Specialty Pharmacies: Meeting Payer Needs in an Evolving Market

With the continued growth of the specialty pharmacy market, payers are employing an increasing number of cost and utilization management strategies to ensure proper use of specialty medications. Collaboration between specialty pharmacies and payers is essential.

The specialty pharmacy market accounted for approximately 27% of the total US prescription drug market in 2012,¹ up from 19% of the total US prescription drug market in 2007. This trend is expected to continue as the specialty pharmacy pipeline expands and new medical technologies are introduced.

Other key specialty pharmacy trends include:

• By the end of 2014, it is projected that the United States will be spending $123 billion per year on specialty therapies, representing a 15% to 17% annual growth.²
• Specialty drugs will make up 40% of the products in the pharmaceutical pipeline by 2020.³
• Fifty percent of the top 100 drugs and 8 of the top 10 drugs will be specialty pharmaceuticals by 2016.⁴
• Orphan drugs are coming to market with price tags of more than $300,000 per patient per year.⁵

The specialty pharmacy segment perceives this as an opportunity for continued economic growth of its businesses, while payers perceive this as a challenge. Specialty drugs are being used to treat a much broader array of disease states, and their use will continue to expand as new specialty drugs come into the specialty market. Given this growing market, patient adherence and medication therapy management (MTM) programs are becoming an increased area of focus within specialty pharmacies.

Payer Perspective

Based on this specialty market growth, payers are eager to determine the total cost of care for various disease states and establish guidelines to ensure the appropriate use of specialty medications. Payers accomplish this through cost and utilization management strategies that focus on the use of benefit design to alter prescribing patterns, ensure affordability, prevent waste, and utilize the most appropriate drug. Payers expect prescribers to follow evidence-based clinical guidelines to ensure appropriate use of specialty drugs and minimize the risk to patient safety. Based on cost, payers recognize the following disease states within the specialty category:

• Oncology
• Human growth hormone
• Multiple sclerosis
• Hemophilia
• Immune deficiencies treated with intravenous immunoglobin
• Rheumatoid arthritis
• Hepatitis
• HIV/AIDS
• Kidney disease
• Ophthalmologic disease

Payers are faced with significant challenges related to coverage, cost, clinical management, and reimbursement. A variety of strategies has been utilized to address these challenges and will continue to evolve as payers examine the specialty category with increased scrutiny. Payers are employing more intense management techniques to manage specialty drugs. They will manipulate the following utilization management tools to get better results:

• Specialty pharmacy contracts and agreements
• Cost and reimbursement issues
• Medical policy coverage challenges/limitations
• Clinical outcomes
• Compliance and adherence—medication possession ratio
• Site of care of administration
• Office-based injection programs
• Benefit design
• Provider/employer partnerships
• Technologic enhancements, such as claims adjudication visibility

Payers and employers must carefully monitor the specialty pharmacy market for the following reasons:

• Specialty pharmacy is the fastest growing employee benefit expense, especially for administrative services—only groups.⁶
• Specialty pharmacy is concentrated within a small segment of patients (~1% of the population),⁷ but spending in this category stands to have a big impact on plans.
• Complex biologics are high-cost and high-risk medications.

In addition, specialty pharmacies are affected by the narrowing of specialty pharmacy networks. Other restrictive utilization techniques used by payers include:

• Use of preferred specialty pharmacy networks
• Dose optimization programs and proactive refill compliance assessments
• Payer adherence programs
• Payer precertification, predetermination, and revaluation policies
• MTM or therapy optimization management programs that focus on dosing, duration, therapy interval, diagnosis, and drugs
• Movement to average sales price reimbursement methodology
• Preferred product selection
• Requiring specialty pharmacies to mirror certain payer policies

For the payer, specialty pharmacies must demonstrate appropriate use through drug management programs. Payers focus on key cost and utilization management strategies to optimize prescribing patterns, ensure the use of the most appropriate drug, and prevent waste. Specialty management programs include distribution channels, utilization management, contracting, and care coordination.

Specialty Pharmacies Adding Value

Specialty pharmacies need to establish key contracts and agreements with payers to add additional value both to the payer and the prescriber by providing additional patient education, opportunities for improved adherence, and other cost utilization measures. In addition, specialty pharmacies can add value with their clinical expertise and local relationships, and can gain preferred provider status with key payers.

More and more, specialty pharmacies are emerging and providing additional expertise in areas such as specialized regional coverage, therapy management programs, and information technology medical claim expansion. However, specialty pharmacies must also consider new lines of services or improve their current services in order to deliver quality value-added propositions to their clients. This shift toward improved services is due to the fact that profit margins are shrinking. The reason is because payers are challenging specialty pharmacy networks to prove their value and manufacturers are looking to specialty pharmacies to improve the total cost of care management of specialty products.

Other factors driving increased growth of specialty pharmacies include:

• Increased specialty medication volume
• Specialty drug shifts to oral therapies
• Growing physician acceptance of specialty pharmacy value
• Manufacturer desire to improve distribution channel
• Health care reform implementation

Specialty pharmacies offer an array of services to payers to manage chronically ill, high-touch patients in a cost-effective manner. Some use extensive MTM programs that involve the collaboration among the pharmacist, patient, and physician. Other specialty pharmacies offer consistent patient management, specialized clinical staff support, and clinical programs focused on patient adherence to therapy.

Essentially, what this means for the specialty pharmacy market is that there will be more barriers and hurdles to overcome in order to get access to and coverage for specialty drugs. Payers’ increasing level of sophistication about the economics of health and therapy management programs will help them measure the true value of specialty pharmacies. As payers work to change strategies around specialty pharmacy utilization and cost, many specialty pharmacies continue to struggle with implementation. Specialty pharmacies should consider developing or improving service offerings in the following areas:

• Specialty distribution channel advancement
• Improved data analytics support and outcomes
• Establishment of partnerships and outsourcing with companies

Specialty Distribution Channel Advancement

Payers are changing their pharmacy networks and developing limited specialty pharmacy networks based on which specialty pharmacies members can access which pharmacies to fill the script. The overarching business strategy fueling this practice of narrowing specialty pharmacy networks has been to obtain more consistent and reliable data from a limited number of specialty providers and to increase the quality of care to members. In addition, many retail pharmacies are investing in developing specialty drug capabilities to capitalize on the growing market and are adding more restrictive networks within the payer distribution channel.

The narrowing of pharmacy networks places focus on the site-of-care options for specialty medications. Multiple sites of care have appeared as payers and employers consider changes in benefit design and reimbursement methodology to control cost and utilization for specialty products. Specialty pharmacies have much to gain from understanding the market dynamics of site-of-care options for specialty products and the impact on product success. Additionally, payers and specialty pharmacies will continue to modify their programs to ensure cost containment and monitor product effectiveness. Payers now have more tools to manage specialty products and redirect patients to other sites of care, allowing payers to establish clinical standards and dosing guidelines, lower reimbursement based on the sites of care, and better control patient outcomes (Table 1).

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Improved Data Analytics Support and Outcomes

Specialty pharmacy programs should incorporate innovative technologies to ensure accurate management of patient data and maximize reimbursement opportunities. Key data analytics and outcomes programs should offer these key insight areas of specialty pharmacy for the payer (Table 2).

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Key Partnerships and Outsourcing

Specialty pharmacies must collaborate with payers to develop a distribution strategy model that meets this rising market change toward site-of-care optimization for specialty products. In addition, continued changes in reimbursement methodology and benefit design will be necessary to drive optimal usage and ensure contracting efficiency between all stakeholders (Table 3).

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Collaboration is essential to all specialty stakeholders to provide optimal patient care. Specialty pharmacies seek to diversify their offering to payers by utilizing outside vendors to support their management of specialty therapies. Although many services are available, the core contracted services are: patient monitoring, distribution discount programs, special drug handling and reporting, risk evaluation and mitigation strategy requirements, prior authorization and physician documentation, patient assistance programs, clinical programs, access to pharmacy and retail networks, and patient outreach programs. These support service collaborations help add value to the specialty programs and provide physicians, payers, and manufacturers with the opportunity to use specialty pharmacies to achieve a common goal—a successful therapeutic outcome for the patient.

As a result, key partnerships will continue to grow within the specialty pharmacy segments based on meeting the needs of these patients whose health care requires more time, different resources, more information, enhanced data tracking, and improved transition of care for the appropriate use of specialty pharmaceuticals. In short, specialty pharmacies will need to assess their value and ensure that they are offering value to payer by:

• Developing the appropriate distribution model strategy for payer networks
• Addressing payer medical policy challenges
• Assessing health care reform’s impact on payers
• Evaluating clinical services and performance and regularly updating resources aimed at disease-specific adherence, interventions, and outcomes measurement
• Maintaining communication with patients/physicians/employers
• Level of control in marketing & program enrollment
• Providing data analytics support and improved diagnostics. Pharmacies should have the ability to access unique clinical and economic data to leverage evidence-based coverage decisions
• Employing a biosimilar therapy strategy for the future. SPT

About Armada

Armada Health Care, LLC, is the industry’s largest specialty pharmacy group purchasing and contracting organization. Armada provides comprehensive and cost-effective access to the nation’s $100-billion specialty pharmacy industry. Armada offers pharmacy providers, manufacturers, health plans, and wholesale distributors a total channel management solution through customized patient programs, prescription data management services, online platforms, and unique purchasing agreements on specialty pharmacy products. To learn more about Armada Health Care, visit www.armadahealthcare.com. The author is currently employed by Armada Health Care. The views expressed are that of the author and not that of current or previous employers.

References

• Managed Markets and National Accounts Service. Specialty Pharmacy Provider Market. 2013 Summer Report. Health Industries Research Center.
• Maas A. Focus on site of care can boost patient outcomes, payer savings. AISHealth website. http://aishealth.com/archive/nspn0513-06. Published May 2013. Accessed March 1, 2014.
• Kerr J. Employers becoming more savvy about specialty pharmacy, but need more cost controls. Health Leaders InterStudy website. http://hl-isy.com/Healthcare-Reform-Blog/February-2013/Employers-specialty-drugs-pharmacy-benefits-020613. Published February 6, 2013. Accessed March 5, 2014.
• 2011 Drug Trend Report: Healthcare 2020: fast forward to the future. Med Benefits. 2011;28:1.
• Herper M. Inside the pricing of a $300,000-a-year drug. Forbes website. www.forbes.com/sites/matthewherper/2013/01/03/inside-the-pricing-of-a-300000-a-year-drug/. Published January 2, 2013. Accessed February 28, 2014.
• Specialty pharmacy: stakeholders, strategies and markets 2009. Washington, DC: Atlantic Information Services, Inc. Published January 12, 2009.
• Specialty pharmacy. UnitedHealthcare. www.uhc.com/pharmacy/specialty_pharmacy.htm. Accessed March 3, 2014.

About the Author

As executive vice president of industry relations and advocacy for Armada Health Care, Michael J. Baldzicki, CRCM, implements strategic business development and contract negotiations and heads the blood product initiatives that affect Armada and its client base within key market sectors for specialty pharmacy. Armada Health Care is leading the specialty pharmacy industry with channel management solutions, commercialization strategies, and specialty pharmacy support services.

With more than 14 years of pharmaceutical and biotech industry experience, including roles in national and regional managed markets, specialty supply channels, sales management, and specialty brand management, Mr. Baldzicki offers strategic insight into specialty pharmacy trends, distribution, contracting, reimbursement, and the application of health outcomes and economic evidence to prove value proposition. He is a recognized leader in the specialty pharmaceutical market for developing and implementing key payer and specialty pharmacy agreements that result in documented savings for specialty market segments.

Prior to joining Armada Health Care, Mr. Baldzicki held roles in senior management within the specialty pharmacy supply group, pharmaceutical and biotech industry of managed markets, group purchasing organizations, and integrated delivery networks. He brings particular expertise in managed care, specialty pharmacy, hospital sales, reimbursement, and brand management for biologics, including specialty infusion therapies and blood products for hematology, oncology, and other rare disease areas.

Mr. Baldzicki holds a Bachelor of Arts in business management and a certificate in clinical research compliance and management. He has completed programs in leadership development at Harvard University, Quantum Management, Brooks Group, Miller Heiman, and MD Anderson Cancer Center.

He is active in the biotech community and is a member of the Academy of Managed Care Pharmacy, Specialty Pharmacy Association of America, Guidepoint Global Committee Member for Specialty Pharmacy, Immune Deficiency Foundation Committee, and is an editorial board member of Specialty Pharmacy Times.