We recently wrote about the power of utilization management programs as a lever for pharmacy savings. Utilization is critical, we argued, but often not valued in the PBM RFP process. Too often, utilization management programs are not assigned a monetary value based on actual savings opportunities that exist within the employer’s own claims data.
Every employer and consultant running an RFP process should require PBMs to quantify the value of their utilization management programs. Using existing claims data, the PBMs should be asked these questions:
To quantify the value of utilization management, we consider two categories of metrics: first order and second order. First order metrics impact costs and can be quantified through the claims data. They are traditional utilization management metrics: medication mix, quantity and dispensing channel. For each, you can place a value against current and desired behavior and understand the value of a shift.
Second order metrics are health impact metrics, those factors that will impact outcomes that will, in turn, impact costs. This group includes access to therapy, adherence, speed to treatment response and side effect management.
Second order metrics are trickier to quantify because they can’t be tracked through claims data. To collect this data requires a combination of member engagement data and healthcare spend data (pharmacy + medical). It’s not common practice amongst PBMs, but WithMe is building out a system to do just this, because the insights will be invaluable.
However, evaluating first order metrics is something employers and consultants can do now with the data they already have.
Utilization management: aka who, what, where, and when?
Strictly speaking, utilization is defined as the quantity of drugs dispensed across a population. This number increases when more members fill prescriptions, each member fills more prescriptions, or more units are dispensed per prescription.
For most employers, quantity data is interesting but not eye-opening or urgent when it is unpinned from context and cost. To pin cost to quantity, we need to look at utilization mix - how much of each kind of medication is being dispensed across a given member population - and the impact on spend. We also need to look at where the medication is bought and administered and how this impacts spend.
We know that assessing utilization savings opportunities is logically simple but complicated in practice. Below we’ve chosen to dissect one example from a recent claims dataset that is straightforward but gives us the opportunity to discuss the methodology of the analysis, including ambiguities and margins of error.
1. Identify the opportunity:
In our claims review, we regularly see opportunities to improve what medication is prescribed, including:
We also see opportunities to improve how much is prescribed:
Indicated for rheumatoid arthritis and osteoarthritis, Duexis is a branded tablet that combines ibuprofen and famotidine (e.g. Pepcid AC) to help with pain while also decreasing the risk of developing an ulcer from the ibuprofen. Taking the individual components of generic or OTC ibuprofen and famotidine at the same time would in most cases achieve similar benefits and be significantly less expensive.
2. Size the opportunity:
To size the opportunity requires understanding not just how many members are eligible to shift but how many members realistically can be shifted. In this regard, tactics are critical.
In today’s world, most PBMs either require a prior authorization before covering the medication or simply exclude it from coverage altogether. This approach creates backlash from members. The end result is that employers are slow to make changes to curtail spending for fear of disruption.
Two capabilities we think are needed to achieve meaningful shifts are:
Optimizing new starts: Getting a new patient on the right medication from the start means you don’t have to change patient behavior later. A prescriber should have access to the formulary’s preferred list and the prices for medications being considered in real time, when prescribing for a patient sitting in his or her office. (We get this information to prescribers through real time benefits check (RTBC) which is an integrated part of the EMR prescribing workflow.)
Shifting existing patients: Behavior change is hard. But getting members to make changes is a critical capability for managing utilization.
Our approach: we start with incentives. We use state of the art technology to engage, motivate and offer personalized positive incentives for members to make changes. When appropriate, and in coordination with the prescriber, this may be a change towards a more cost-effective medication or a different pharmacy. For a certain portion of the population, this is enough. For others, it isn’t.
There are barriers that cannot be understood without first building a different quality of relationship. We do this through personalized engagement via a model we call MEDS: Meet, Evaluate, Decide and Support. This model is built on proven influencing techniques grounded in behavioral psychology and economic insights. At MEDS’ heart is the core concept that trusted relationships can influence behavior.
In this case, we’ll build in a 75% shift rate.
3. Value the opportunity:
Valuing the cost difference between current behavior and potential behavior is critical because it is not always intuitive. Some changes that sound great - e.g. shifting from certain brand drugs to their generic options - may make very little difference to your bottom-line while others have significant savings potential.
Duexis is a great example of the savings that can be realized when even a small population makes a change. Assuming that 75% of eligible members switch to the generic components in exchange for a waived copay, this plan sponsor would capture nearly $200,000 in annual savings.
Annual Savings = 100 x 0.75 x ($2,600 - $10) = $194,000
If a plan sponsor wants to realize 100% of the opportunity, they can exclude Duexis from coverage. However, many employers like to have the option of first trying to affect change in a way that does not create member backlash. Prior authorization is another popular tool, but this also adds friction to the system. Incentives can achieve the same end without the same side effects.
A formulary needs to be equally dynamic, able to incorporate the most up-to-date priorities to protect employers from the financial exposure of pricey new entrants and rapid changes in drug prices.
You have opportunities. We have answers (you knew this plug was coming...)
Utilization management is not a new concept. But to do it well requires agility and finesse. Trying to do it with blunt instruments - such as relying heavily on prior authorizations or high copays - really damages the member experience. For many, this version of tight management hasn’t been appealing. Doing it well requires a fine balance.
This objective is embedded in our clinical protocols, which are more detailed, data-backed and dynamic than our competitors’. It is central to how we’ve built our technology, which supports giving prescribers and patients the information they need when they need it. It’s evident in our deep bench of engagement tools, which enable us to tailor interactions by plan sponsor and for the occasion, from light-touch incentives communications via app or text to in-depth conversations between our team of pharmacists and members in need.
And we’ll put a significant portion of our fees on the line to prove it to you.
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