Rapid Deployment of Prior Authorization Policies

In an effort to minimize the cost curve, payers have been adjusting their utilization management policies, spurred by the approval of several costly new hepatitis C medications.

It’s no secret that payers continue to increase their attention on specialty pharmaceuticals. The reasons behind this trend have been well identified in industry press. Stakeholders expect utilization and costs to rise over the next 5 years, with the specialty category consuming a majority of drug spend. Similarly well known are the management interventions payers implement to ensure appropriate utilization and minimize the cost curve: prior authorization (PA), 4-tier cost-sharing, and distribution limits, to name a few. Less obvious, perhaps, are the ways in which payers have fine-tuned their utilization management (UM) operations and the tools they employ, and how these changes present an opportunity for their specialty pharmacy partners.

Reflecting on the management dynamics of the past several years within the rheumatoid arthritis and multiple sclerosis categories (and also the human growth hormone and erythropoiesis-stimulating agent categories) can help one to foretell payers’ strategies for the future. Management of these specialty categories has become decidedly less special; contracting for preferred status is the norm and serves to restrict access to newer agents through prior failure requirements. The rise of contracting (where practicable within specialty categories) indicates that the severity of the conditions treated by these agents does not (and will not) preclude payers from making financially motivated formulary decisions. Indeed, such arrangements have already taken hold in select oncology subtypes. However, if contracting-enabled prior failure represents the ultimate UM intervention (short of formulary exclusion), it goes without saying that the dynamics that allow contracting among anti-tumor necrosis factor agents or growth hormones or interferons don’t exist in each specialty category. Specifically, some categories don’t contain therapeutically equivalent agents and others don’t have willing contracting partners. In these categories, and especially for the newer agents therein—most oncology subtypes, hemophilia, immunoglobulins, HIV—payers are maximizing UM.

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This maximization manifests itself along 2 paths. As alluded to in the opening paragraph, on the financial side of the UM ledger, payers implemented significantly more 4-tier plans in their commercial lines during the plan year 2014 than they had the year before. Coupled with deductibles, the 20% coinsurance typically adjudicated on the fourth tier can quickly drive out-of-pocket costs into the thousands of dollars, particularly early in the plan year. Payers are not immediately moving established agents to these tiers, possibly out of concern for patient pushback, but are rather establishing a “start as you mean to go on” policy, placing new agents on higher levels of patient cost-sharing immediately upon launch.

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But it’s on the clinical side of the ledger where payers’ approaches to UM developed most interestingly this year. The development is not strictly clinical, but rather operational, in nature. Traditionally, payer policies had allowed relatively open access to new agents for the first 6 to 12 months post approval. Employing omnibus new drug launch policies, payers reviewed claims individually until development and implementation of the formal, final PA criteria. These new drug policies provi-ded manufacturers the opportunity to build market share among physicians, thereby influencing payers to allow broader access in deference to those very same doctors.

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Recently, however, we’re seeing evidence that the launch policy window may be closing for manufacturers. Shortening the timing of formal policy adoption makes sense for payers for 2 reasons. First, in the absence of preferred contracting, PA language most likely corresponds to label, so by shortening the timing of formal policy adoption, payers can unilaterally ensure appropriate utilization without courting the controversy of contracting. Second, and by extension, because these agents are expensive, plans can more consistently control costs.

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The prime example of payers’ speedy UM decision making can be seen in their recent handling of costly new hepatitis C drugs. Payers were so attuned to HCV policy development that within 1 month of publication of the American Association for the Study of Liver Diseases’ recommended guidance about Olysio and Sovaldi, 94% of payers that had forbid concomitant use reformulated their PA documents. Just as rapid was the payers’ reaction to the recent approval of Harvoni. In this instance, 30% of payers covering 43% of lives had their policies ready within the first month of launch, compared with 20% of payers covering 22% of lives for Sovaldi. In addition, Blue Cross and Blue Shield of Kansas, Alabama, and Montana have already published a policy for the as yet unapproved AbbVie combination therapy. During a conversation in October, a major national pharmacy benefit manager and specialty pharmacy explained to us they have an operational process in place to have policies ready at launch.

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It’s important not to overstate the dynamic our research has identified. New drug launch policies will not disappear overnight. Not all payers manage access according to the same philosophy. Some payers may not have the operational expertise, or staffing headroom, to plan policies in advance of launch. Finally, although we think it will, select payers’ behavior regarding costly new HCV therapies may not spread to other payers, or translate to UM developments in other therapeutic areas. It is important to recognize the trend, however, because this dynamic may offer a chance for specialty pharmacy providers to provide key guidance to payers on how to balance the growing costs of specialty with the value these agents bring to patients. SPT

About the Author

Lee Goldberg, MBA, is director, syndicated research, at Zitter Health Insights. He previously worked as a senior financial analyst at Medco. Lee earned a Master of Business Administration in finance from Rutgers, The State University of New Jersey—Rutgers Business School.