Why the New Drug Pipeline Will Make You Rethink Your Pharmacy Benefits Management Strategies


Specialty drugs is a topic that is on the top of every broker’s and employer’s mind. Just 20 years ago, specialty was not much to talk about. It started with medications such as Copaxone®, Remicade®, and Enbrel®, and slowly built-up steam with the approval of Gleevec®. Then a specialty explosion occurred as Humira® came on the market. Now, the reality for most employers is that specialty drugs account for 50% to 60% of pharmacy benefits costs, driven by just 1% to 2% of their members.

Meanwhile, despite the obstacles posed by the COVID-19 pandemic, drug manufacturers’ researchers behind the scenes did not cease to achieve advancements in treating some of the world’s most devastating diseases. In fact, an RxBenefits analysis of the reported 2020 earnings and 2021 analyst earnings projections of the top 20 prescription drug manufacturers shows that they are expecting a 7.8% projected growth in earnings. While COVID-19 was wreaking havoc on the world and hospitals and other small- to mid-size businesses in particular, drug manufacturers raised prices on dozens of high-cost drugs throughout 2020 and continued that trend to start 2021.

By analyzing the plan from an unbiased viewpoint and taking a holistic approach, the employer will be positioned to experience the maximum amount of cost-savings while keeping the best interest, health, and well-being of their employees in mind.

As medication utilization trends begin to normalize post-pandemic, these pricing increases are expected to begin impacting employer-sponsored plans in a bigger way. Employer plan sponsors are starting to see increasing costs within their own risk mitigation strategies as well — particularly in stop-loss insurance — because of non-intentional interventions to control utilization. In Gartner’s 2021 HR trends and priorities report, more than 800 leaders across all major industries shared their plans for the year. Not surprisingly, 50% of survey respondents say they plan to optimize costs in 2021, which is up 13% from last year. Constant vigilance concerning new and expensive drugs on the horizon and having a strategy in place to address specialty, as well as non-specialty drugs, is required.

Prescription drug pipeline

Employers should be aware that the new drug pipeline focuses on manufacturer investments in developing high-cost brand, specialty and orphan drugs. With more than 8,000 drugs in development, new drug launches will reach historically high levels over the next several years. New and potentially lifesaving or life-prolonging therapies are reviewed and approved every year, but generally there are two drug pipelines to monitor: novel drugs coming to the market for the first time for any indication, and new indications for existing medications already approved by the U.S. Food and Drug Administration (FDA).

There are several specialty drug classes with notable products in the pipeline for 2021-2022: oncology, hematology, multiple sclerosis, inflammatory diseases and genetic disorders. Many of these medications are channel-agnostic and could find their way under either medical or pharmacy claims. Data analysis over the last 20+ years appears to validate that specialty drug costs are increasing at a similar rate under both the pharmacy and medical benefit, so evaluating net drugs costs within both channels is crucial for long-term sustainability. Whether the drugs are utilized in the medical or pharmacy channel, here are a few of the top drugs to look for this year:

Novel Drugs:

Hereditary angioedema (HAE).

Drugs such as Haegarda® and Takhyzro® are taken routinely to prevent edema attacks, while Firazyr® and Ruconest® are used for acute attacks and should be used on an as-needed basis. New to the HAE market is Orladeyo®, a lower-cost oral medication approved in late 2020 that may drive new utilization from individuals who previously exercised restraint with the mainstay injectable products.

  • Cancer treatments. Some of the biggest cancer therapies that may make headlines this year include: Ygalo®(melflufen), used to treat multiple myeloma; Fotivda® (tivozanib), used in the treatment of advanced renal cell carcinoma; Abecma® (idecabtagene vicleucel), a CAR-T therapy for the treatment of relapsed or refractory multiple myeloma; Breyanzi® (lisocabtagene maraleucel), a CAR-T therapy for the treatment of relapsed or refractory B-cell non-Hodgkin’s lymphoma; and Tepmetko® (tepotinib), a treatment for metastatic non-small cell lung cancer.

New Indications for Existing Drugs:

  • Rinvoq® is FDA-approved for rheumatoid arthritis and awaiting approval for moderate-to- severe active psoriasis andatopic dermatitis, an indication that brings enormous potential for financial impact. New utilization of oral Rinvoq may occur from eligible patients who have been on the sideline due to injection aversion with Dupixent®, an injectable drug that skyrocketed to the top of many claim files in 2020. Coincidentally, Rinvoq may be accompanied by a price point higher than that of Dupixent, which may further complicate the financial
  • The cancer drug category also has several therapies recently approved for new indications. Among those are Yervoy®, approved in October 2020 as a weight-based dose indication for mesothelioma, as first-line treatment in combination with Opdivo® (nivolumab); Tagrisso®, approved in December 2020 to treat lung cancer and expected to cost approximately $18,000 per month; and Iclusig®, approved in December 2020 as a treatment for leukemia and expected to cost approximately $20,000 per month.

Employer strategies to manage high Rx costs

For most employer-sponsored pharmacy benefits plans, around 90-95% of a plan’s prescription claims are for generic or very low-cost brand drugs and represent about 10% of costs. The other 5-10% are the higher- cost brands, typically over $1,000, as well as specialty medications. Roughly 2% of the members will incur 50-60% of the costs of any given plan. As a result, employers find themselves in a challenging situation trying to  maintain an affordable yet rich benefit for their employees. This is especially challenging when there are multiple choices for a medication, and some have a better clinical and economic profile than others.

As we think about what we could do to help reduce costs, our emphasis is on those claims that are on the high-end of the brand category and on the specialty category. It is essential that plan sponsors have strategies in place to help steer people toward that clinically and economically valuable medication.

As we think about what we could do to help reduce costs, our emphasis is on those claims that are on the high-end of the brand category and on the specialty category. It is essential that plan sponsors have strategies in place to help steer people toward that clinically and economically valuable medication. There are several recommended strategies that are proven effective for managing high-cost specialty drugs today. It begins with first understanding the financial and member disruption (i.e., employee retention/recruitment impact) goals for each employer.

Then you can focus on these four key areas to ensure a holistic solution is in place to manage costs and appropriate utilization in line with both the contract and clinical perspectives:

1. Maximize contract value: Obtain the deepest discounts and maximize rebate yield through an aligned formulary coupled with an unbiased analysis and independent review strategy

2. Evaluate plan design: Examine tiering, copayvs. coinsurance, HDHP vs non-HDHP; Deductibles/Out of Pocket Maximum changes, separate medical/pharmacy accumulators, network design, mail order, Dispense as Written penalties, etc., as well as the extent of each change under consideration (ex: 10% vs 20% coinsurance)

3. Eliminate wasteful spending: Remove questionable low clinical value medications from the formulary; independently review prior authorizations, suspect high-dollar claims, and drugs with the potential to be used off-label; optimize existing therapy and dosing to remedy any per-dose cost improvement opportunities; and independently verify appropriate indication and dosing for complex conditions

4. Manufacturer assistance programs: Leverage available manufacturer-provided member incentives on specialty medications through a PBM systems-based approach, as opposed to partial carveout solutions that require manual formulary and system manipulations that generate additional risks and inefficiencies

Focus on high-cost claims

As new drugs or existing drugs with new indications enter the market this year, managing appropriate use of these high-cost medications will be essential. Employers need a tailored clinical strategy that addresses their risk areas to maintain a sustainable pharmacy benefit moving forward. For example, implementing independent prior authorizations on specialty medications can be a very valuable strategy to help your self-funded clients ensure appropriate utilization of oncology medications.

Consider these real examples where RxBenefits’ enhanced oversight of complex condition medications resulted in improved clinical outcomes and significant financial savings for mid-market employers and their members:

  • Acromegaly: Synthetic hormone Somatuline® is an orphan drug used to treat rare conditions, like acromegaly (or giantism). Our clinical team flagged a claim for this high-cost medication that was prescribed at an irregular dose of one syringe per week instead of the recommended one syringe per month. The member was injecting 4x the amount than was clinically necessary, and it was costing upwards of $300K. A clinical intervention improved the member’s care and saved the plan more than $200K a year.
  • Cancer: Chemotherapy medication Afinitor Disperz® is a parity priced medication, meaning that the drug manufacturer charges the same price for each tablet regardless of the medication By optimizing dosing to account for this, employers and members can see significant savings without impacting the member’s treatment. Upon making a dose adjustment, the hospital group avoided more than $220K in unnecessary expenses.
  • Cancer: A targeted therapy treating B cell cancers, called Imbruvica® is another drug that is commonly parity .Oftentimes, prescribers are not aware and prescribe a smaller dose to be taken frequently when it’s clinically appropriate — and more cost-effective — to take a higher dose less frequently. In some instances, there also could be an opportunity to use a capsule instead of a tablet. By optimizing the Imbruvia dose, the employer reduced its pharmacy benefits expenses without impacting the member’s treatment plan.

For any other strategy under consideration, always consider the intentions of the institutions guiding the strategy options. Many times, employers unknowingly spend more than is necessary because of confirmation bias from PBMs and other entities that may benefit from excess utilization.

By analyzing the plan from an unbiased viewpoint and taking a holistic approach, the employer will be positioned to experience the maximum amount of cost-savings while keeping the best interest, health, and well-being of their employees in mind.

RICK SUTHERLAND works in business development for RxBenefits, the nation’s first Pharmacy Benefits Optimizer. He supports brokers in the California and Hawaii regions, guiding them through the pharmacy benefit contracting process to help them evaluate their clients’ prescription drug plans for optimal savings, clinical management, and service. Rick is also the current Board President for the Employee Benefit Planning Association of Southern California (EBPA). Reach him at: rsutherland@rxbenefits.com.