In 2021, specialty drugs made up just 2% of prescriptions written but accounted for 51% of commercial payers’ net pharmacy spending, according to AIS Health. Plan sponsors spend an average of $38,000 annually to cover a specialty patient’s drugs compared to $492 for a non-specialty patient.
Although specialty trend stabilized during the pandemic due to overall deferral of care, it has bounced back, and all signs point to sustained increases. According to the PSG 2022 State of Specialty and Trend Report, in 2020, growth in specialty spend was 11.8%. In 2021, it was 14.2%. Of this growth, the majority (9.8%) was driven by an increase in utilization (not price). So while specialty drugs are still becoming more expensive, the major driver is that more people are using specialty drugs. “We all worry about the drug costs and how high the drug costs are. But in this case according to our data, utilization is driving the trend more than the cost,” Renee Rayburg, R.Ph., vice president of specialty clinical consulting, said in an interview with Formulary Watch.
Because utilization is the largest driver of specialty trend, the key question for plan sponsors is: How do I reduce inappropriate usage while supporting appropriate usage?
Plan sponsors made this concern clear in a 2021 survey of 171 benefits leaders representing plan sponsors of 41.4M covered lives. The top priority amongst these respondents was reducing inappropriate utilization (37%). Doing this successfully is an opportunity to save an average $114.82 per member per year (PMPY).
The PSG survey highlighted the most popular utilization management tools today:
95% use prior authorization (PA)
94% use quantity limits and/or dose optimization programs
92% use step therapy and quantity limits
86% use clinical care management programs (e.g., adherence, disease management, patient support programs)
While utilization management is the backbone to better managing specialty spend, it does not decrease the risk of appropriate usage that results in catastrophic spend.
To manage this risk, self-funded plans have other options:
Stop-loss insurance: Either independently or as part of a group captive
New to market formulary blocks (NTMB): 51% of those surveyed always or sometimes exclude new products at launch when recommended. This practice – also known as “excluded at launch” – delays member access to certain newly launched drugs to allow the plan sponsor time to develop clinical criteria for coverage
Alternative funding models: Only 8% of employers are currently using one but 31% are exploring the idea
Alternative funding models are controversial. They work by first requiring plan sponsors to deny coverage for a medication. Then the AFP will match members who need a specialty medication with third-party organizations that provide funding for that therapy. These organizations can be foundations, public charities, or government programs. Some are funded by drug manufacturers; some are independently funded.
The risk to members is that this model guarantees delay of treatment while not guaranteeing successful funding of the medication through third-party resources. One potential outcome is that no alternative funding is secured and the member is sent back to their plan to attempt to secure a coverage exception. However, for plan sponsors trying to manage spend, this outside option can act like a safety valve - enabling them to both care for their member and their budget.
Plan sponsors and their advisors should seek to understand the source of the funds and scrutinize the relevant tradeoffs for their members; AFPs may be a good fit for some plan sponsors but overly disruptive or a bad fit for other reasons for other plan sponsors.
We manage costs of specialty pharmacy through our best-in-class Personalized Medication Guidance model. This brings forth our full suite of services that guide members and prescribers to the optimal medications, optimizing for clinical outcomes and lowest net cost. It’s an all-in-one program that deploys utilization management (PAs, step therapy, quantity limits), patient assistance programs like our CopayMAX program, channel optimization, and clinical interventions.
We believe it’s a mistake to silo specialty management from non-specialty. Our approach is instead to integrate. We believe that having one team managing across specialty and non-specialty medications enables a holistic view of member behavior that prevents unsafe or overly complex prescribing. It also helps us control overall costs on behalf of plan sponsors and members.
Specialty patients represent both higher costs and more complex needs. They need more support. Accordingly, our analytics platform and rules engine prioritizes them for high-touch engagement and outreach from our team of experienced pharmacist Guides. But we also think it’s critical to look at the full population, since the future specialty user can be managed through preventive care and upstream treatment options more effectively today so unnecessary costs can be avoided or at least delayed.
There is no one size fits all approach to managing specialty, so all solutions need to be understood in the context of a specific plan sponsor’s situation.
For some of the more innovative plan design offerings, such as alternative funding models or international imports, we partner effectively with our plan sponsors to accommodate and integrate those programs that are important to them and their members, but we caution that these solutions are not always the right choice.
Most importantly, regardless of what a plan sponsor and their advisor decides to include in the plan design with WithMe Health, we don’t leave members hanging. Instead, we monitor members’ response to medications, with hands-on service to get them on appropriate medication in coordination with their prescribers. It’s going that extra mile that makes all the differences – for savings, for satisfaction, and for health outcomes.
¹The report’s findings were based on a May 2021 survey of 171 benefits leaders (employers, unions/Taft-Hartley plans and health plans) offering specialty drug coverage through pharmacy and medical benefits. The sampling represented plan sponsors of roughly 41.4 million covered lives.
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