Helping Employers Understand the Impact of CMS Part D Proposal on Specialty Drug Costs

By Dea Belazi

The Centers for Medicare & Medicaid Services (CMS) recently proposed a new payment rule for Medicare Advantage (MA) and Part D plans designed to generate competition and more rebates for specialty drugs. For commercial plans, it’s important to understand the proposed rule because, typically, federal trends influence commercial stakeholders.

The high cost of specialty drugs is a challenge that is being effectively addressed by Specialty Pharmacy Benefit Managers™ (SPBMs).  SPBMs are innovative, pharmacy benefit managers that offer high quality prescription drug management services specifically for those with chronic diseases that require specialty drugs. Along with customizable services, they offer carved-out specialty pharmacy services and cost-savings programs that extend discounts on prescription medications. They also adhere to transparency and initiate innovative treatment programs that leverage their existing tools to negotiate favorable rebates, as well as take advantage of the new rule to advocate for patients and reduce costs.

On the commercial side, savings can be measured in several ways. Consider the example of a program for hemophilia patients that saw a savings on drug costs of 10-40%, in addition to significant reduction in hospitalizations, improved patient education and awareness, as well as elevated understanding of pharmacy options to support coordinated care. Programs like this could continue to produce more savings if the CMS rule allows for more competition and opportunity for PBMs to negotiate in a way that impacts the larger commercial marketplace.

For brokers advising employers, the costs of managing chronic disease, such as hemophilia, is an important discussion to have, including the impact of legislation on commercial plans and their bottom lines.  For instance, while hemophilia is a rare disease, affecting approximately 13 out of every 100,000 lives, it is still common enough that most employer groups will eventually deal with the challenges of providing care to hemophilia patients in their workforce.

A look at the proposed CMS rule

The proposed CMS rule would create a new preferred tier for Part D plans for specialty drugs in a bid to eventually lead to lower prices for seniors, giving plans more flexibility and two potential tiers if it is deemed that a specialty drug will drive more competition and rebates.

Currently, Part D plans put all specialty drugs, which often have the highest cost, into their own tier that has the same level of cost-sharing. The proposed second “preferred” tier would allow for a lower percentage of beneficiary cost-sharing for such specialty drugs. CMS is proposing that the maximum amount of cost-sharing for either specialty tier is 25% or 33%, depending upon whether the plan has a deductible.

Manufacturers would prefer a lower cost-sharing percentage for their drug in order to enable greater access, but they could be more willing to offer plans a higher rebate in order to get lower cost-sharing. The concept of the proposed rule is to give Part D sponsors “maximum flexibility” to get a brand-name drug that could cost less after a rebate than a generic or biosimilar.

Another provision of the rule that could help Part D plans and PBMs save money is a requirement for plans to disclose pharmacy performance measurements, such as generic drug utilization.

In the absence of a core set of performance metrics across plans, a pharmacy could face a separate set of metrics from one plan to the other. Ultimately, stakeholders should agree on one set of metrics that would make it cheaper to administer.

Understanding the high cost of specialty drugs for commercial payers

As commercial payers often follow the lead of Medicare, it will be helpful to view the costs of specialty drugs through the lens of hemophilia. Brokers and employers have only to look at the numbers to see the potentially crippling costs, with many self-insured employers spending up to $1 million a year on patient care.

For a patient with hemophilia A, the annual cost of treatment ranges from $59,101 for those with mild disease to $301,392 for patients with severe disease receiving prophylaxis. For a patient with hemophilia B, the cost of treatment ranges from $85,852 to $263,253. Furthermore, factor replacement products represent up to 94% of total costs for patients with severe disease.

One SPBMTM program for hemophilia patients enabled one hospital to reduce its specialty spend by 30% in the first year.

With the development of new technology and tools for addressing high-cost diseases, employers can adopt a comprehensive chronic disease management program designed to provide an unprecedented level of control, transparency and accountability, not only for payers but also physicians, specialty pharmacists and patients alike. For self-insured employers, this approach enables them to contain prescription costs, ensure appropriate medication utilization and monitor physician and pharmacy performance in real-time.

In the case of hemophilia, payers face key management challenges, including:

  • Fragmentation of care and lack of uniformity due to no standardized guidelines or care models for treating hemophilia
  • Need for reinsurance programs for high-cost members
  • High pharmacy and medical benefit utilization
  • Potential stockpiling and product waste
  • Limited payer insight into clinical data beyond factor product cost
  • Limited provider insight into product utilization, dispensed amounts and total healthcare resource utilization
  • Lack of individualized treatment
  • Robust and complex product selection

In today’s value-based climate, and for future legislation changes, data collection and analysis will be essential to determine benchmarks and measure relevant outcomes. Equally important, collaborating with local centers of excellence under pre-agreed upon standards of care and data sharing arrangements can help to prevent the need for prior authorization. Also, holistic care and coordination of care designed to consider the whole patient – and not simply the disease – will be of utmost importance.

Finding the right SPBM

An effective all-encompassing SPBM should be designed to provide optimal levels of control, transparency and accountability for all stakeholders, including payer, physician, specialty pharmacy and patient.

Look for a program that offers 100% control of the prescription through its network of reliable and transparent specialty pharmacies. It should offer prior authorization control and real-time benefits verification, prescription fill dates, refill alerts, pharmacy fulfillment accuracy and quick turnaround time.

The program should also offer unprecedented access to physician, specialty pharmacy and patient data and visibility into how prescribers are writing scripts. Also, it should provide dose optimization, identify prescribers according to the label and provide insight into which prescribers are driving the best outcomes.

For specialty pharmacy, the management program should compare all network pharmacies in real-time on a leaderboard, provide visibility into factor units prescribed vs. units dispensed, drop shipment/over shipment prevention and ensure appropriate shipment of on-demand and bleed doses.

For patients with hemophilia, there should be real-time visibility into medication adherence, infusion adherence reporting, including prophylactic vs. bleed/on-demand doses, in-home patient inventory, medication hoarding prevention, outlier infusions (with or without bleeds) based on prescription and visibility into frequency of patient dosing. It should also ensure compliance with label and clinical trial literature.

Snapshot of best-in-class SPBM management program

The most effective management programs offer specialty networks that cover most limited distribution drugs (LDD) products.

In terms of cost savings, look for a management program that is flexible and sustainable, with a guaranteed pharmacy performance product and treatment cost containment, customized pharmacy network therapy management in real-time data and outcomes reporting. Overall, it’s important to find a program with a patient-centric approach that supports hemophiliac treatment center alignment.

Keep in mind that a value-based program allows for greater transparency and accountability for patient and pharmacy activity. It will also be more likely to provide utilization management and clinical interventions based on active patient management that leads to contained costs and predictability on usage and costs. In this way, an appropriate utilization management and pharmacy network design can contain costs by as much as 10 to 42%.

The best-in-class programs are being designed to align with specialty pharmacy partners with innovative programs around a customized specialty pharmacy network. These networks are focused on calculated cost savings with customized clinical management and innovative technology – which aligns well with the intention of the latest proposed CMS rule.

Remember that employers are very concerned about how to finance the high cost of new million-dollar drug therapies, some of which can cost more than what an employee would earn in a lifetime. Specialty disease management programs that combine a trusted and transparent network of specialty pharmacies with the most up-to-date technology can allow them to contain prescription costs, ensure appropriate medication utilization and monitor physician and pharmacy performance in real-time.


Dea Belazi, PharmD, MPH, president and CEO, AscellaHealth, has more than 20 years of experience in the healthcare industry, mostly developing and managing pharmacy benefit management companies. He is president and CEO of AscellaHealth, a national PBM with almost 2 million lives under management. He was part of the development of PerformRx as well as Future Scripts. Dea holds a PharmD from the University of RI and completed his dissertation work at Brown University and later completed an MPH from Johns Hopkins University and a postdoc health outcomes research fellowship at Thomas Jefferson University.