Challenges of Channel Management for Specialty: Medical Benefit or Pharmacy Benefit

When most people think of getting their medications filled, they take their prescription to their local community pharmacy or send their prescription to a mail service pharmacy. Usually, the vast majority of prescription medications are commonly covered under a pharmacy benefit on behalf of the person’s insurance.

Although a retail or traditional mail channel makes sense for 97% to 99% of non-specialty prescriptions, the other 1% to 3% of prescriptions are specialty drugs that may need to be filled through another pharmacy channel (either a specialty pharmacy provider or an institutional setting). With specialty drugs, there is a fork in the claims processing and fulfillment road in which either the medical or pharmacy benefit may be the primary point for dispensing, administration, and reimbursement.

How much do specialty drug costs contribute to total prescription spend?

In recent years, as the industry has watched specialty spend grow, I have observed prescription insurance plans’ specialty gross costs represent anywhere from one-third to 50% of their total gross spending while the number of prescriptions being filled for that specialty spend is for fewer than 1% of the health plan’s total pharmacy prescriptions.

According to CVS Health’s 2018 Drug Report and the cohort of insurance plan’s it manages, “Specialty utilization and share of gross cost continues to grow, reaching 45 percent of total pharmacy spend in 2018 as compared to 42% in 2017, despite comprising only 1 percent of prescription claims.”

This is in line with what other national providers have observed as well. For example, a recently published report by Blue Cross Blue Shield shows 3% of their brand specialty products are driving 34% of their costs.

Not surprisingly, the top drugs by total gross costs are largely specialty products. As we examine this spend, the next question that usually comes to mind for industry stakeholders is what portion of claims are going through the most cost-advantageous channel?

Where are specialty drugs being filled and billed?

Looking deeper into specialty drug data, many observations can be made about specialty drugs and which portion of a person’s insurance prescription benefit or medical benefit makes the most sense to have the drug coverage. Pharmacy benefit managers (PBMs) administer and manage the prescription drug benefits for health insurance plans and report on the distribution of specialty spend by channel.

According to an article from the Drug Channels Institute, there are 3 big PBMs in the industry that have the majority of the market share and process about 75% of prescription claims. Drug Channels lists the order of PBM market share from largest volume of claims to smallest as CVS Health, Express Scripts, and Optum. Using data reported from these 3 PBMs, the specialty pharmacy benefit channel share is comparable between CVS Health and Express Scripts; however, Optum cites a larger proportion of specialty pharmacy benefit share, according to the report.

CVS Health reports in their 2018 Drug Trend Report, “Nearly half of specialty spend—45%—is under the medical benefit. That’s over and above what you spend through the pharmacy benefit. We estimate that combined spend on specialty under both benefits is equal to 60% of your total drug spend.”

Express Scripts, which is part of Cigna, stated that “According to the Drug Trend Report, nearly half of all specialty medications are currently billed through the medical benefit, which lacks the visibility, cost-control strategies and oversight of the pharmacy benefit.”

A report by Optum, which is a division of UnitedHealthcare, states “Currently, 65% of total drug spend is handled via the pharmacy benefit and 35% is handled via the medical benefit.” They also go on to say “drugs administered in hospital settings often cost two-to-three times more than the same drug administered elsewhere.”

Other consulting sources, such as Pharmaceutical Strategies Group (PSG) data and analytics division, Artemetrx, published the “2019 State of Specialty Spend and Trend Report,” which shows higher spending on specialty drugs through the pharmacy channel. Their report states, “In 2018, nearly 63.5% of spending on specialty medications occurred in the pharmacy benefit, versus 36.5% within medical.

Although specialty utilization is increasing within the medical benefit, the spend within pharmacy for specialty drugs is increasing at a similar rate, leading to very little variance between the percentage of specialty spend by benefit since 2014.”

Spend on specialty drugs is extremely high and multiple channels exist, so what’s next?

Further complicating how to devise a game plan for which channel a specialty drug should be filled and under which benefit it should reside are both the new wave of game-changing biotech drugs that have come to market and the advent of gene and cell therapies, such as chimeric antigen receptor T-cell therapies. The same channels we use for solid oral dosage forms and other biologics needs to evolve in order to be suitable for cell and gene therapies.

Here’s why: the new revolutionary biotech products come with unprecedented high launch prices, complex third-party logistic expertise, intricate supply chain requirements, exclusive distribution rights, and require specialized training for administration and monitoring. Given many of these exceptionally unique attributes, it’s no wonder the vast majority of these products do not fit into a standard pharmacy or medical channel.

According to an Insights article from CVS Health, due to the specialized nature of administering gene therapies, the products are designated to be administered at authorized treatment centers. The article goes on to discuss some of the unique attributes of gene therapies in that highly trained specialized providers and care teams are required for the pretreatments, handling, administration, and monitoring of these products.

Many of the manufacturer websites have treatment center locators. Access to treatment and the number of centers authorized to provide treatment can vary greatly by drug.

For example, tisagenlecleucel (Kymriah) is available at 114 treatment centers across the United States, according to their treatment center locator, whereas gene therapies such as voretigene neparvovec (Luxturna) are only available at 10 treatment centers across the United States.

Current FDA-approved drugs for spinal muscular atrophy (SMA) include nusinersen (Spinraza) and onasemnogene abeparvovec-xioi (Zolgensma), which are typically paid for in the medical benefit because of how they’re administered.

However, a competitor small molecule splicing modifier therapy is in the pipeline that could have the potential for self-administration. Risdiplam is a new oral product slated for FDA approval on August 24, 2020, according to Roche, and potentially, the new oral product could be covered under the pharmacy benefit.

Channel selection

In addressing many of the challenges associated with which benefit—medical versus pharmacy—to provide coverage for a drug, it’s important to point out the typical advantages and disadvantages of each channel.

Attributes

Pharmacy Benefit

Medical Benefit

Route of Administration

• Oral, self-administered or self-injectable

• Intravenous Infusion

Claims processing

• Electronically, in real-time

• Paper claims, electronic, or batch claims

Dispense Location

• Specialty pharmacy
• Some vendors offer pickup at local community pharmacy

• Physician office, outpatient facility, home infusion, or hospital/clinic

Utilization Management (UM)

- Prospective reviews conducted before claim is paid

- More highly automated with built in benefit information

- Highly developed and dedicated support for utilization management strategies such as prior authorization, quantity limits, and step-therapy

- Complete visibility to specific drugs since claims are submitted with highly specific and unique NDC codes. NDC codes contain information on a specific drug, the package size, manufacturer, and dose of drug.

- UM criteria updated frequently

• Criteria typically more limited in scope
• Timing of UM reviews may be retrospective after claim filled and billed
• Long lag time between the drug administration and claim submission
• Limited visibility on specific drugs due to non-specific codes: HCPC codes and J-codes
• HCPC = health care procedure code and known as “J- codes”. These do not provide the quantity dispensed, are often assigned up to 18 months after the drug has launched, and may include multiple drugs within a single J-code

Specialty Formulary

• Manages drug mix and lowest net cost pricing
• Value-based and plan design

• Formulary may apply across Rx and Medical
• Manages drug mix and lowest net cost pricing
• Value-based and plan design

Reporting

• Due to real-time nature of claims and clean codes associated with claims submission, there are clear lines of sight to not only the drug costs, but to analytics and reporting for a given product

• Limited reporting capabilities
• Lack of transparency on utilization and pricing
• Not routinely provided

Reimbursement Rates and Cost

• Drug specific AWP*, minus a discount

*AWP = Average Wholesale Price

**ASP = Average Sales Price

• ASP**, plus a percentage or mark-up on AWP
• Payment based on provider charges and incentivizes Buy and Bill income

Management strategies

One thing is for certain, regardless of the channel through which the specialty medication is billed and filled, management strategies will be an essential cornerstone to controlling costs. Strategies such as plan design management, including value-based plan designs, specialty cost-sharing tiers, limiting supply for first fills and maintenance fills, can maximize outcomes, assist with beneficiary contribution, and manage waste.

Specialty formulary management strategies can optimize drug mix and lowest net cost drugs. Clinical management programs such as prior authorizations, quantity limits, and step therapy can ensure a patient receives the appropriate drug.

High-touch patient management with specialized care teams and centers of excellence can ensure disease management, medication therapy management, and ancillary services are integrated into care plans. Reimbursement management will play a more important role moving forward not only for patients, but also for payers by providing options for the new era of high-cost cell and gene therapies.

Channel management and determining through which channel drugs are covered can leverage network strategies and consolidation and consistent management of specialty drugs. Optimizing the site of care in which the drug is administered can save insurers money and save patients time, contributing to greater patient satisfaction and cost effective outcomes.

How has the pharmaceutical landscape evolved to coordinate better channel management strategies?

All PBMs, such as Express Scripts, CVS Health, and Optum, have robust programs and services aimed at reducing costs associated with specialty drugs under both the pharmacy and medical benefit. The “big 3” PBMs—CVS Health plus Aetna, Express Scripts plus Cigna, and United Health plus Optum—have now all vertically integrated and exist as linked entities with major medical providers.

These entities have combined with national medical providers to provide integrated health services. With heavy competition in this space, health plans should continue to see innovation and more cost effective strategies to help address some of the challenges we see today to provide capabilities that not only manage a specialty drug under one benefit or the other, but across both the medical and pharmacy benefits together.

About the Author

Brandeis Seymore earned her Bachelor of Science Pharmacy degree from the Duquesne University School of Pharmacy and her Master of Pharmacy Business Administration (MPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines. She has spent the past several years working as a senior clinical manager assisting employers with their pharmacy benefit management strategy. Prior to these experiences, she has held roles of increasing responsibility, most recently as a Strategic Account Executive to support client’s marketplace needs and demands.