Witness the sad state of the economy. People are watching their 401(k) become a 101(k) with no bottom in sight. And there’s less money in the bank, yet larger and larger bills to pay. That means some tough choices, like dinner out once a month instead of once a week; a vacation in Paris, Texas, instead of Paris, France; and driving back and forth to work in a beat-up jalopy instead of next year’s model.
Employers, too, have their economic woes, and are facing some tough decisions regarding their health benefit plans. Specialty pharmacy is one area that is getting a hard look.
As specialty pharmacy gobbles up an ever-increasing percentage of healthcare costs, several solutions are being considered to slow its rising expense.
“With the economy going south, a lot of employers who were once giving away everything and anything to their employees in return for loyalty and tenure are looking for any way to control costs,” says Bob M. Charles, staff vice president at WellPoint Specialty Pharmacy. “Healthcare, and specifically specialty pharmacy, continues to be a huge driver of costs, and businesses can’t continue to absorb an overall 8 to 9 percent increase every year.”
One solution that is being bandied about is the not-so-new concept of disease-specific specialty drug carve-outs. These carve-outs involve the dispensing of specialty drugs, including biologics, for a specific disease through a pharmacy that specializes in that disease. Many pharmacy benefit managers now offer specialty pharmacies staffed by pharmacists and clinicians who have the knowledge and resources to meet the complex disease-specific needs of patients with rheumatoid arthritis, multiple sclerosis, HIV, hepatitis C, and cancer, for example.
About a decade ago, oncology drug carve-outs seemed imminent. Because of the complexity of cancer management, it was thought that a carve-out would allow better coordination of the high-quality care that is needed and in turn reduce employer costs. But both patients and providers campaigned loudly against a cancer carve-out, arguing that it would complicate and fragment care, limit provider access, and confuse covered employees and their families.
Robert Kalman, national pharmacy practice principal at the global human resources firm Buck Consultants, an ACS company, notes that one of his clients carved out specialty drugs, including cancer drugs, from its medical and pharmacy benefit plans a few years ago. The company’s PBM dispensed these drugs and provided clinical services to ensure their proper administration, improve drug adherence, and reduce the incidence of expensive inpatient hospital stays resulting from disease exacerbations.
Then the company received feedback from its employees about oncologists’ unwillingness to accept deep discounts of oncology drugs through the carve-out arrangement, so the company restored coverage of infusible oncology drugs under the medical plan benefit, but continued to carve out oral and self-injectable oncology drugs, along with specialty drugs for rheumatoid arthritis, multiple sclerosis, HIV, and hepatitis C.
“Infusible specialty oncology drugs are too sensitive an area to carve out because of oncologist resistance. We do not want to take any action in covering specialty oncology drugs that will risk interrupting cancer treatment,” says Kalman.
Although cancer carve-outs have not gained traction, the concept of a carve-out for other specialty drugs has gradually become an acceptable approach among employer plan sponsors to manage the high costs of these drugs and to improve patient management. The crumbling economic environment may be an important catalyst for generating even greater interest among employers in carving out specialty drugs.
“It’s a brand new day now,” Charles says. “I think we’re going to see a lot of people in these next few months who are going to look very carefully at carve-outs to try to get some cost control in this economy.”
WHY CARVE OUT?
Disease-specific specialty drug carve-outs are an attractive option to payers for more than just financial reasons. Payers have the opportunity to select vendors through a rigorous outcomes-based request for proposal process that identifies those vendors who are best able to meet a payer’s key cost and service objectives.
Specialty pharmacies also have begun to use the Center of Excellence model, which directs individuals with hard-to-treat conditions like hemophilia or HIV to those clinicians and health centers that will work with specialty pharmacy staff to improve compliance and overall outcomes. As new specialty drugs are developed to treat chronic diseases such as diabetes and heart disease, specialty pharmacy vendors will expand their range of therapeutic services to meet the needs of the expanding specialty drug patient population.
The crumbling economic environment may be an important catalyst for the heightened interest among employers in carving out specialty drugs.
Although cost savings will follow, Charles warns that the financials must be a secondary, not the primary, driver behind a carve-out.
“If you choose to carve out a therapeutic area and choose a specialty pharmacy on a cost basis alone, that’ll likely have an adverse effect on patient outcomes.
“But a properly executed carve-out scenario allows you to benefit in multiple areas. If you start by choosing a vendor based upon key measurable benchmarks, like compliance, you will be able to avoid downstream medical costs. The financial benefits are just icing on the cake.”
Adds Kalman, “Careful evaluation of all aspects of a specialty pharmacy’s offerings — clinical resources and services, patient management programs, outcomes reporting, performance guarantees — in addition to pricing terms is critical in selecting a specialty pharmacy.” A significant portion of the savings from specialty drug carve-outs comes from managing the patient to ensure appropriate drug therapy and the avoidance of disease exacerbations that lead to expensive hospitalizations, says Kalman.
So in what therapeutic areas might specialty pharmacy carve-outs likely grow?
Charles points to a few areas, such as multiple sclerosis, where the cost of therapy is particularly onerous. But he also notes that in some states, regulations may limit the ability of payers to provide access to healthcare providers through a carve-out for a specific disease. Some states have made it illegal to identify an exclusive provider of medical care. So, Charles says, employers should perform their due diligence before going in that direction.
Kalman believes that there is enormous growth potential in carving out specialty drugs in all therapeutic areas where they are used, with the exception of infused oncology drugs. He also believes that oncologist resistance to specialty carve-outs may be mitigated through future Medicare program reimbursement rule changes.
WHY NOT CARVE OUT?
For many of the same reasons that cancer carve-outs have not taken off, other therapeutic areas may also face obstacles. Advocacy groups often line up against carve-outs, arguing that any service limitations unfairly infringe on a patient’s freedom of choice and access to care — a carve-out, they say, may not include the best physicians in a particular disease area. Employers may not want to deal with that sort of headache.
“One of the reasons we are not seeing carve-outs happen more frequently is because these advocacy groups will really gear up to try to stop you, and they are a powerful force in many instances,” says Charles.
The administrative challenges can be formidable too. Carve-outs require new agreements with new vendors and care providers, a new set of rules that employees need to understand and follow, and more framework to support those rules. Some employers simply may not have the personnel to support multiple carve-outs with multiple vendors, even if they do make financial sense.
“If you do carve out therapeutic areas, you had better make sure you have the infrastructure to support them,” Charles says.
“A lot of specialty medications can be covered under both the medical and the pharmacy benefit, so they are carved out on a per-member, per-month basis. If it’s a pharmacy-based carve-out, the insurer must make certain that the referral is not claimed by the medical benefit, thereby triggering a double payment for the same service. There are a few administrative ways to stop that from happening, including frequent and visible claim audits,” says Charles.
Despite the hurdles, Charles and Kalman agree that disease-specific carve-outs are likely to gain a stronger foothold as the cost and utilization of specialty drugs increase. Whether they will be able to gain a widespread foundation, though, remains to be seen.