

Four key areas of investigation:

4A-15

Plan Design

Medical Benefit Pharmacy Benefit

Current Designs

$25 copay for office and $25 for therapeutic injection = $50 total.

$100 copay for drug + $25 injection copay = $125.

Alternative Designs

OA specialty tier: 20% coinsurance:with a $2,500 annual out-of-pocket max for therapeutic injections. $25 therapeutic injection fee.

Specialty tier for SA drugs: 20% coinsurance with min $30 and max $100 with a $2,500 annual prescription out-of-pocket maximum. $25 therapeutic injection fee

OA—office administeredSA—self-administered

Evaluating the effectiveness of specialty drug benefits.

Benefit consistency:

• Is there consistency in member cost share across medical and pharmacy benefits?

Cost share affordability:

• Does the member cost share affect adherence to therapy?

4A-16

Specialty Copay—High, But Not Too High

Researchers have tried to determine if high specialty copayments impact adherence. • It was found that tumor necrosis factor (TNF) inhibitor patients with

copayments over $250 were 4.6 times more likely to decline to fill the prescription than patients with a copayment of $100 or less (Gleason P, 2008).

• Another study found that specialty patients with copays over $50 were more likely to discontinue their medication than patients with lower copays (Curkendall S, 2008).

• For multiple sclerosis patients, a $200 copayment resulted in patients not filling their prescriptions six times more than members with a $100 or less copayment. (Gleason P, 2009).

4A-17

Plan Design

Vendor Performance

Clinical Management

ReimbursementManagement

Four key areas of investigation:

Management Approach

4A-18

Specialty Pharmacy Vendor Basic Services

PATIENT PROVIDER PAYER MANUFACTURER

Toll-free, 24-hour clinical support

Compliancemanagement Competitive pricing Shipping and delivery

Benefits verification Reimbursement coordination

Reduction in wasted drug

Office reimbursementcoordination

Direct home delivery Patient education services

Dedicated payer/sales support

Patient assistance programs

Intensive member education

Coding and billing assistance

Customized programs(disease treatment management and clinical support)

REMS execution

Most vendors perform basic services satisfactorily. The key is to find the exceptional programs that differentiate one from another.

“Changing the Channel: Developments in US Specialty Pharmaceutical Distribution,” Pharmaceutical Commerce, September 2009.

4A-19

Vendor Performance—Rx Benefit

Evaluating the effectiveness of specialty drug benefits:

Consider an exclusive arrangement with one specialty pharmacy for employers and two to three specialty pharmacies for health plans.

Retain final authority for exclusions and inclusions on the specialty list and channel restrictions.

Require specialty drug claims to be included in discount guarantees.

Contract for specific AWP discounts for each drug (i.e., do not accept a flat discount for all specialty drugs).

Request rebates for specialty drugs with minimum guarantees.

Review and negotiate specialty discounts annually.

Enact performance guarantees specific to specialty drug management for clinical services, such as increased in MPR, waste management, length of therapy adherence.

4A-20

Specialty Pharmacy Program Evaluation

Evaluate specialty program performance through reporting:• Annual member and provider satisfaction scores.

• Clinical management savings.

− Adherence rates by disease and by patient.

− PA approval and denial rates for specialty.

− Dose wastage programs.

− Prescriber interventions to change drug/dose/duration of drug or manage adverse effects.

− Refill rates by drug aggregated by disease.

• Operational measures.

− Missed delivery dates.

− Call center statistics.

− Copay assistance program participation.

− Dispensing accuracy.

• Audit of coverage determination process to determine if criteria are being followed correctly.

4A-21

Plan Design

Vendor Performance

Clinical Management

ReimbursementManagement

Four key areas of investigation:

Management Approach

4A-22

Reimbursement Management—Rx Benefit

Evaluating the effectiveness of specialty drug benefits:

Channel management through retail-lock out: • Require patients to use specialty pharmacy to get

the prescription.

−Various ways to require use.

• PBMs will exclude coverage for specialty drugs at mail rates.

• Confirm pricing differences between channels justify movement.

4A-23

Rx Specialty Pharmacy Rates

BrandName Common Use Utilizers # Rx Plan $ PBM AWP

DiscountMarket Range–

ExclusiveAvg

Savings

ENBREL RHEUMATOID-ARTHRITIS 21 133 $240,480 11.58% 12.6% - 16.6% $7,492

COPAXONE MULTIPLE-SCLEROSIS 9 71 $217,226 11.58% 14.2% - 15.8% $8,172

If the average market range AWP discounts were received by our client for the top 15

dispensed specialty drugs, a savings of $66,000 could have been achieved.

4A-24

Reimbursement Management—Medical Benefits

Confirm payment calculation medical carriers are paying physicians for J-codes. • Average Sale Price (ASP) + 6% (medical plan) methodology vs. AWP—

15% (Rx) methodology may not yield significant savings.

• Enhanced clinical management and appropriate use by specialty pharmacymay drive additional savings.

Move all self-injected drugs to go under pharmacy benefit and exclude J and S codes for self-injected drugs from medical benefit. • Evaluate your own data to determine if appropriate.

Require prior authorization for non-self administered drugs under medical benefit.

4A-25

Specialty Drug Spend by Site of Care

$1,685

$4,599

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000

Office/Clinic Outpatient Hospital

Average Drug Cost Per Visit By Site of Care

Administration costs are

also higher at outpatient

hospital settings.

2.8xhigher

4A-26

Reimbursement Management—Rebates

Some PBMs will offer different rebates for specialty, will usually match mail or retail offers and others do not.

Some specialty vendors offer and others do not.

Rebates for drugs billed under the medical benefit are available through either direct contracting or through selected vendors.

While rebates are not available for all specialty drugs, in some well-used classes such as growth hormones, rheumatoid arthritis, or multiple sclerosis, manufacturers are providing rebates similar to those seen on the traditional drug side.

4A-27

Plan Design

Vendor Performance

Clinical Management

ReimbursementManagement

Four key areas of investigation:

Management Approach

4A-28

Employers Use of Clinical Programs for Specialty

2013 Specialty Drug Benefit Report – Pharmacy Benefit Management Institute

84%

74%

74%

73%

68%

67%

53%

49%

44%

41%

25%

0% 20% 40% 60% 80% 100%

Prior Authorization under Rx Benefit

Clinical Care Management Programs

Require Use of Contracted Specialty Pharmacy

Preferred Products/Formulary for Specialty Classes

Step Therapy Under the Rx Benefit

Limit Specialty Products to 30 days Supply

Move Specialty Meds from the Medical to the Rx Benefit

Prior Authorization under the Medical Benefit

Separate Cost Sharing Tier for Specialty Medications

Restricted Coverage Under the Medical Benefit

First Fill Limit of 1-2 Weeks to Ensure Patient Tolerates

4A-29

Clinical Management

Standard clinical management programs for traditional drugs work for specialty also:• Prior authorization.

−Diagnosis, prescriber specialty, clinical parameters, genetic testing requirements, previous therapy, measures of effectiveness, etc.

• Step therapy.

• Quantity restrictions.

• Dose consolidation and duration of therapy.

4A-30

Clinical Management—continued

• Managed formularies—immunologic conditions, growth hormone, hepatitis C, etc.

• Coordination with care or disease management vendor—specialty pharmacy vendor should have in place an exchange program with the payer’s case or disease management vendor to coordinate the care of the member.

• “Short-fill” program for selected oral chemotherapy drugs limiting the first fills to determine patient tolerance before 30-day supply is filled.

4A-31

A New Mindset for Specialty Management

Move towards disease/condition management. • Move away from channel or therapy class management.

• Instead of managing breast cancer by looking at aromatase inhibitors, look at the complete disease.

• Team of Care Management at Health Plans. − Pharmacy and Medical Directors look at entire disease process to determine

coverage rules (drugs, labs, inpatient and outpatient, professional, radiology, and ancillary services).

• After determining coverage rules, then determine which department manages that best.

• Requires data integration.

4A-32

Final Thoughts

To meet the growing challenge, payers must review their programs to be assured:

Comprehensive cost containment measures are in place.

Member benefits do not disadvantage one benefit.

Clinical programs are measured for effectiveness.

Failure to do so will result in the cost of specialty drugs siphoning off a disproportionate share of the healthcare dollar.

4A-33