Annual Medical Pharmacy Trend Report Illustrates Impact of Costly Specialty Drugs

Magellan Rx Management has released its seventh annual Medical Pharmacy Trend Report, which highlights the member and payer impact of high-cost specialty drugs billed on the medical benefit.

In 2016, the FDA approved 13 new drugs that fell under the medical benefit. These approvals included 4 drugs for oncology or oncology support, 3 for bleeding disorders, and 2 for rare pediatric neuromuscular disorders.

As specialty biologics enter the marketplace, drugs billed to the medical benefit continue to be cost drivers for the overall drug trend, according to Magellan Rx Management. By 2018, it’s expected that 50% of total United States drug spend will be composed of specialty medications. Furthermore, half of specialty drug spend is billed through the pharmacy benefit and half through the medical benefit.

The following are key findings from the report on the current state of medical benefit medications:

1. Spend for the commercial medical benefit increased 55% since 2011, while the Medicare medical benefit increased 5%.

2. Commercial per-member-per month (PMPM) year over year allowed amounts increased 13% to $23.68. Medicare PMPM increased 2% to $46.01.

3. Oncology and oncology support accounted for 44% of commercial spend ($11.23 PMPM), and 57% of Medicare spend ($26.04 PMPM).

4. Of the top 10 categories, ophthalmic injections had the highest year-over-year trend, with commercial at 30% and Medicare at 39%.

5. The 10 most expensive commercial medical benefit drugs averaged $421,220 annually per patient and affected 2 per 100,000 members. The 10 costliest Medicare medical benefit medications averaged $268,780 and affected 8 per 100,000 members.

The top 25 drugs accounted for 61% of commercial and 71% of Medicare medical pharmacy allowed amount PMPM. The average annual cost per patient for these drugs were $24,751 (commercial) and $11,063 (Medicare).

Over a patient’s treatment lifetime—–averaged at 40 years––payers may incur more than $18 million in costs for rare disorder drugs, such as Soliris.

For the overall provider landscape, the report found that 64% of payers plan to capture NDC data over the next 12 to 18 months; 57% had providers share quality and outcomes data from their medical records; and 33% implemented bundled payments or value-based contracting models for their providers.

“It’s clear that specialty spend on the medical benefit accounts for a significant expenditure for both members and payers alike and it is continuing to grow rapidly, particularly for commercial health plans,” Casandra Stockman, PharmD, vice president of medical pharmacy strategy at Magellan Rx Management, said in a press release. “Ensuring a sound medical benefit drug management structure is in place is necessary to rein in costs in both the short- and long-term, particularly as new drugs come to market.”

The following are key strategies outlined in the report for the effective management of medical benefit drug spend:

1. Clinical and operational managing drugs billed with unclassified Healthcare Common Procedure Coding System codes.

2. Improving claims system capabilities to capture and report National Drug Codes.

3. Employing provider network strategies for commercial members to remove disparities in cost by outpatient site of service.

4. Implementing benefit design strategies.

5. Bringing transparency of medical benefit drug costs and therapeutic options to members.

“Building an effective medical benefit drug management strategy requires an in-depth knowledge of and expertise in this complex area, but it’s essential to help payers rein in costs and improve the quality of care for members,” Stockman said in the release.

The 2016 Medical Pharmacy Trend Report payer survey included insights from 49 US health plans that represented more than 109 million medical pharmacy lives. Data were collected over a period of 2 months in summer 2016 through a custom market research survey comprised of topics that ranged from utilization and management trends to benefit design and provider network landscape.

Of the total respondents, 38 payers reported that they were responsible for managing Medicare Advantage lives in addition to their commercial population. Of the respondents to the health plan survey, 82% were pharmacy directors, 12% were medical directors, and 6% were provider network directors.