UNDERSTANDING COST DRIVERS AND MANAGEMENT STRATEGIES
BY JOHN THORNTON
Pharmaceuticals have been rising in cost steadily, but none greater than specialty drugs (i.e., those typically prescribed by a specialist, are often intravenously administered, and require special handling and high patient management). The Centers for Medicare and Medicaid Services (CMS) estimates that specialty drug costs have been increasing at a rate of 18% annually since 2014. The AMS 2020 Specialty Drug Trends Report stated that high-cost specialty drugs account for 51% of total drug expenses and drive 80% of all medical trend increases even though just 2% of the U.S. population uses specialty drugs.
The combination of both an advanced specialty drug cost management program and a specialty drug prior-authorization service that identifies alternative and more cost-effective specialty drugs has been shown to result in a 40% average savings on specialty drugs.
These findings are representative of what many plan sponsors have been experiencing and are struggling to address. Understanding what is driving the costs of specialty drugs, measures being taken to manage them, and what new cost-containment strategies to deploy is important for all brokers in order to better serve their clients.
WHY ARE COSTS SO HIGH AND WHAT ROLE DO SPECIALTY DRUGS PLAY?
The lack of competition specialty drug manufacturers’ enjoy is one reason for the high costs. That has prompted many to raise their drugs’ prices annually, something which has not been lost on health plan sponsors, pharmacy benefit managers (PBMs) or advocacy groups. AARP, for example, is calling for Congress to address the problem of skyrocketing specialty drug costs. In a recent release issued by AARP, Leigh Purvis, director of Health Care Costs and Access for the AARP Public Policy Institute, was quoted as saying, “The excessively high prices and price increases we see each year for specialty drugs are not sustainable. While specialty prescription drugs can provide substantial health benefits, those benefits are only available if people can afford to use them.” The AARP is asking Congress to enact legislation that would enable Medicare to negotiate drug prices, place a cap on out-of-pocket costs incurred by older adults, and impose penalties on pharmaceutical manufacturers that raise prices faster than the rate of inflation. While there was a Prescription Drug Pricing Plan provision contained in the Build Back Better Act, that legislation has yet to pass. In the meantime, plan sponsors are adopting strategies to control the cost of specialty drugs.”
Specialty drug costs have been increasing over the past decade with drugs for treating some medical conditions rising more quickly than others as reflected in the total spends associated with these drugs. Take the top selling specialty drug, Humira®. Consolidated Medi-Spam Average Wholesale Price (AWP) data shows that the total spend for this drug has doubled over the past eight years. Other specialty drugs recording high gross spends include Enbrel®, Stelara®, Cosentyx® and Dupixent®.
Overall, drugs for treating cancer, arthritis, multiple sclerosis, anti-inflammatory conditions like Crohn’s disease and psoriasis, hemophilia and cystic fibrosis are showing increasing costs and related spends. Cancer drugs, for example, increased by an average 7% in 2020 over 2019 according to data from the Evernorth 2020 Drug Trend Report and Pharmaceutical Care Management Association. An increase of that size for an already high-cost drug can break a plan. Consider that the average annual cost for one specialty drug used for a chronic condition is approximately $85,000 according to AARP’s Rx Price Watch. Drugs treating rare conditions can reach as high as $250,000 a year for one claimant.
MEASURES TO CONTROL HIGH-COST SPECIALTY DRUGS
To better manage their specialty drug costs, many employers have resorted to measures such as increasing employee copayments and reducing the length of prescription coverage. Some are implementing phased-in approaches, which require employees/patients to first try less expensive drugs before using the more costly drugs. Of course, this is not going over well with physicians or patients whereas less onerous utilization management approaches are proving effective and more acceptable.
Plan sponsors are also placing more pressure on their PBMs, expecting them to provide more frequent and detailed reports relating to their pharmacy expenditures and employee utilization. Employees being treated with specialty drugs, too are expected to adhere to their treatment plans for which a small percentage of plan sponsors are providing incentives. Plan sponsors should research programs that offer an integrated approach to alternate payer sources. For example, the combination of both an advanced specialty drug cost management program and a specialty drug prior-authorization service that identifies alternative and more cost-effective specialty drugs has been shown to result in a 40% average savings on specialty drugs.
While these more traditional measures do play an important role, there are other cost-containment strategies that brokers should understand and share with their clients. They include next-generation telehealth solutions and pharmacy benefit administration (PBA) services.
ADVANCED PHARMACY BENEFIT ADMINISTRATIVE (PBA) SERVICES
Another remedy for high-cost specialty drugs is a PBA service. This can help plan sponsors better manage their specialty drug costs by giving patients access to a national network of retail pharmacies with mail order capabilities. It too leverages online technologies to promote a more user-friendly service.
Using easy-to-navigate online platforms with intuitive functionality, a PBA service portal features an engaging dashboard and provides 24/7, real-time access to drug and other health care information. Accessible from any PC, tablet or smartphone, the portal incorporates quick response codes
on select specialty prescription labels and provides drug videos on demand. It also provides patients with refill reminders using real-time alerts. When used in concert with a specialty drug reimbursement cost management program and prior specialty drug authorization policy, 40% savings are attainable. The service also can drive reductions in costs associated with medical stop loss.
HOW TELEHEALTH CAN SUPPORT COST-CONTAINMENT INITIATIVES
Telehealth is already making a significant impact on plan sponsors’ health care costs. In 2020, McKinsey reported that up to $250 billion of U.S. health care spending could be shifted to a telehealth care option. The savings associated with telehealth solutions are worth noting. The National Business Group on Health estimated that employers could achieve net cost savings of between $19 and $121 per telemedicine visit based on where the individual would have gone to seek treatment (i.e., hospital emergency department, urgent care facility, physicians’ office). Individuals with critical and/or chronic medical conditions have more medical appointments than others. Replacing and/or supplementing some of these appointments with telehealth options can substantially reduce costs. The additional benefit of providing a telehealth option is that more individuals are likely to be better supported in their medical condition, and be more informed and compliant with their treatment plans. Today’s leading-edge telehealth platforms can have an even greater effect in meeting the needs of those with critical/chronic conditions while containing health care costs.
The most advanced telehealth solutions are integrated with nurse helplines staffed by experienced registered nurses (RNs) who are the patient’s first point of contact. Accessible on a 24/7 basis, individuals are able to discuss their medical symptoms/problem with an RN who performs a thorough patient intake to gather all pertinent information.
After updating the patient’s electronic health record, the RN assesses whether the problem has been addressed or if the matter needs to be triaged and transitioned to another level of medical support, whether that be a physician, hospital, health advocate, etc. Using the telehealth option, unnecessary emergency department, urgent care facility and physician office visits can be avoided thereby lowering the cost to the employer and employee who may not incur a co-payment.
Understanding what is driving the costs of specialty drugs, measures being taken to manage them, and new cost-containment strategies to deploy is important for all brokers in order to better serve their clients.
HOW BROKERS CAN HELP
By making clients aware of all the measures they can take to reduce their specialty drug costs, brokers are demonstrating they are valuable benefit consultants and resources. When a clients’ costs start decreasing, brokers can take some credit for their advocacy role.
JOHN THORNTON is EVP, Sales & Marketing, Amalgamated Life Insurance Company. An industry veteran, he has been a driving force in the expansion of Amalgamated Life’s voluntary worksite product line, geographic expansion, national sales force and broker relationships.
He can be reached at: 914-367-5000 firstname.lastname@example.org www.amalgamatedbenefits.com