Planning a Specialty Drug Strategy Through 2020

Traditional approaches are not suited to managing the cost of specialty drug therapies

By Gregory Judd, CEBS, and Randy Vogenberg, PhD May 4, 2015
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The specialty drug tsunami is picking up strength and is about to come crashing down on health care plans through 2020. Employers have mostly responded by turning to conventional financial tools used in benefits management: an additional co-pay tier for their prescription drug plan and, in some instances, prior authorization rules and step therapy protocols (in which doctors are pressed to first try less-expensive medications) to restrict the use of high-cost specialty drug regimens.

Few if any employers have amended their plans in ways that indicate they realize that new specialty drug therapies represent a structural change in the nature of a health benefits strategy. This has been noted in national surveys on specialty drug cost trends by the National Employer Initiative on Specialty Pharmacy, led by the Midwest Business Group on Health and the Institute for Integrated Healthcare.

Traditional prescription benefit management is not well suited to accommodate the emerging clinical capabilities—let alone the daunting cost—of specialty drugs. For example, drugs for treatment of Hepatitis C have gotten attention for their breathtaking prices, and their potentially backbreaking costs for employers with larger but still limited covered populations susceptible to the diagnostic condition. The clinical ramifications have gotten less attention because few health benefits executives have clinical training, and also because while the condition is much more prevalent than, say, hemophilia or Gaucher's disease, it is not particularly common across large working populations.

Coverage Decisions: Pennywise or Pound Foolish?

But what happens as pricey specialty medications are further developed to treat conditions more prevalent among working-age covered populations, such as high cholesterol, and to do so with unprecedented effectiveness? That reality is happening in 2015 with the expected launch of products in the new class of cholesterol-lowering PCSK9 inhibitor drugs. One manufacturer has already received FDA approval to market a drug of this type in the U.S., beginning as early as June 2015.

Employers should not pretend that doing nothing intentional regarding specialty drugs is the same as having a plan of action or a real benefit strategy. Benefit plan decision-makers are held to a crucial fiduciary responsibility—to deploy plan assets for the exclusive benefit of the plan participants. Regulators are not bound to apply a particular accounting time frame to determine if an employer has appropriately addressed that responsibility.

That is, a “sensible”—though short-term—decision to save plan resources by deciding not to cover costs of certain treatments, or introducing sharply increased cost-sharing via conventional tiered plan design for particular remedies, may not ultimately be judged sensible if the remedy would otherwise help the plan avoid some cases of much more costly “rescue care” for afflicted patients years into the future.

Decision-makers do need to make careful plan design decisions but also must keep in mind that sometimes, being penny-wise may be pound-foolish. And benefits decision-makers will be making harder decisions about pennies and pounds in the very near future—about drugs in the new class of PCSK9 inhibitors, as well as about Hepatitis C remedies such as Sovaldi or Viekira Pak, along with many more new specialty drugs moving through the development pipeline of manufacturers.

Beyond Conventional Thinking

Today, pharmacy benefits managers (PBMs) are typically making those decisions in a conventional way—basically cutting volume deals (contracts and/or rebates) predicated on exclusivity, putting employers in the potentially troublesome position of choosing, via their choice of PBM, one medication over another for its covered population.

Some employers are giving closer attention to value-based contracting initiatives like those EMD Serono (maker of multiple sclerosis drug Rebif) has forged with Cigna and Prime Therapeutics, which puts drug manufacturer revenues at risk if patients' total cost of care is higher than alternatives.

Among other considerations, employers must weigh the greater operational complexity of such arrangements against the promise they hold for enabling employers to purchase better health, rather than cheaper pills, for their covered employees and dependents.

The process of working through these strategic considerations may not insulate decision-makers from accusations that, in focusing primarily on shifting costs to unfortunately afflicted employees, they have not met their fiduciary obligations to the plan and its participants. But it may help do so. And it may also help assure the C-suite that a segment of the health benefits budget that is almost certain to expand rapidly during the next few years is being astutely managed.

Gregory Judd, CEBS, CLU, ChFC, leads Benefits Information Group, a provider of employee benefit plan market intelligence. Randy Vogenberg, PhD, RPh, principal at the Institute for Integrated Healthcare and partner at Access Market Intelligence, is a national expert on managed care and health innovation research. Currently, he is co-project leader for the National Employer Initiative on Biologics & Specialty Drugs with the Midwest Business Group on Health.

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