Emerging Trends in Payor Management and Health Plan Claims

The shift in site of service or movement of provider-administered drugs from the physician office to the hospital outpatient facility remains a key cost driver of medical pharmacy spend across all commercial payors, according to a report by Magellan Rx Management.

Biosimilars continued to generate interest as potential cost-saving opportunities, with forward movement seen with the approval of the first biosimilar in 2015 with many more in the pipeline. Concurrently, new medical benefit drugs continue to enter the market after the FDA approved nearly 20 medical benefit drugs in 2015.

Trends in payor management and health plan claims are summarized below:

Payor Trends

• Ninety-two percent of payors have implemented medical benefit product preferencing
• Small plans tend to have product preferencing at higher rates than large plans

Utilization Management

• On average, 77% of payors implemented prior authorizations to manage use of medical benefit drugs for specific drug categories
• Prior authorization represented the most utilized tool for the management of medical benefit drugs

Benefit Design

• Coinsurance cost-share models made up nearly half of the medical pharmacy benefit
• Thirteen percent of payors varied their cost-share model by drug; 23% varied cost share by site of service
• Covering drugs that may be billed under either the medical or pharmacy benefit had similar out-of-pocket costs for members

Provider Reimbursement

• Consistent over the last 3 years, payors reimbursed physician offices, home infusion providers, and specialty pharmacies using an ASP plus markup methodology
• Hospital outpatient facilities overwhelmingly reimbursed based on % of charges
• Specialty pharmacies and home infusion companies used HCPCS codes; hospital outpatient facilities reimbursed through revenue codes
• Newly released, unclassified HCPCS codes were most often reimbursed at an AWP discount methodology with an average discount of 16% across physician offices, home infusion providers, and specialty pharmacies
• Hospital outpatient facilities continued to receive a percentage of billed charges for these agents

Management Trends

• For payors that implemented oncology-specific pilot programs, 90%, equating to over 77% of lives, were under an oncology-specific prior authorization management program
• Palliative care programs were a major component of oncology care for members; most members are placed in programs once they do not have a curative diagnosis. Many patients still receive chemotherapy within the last two weeks of life, although only 5% of payors knew what percentages of patients were represented

Utilization Trends

• Although half of members were treated in the physician office setting, commercial spend for the medical benefit was concentrated in the hospital outpatient setting (53%), while Medicare members and spend were concentrated in the physician office setting

• Medical pharmacy allowed amount PMPM in 2014 for commercial was $23.60 while Medicare was close to double that at $44.84
• Over the last year, commercial and Medicare allowed amount PMPMs have increased 11% and 5%, respectively

Medical Trend Drivers

• Over the last 5 years, there has been a 21% increase in the representative cost of the top 25 drugs on the commercial medical benefit. The total increase for the top 100 medical benefit drugs was 31%
• In 2014, for both commercial and Medicare, close to or more than 80% of drug spend occurred in the top 50 medical benefit drugs
• Across all medical pharmacy utilization, the annual cost per patient for commercial members increased by 9%, and the Medicare annual cost per patient decreased by 3%

National Healthcare Provider Trends

• Commercial medical benefit drug costs in the hospital outpatient setting are generally double that of the physician office
• On a disease category level, Medicare claims for oncology and biologic drugs for autoimmune disorders saw a decrease in the physician office since 2010, while hospital outpatient use increased and leveled off over the last two years