Biotechnology Healthcare surveyed specialty pharmacies and found distribution, adherence, and cost among purchasers’ biggest sources of anxiety.
Abstract
Employers and health plans expect specialty pharmacies to deliver biologics affordably and effectively. But providing such value can be a challenge, because these drugs tend to be expensive, tricky to handle, and more difficult to administer than traditional medications. Here’s a look at how SPs are managing five key issues.
Like an American icon, Galloway Pharmacy has stood at the intersection of South 30th St. and National Ave. in downtown San Diego since 1924. Today this classic corner drugstore, whose soda fountain served nickel cherry Cokes to sailors three generations ago, stands at the intersection of the 20th and 21st centuries.
In characterizing how Galloway Pharmacy responds to client concerns, CEO, Scott Tyree says, “I can design the billing operation, cut PBM costs, and set up a team to communicate with physicians and patients to address the compliance issue.” The strategy, he says, can be cast according to manufacturer, payer, or disease.
PHOTOGRAPH BY ROBERT BURROUGHS
While maintaining its traditional retail operation, Galloway expanded in the mid-1990s into a specialty pharmacy (SP) to help employers and health plans manage biotech and other specialty pharmaceuticals. More sophisticated to make — and more complex to administer — than traditional pharmaceuticals, specialty pharmaceuticals also are more expensive, and receiving accurate reimbursement for them can be difficult. Galloway and other SPs saw the opportunity to help employers and plans take better control of those issues.
“Most of the new medications that are life-saving are specialty pharmaceuticals such as biotech drugs,” says Scott Tyree, Galloway’s chief executive officer. “We know that cellular-manipulative therapies work. If health plans are going to pay for them, then let’s make sure patients take them appropriately. That’s what we do.”
The challenges are likely to grow, especially if executives like Tyree are correct in their assumption that pharmaceuticals will diverge into two categories: high-volume traditional pharmaceuticals dispensed largely through mail order, and specialty pharmaceuticals like biologics that are sold in smaller volumes and focused on quite specific conditions, such as certain cancers.
Biotechnology Healthcare asked SP executives to tell us in which areas their employer and health plan customers most frequently request their assistance relative to managing biotech therapies. Not surprisingly, cost ranks first on payers’ list of concerns, followed by a fragmented distribution system, and challenges related to patient adherence to therapeutic regimens. All three concerns are pieces of the value puzzle of how to get the maximum clinical benefit from biotech therapies as affordably as possible.
CONCERN #1: COSTS, AND TRACKING THEM
“The number one concern is the cost,” says Michael J. Sicilian, executive vice president for BioScrip, the specialty pharmacy of MIM Corp., of Elmsford, N.Y. “With these drugs ranging from $2,500 to $30,000 a dose,” he says, the major issue for employers and their plans is managing costs in terms of coverage and employee copayments.
Among other services, SPs negotiate with biologics manufacturers for price discounts using buying power built on representing multiple health plans. But the job is more complicated than just leveraging volume. Sicilian notes that 70 percent of SP drug costs fall on the medical side of benefit reimbursement and 30 percent on the pharmaceutical side. Billing for the latter is relatively easy because pharmaceuticals are assigned a National Drug Code number that facilitates quick online transactions. As a result, cost and reimbursement for pharmaceutical benefits is highly visible to health plans and employers that try to track expenses.
However, the bulk of SP drugs—a mushrooming category fueled by a steady stream of new entrants—use medical J-codes for billing, because they’re often administered by a physician. When physicians bill under the medical side, payers have trouble breaking down the drug’s price and therefore have little ability to control it.
“If a health plan receives a medical claim under the J-code billing format for $10,000, it’s difficult to determine what portion is for the drug, the office visit, or physician administration,” says Sicilian. As a result, employers and their health plans have trouble verifying that they’re paying the right amount. “Much of the cost of biotech therapies is physician-office billed. We try to create visibility to better manage the process,” he says.
For example, physicians usually administer infliximab (Remicade) to patients who have rheumatoid arthritis in their offices. Yet self-administration, properly supported by nurses or other licensed clinicians, can be just as effective and eliminates the physician charge. “We spend a fair amount of time teaching patients how to self-inject,” says Sicilian.
Steve Russek, vice president of Medco Specialty Pharmacy Services, says the most basic concern for employers and plans is “affordable access,” or the ability of patients and insurers to pay for drugs that can cost anywhere from $10,000 to $250,000 a year. “How do they maintain access to these drugs and keep their copayments in line?” he asks.
Traditional pharmaceutical prices increased about 10 percent between 2002 and 2003, Russek says, compared to specialty drug prices, which rose about 25 percent during the same period. That rate should continue for the near future, even as new specialty drugs come to market about once every six weeks.
Furthermore, the biotech pipeline is beginning to address larger populations. In the recent past, a typical SP-managed drug would treat an illness like Gaucher’s disease, targeting only 3,000 patients. Today, SPs manage drugs aimed at larger populations with chronic diseases like asthma, psoriasis, and diabetes. As a result, plans increasingly will face costs of $10,000 or more a year per patient with chronic conditions, compared to $300 a year for traditional pharmaceuticals.
If no one monitors how well the patient responds to the specialty therapy, “the plan could pay twice.”
— Steve Russek Medco Specialty Pharmacy Services
Compounding the cost issue is the fact that direct-to-consumer advertising is driving up demand for certain biotech products, including Procrit (epoetin alfa), which costs $10,000 to $15,000 a year.
CONCERN #2: ADHERENCE
Such advertising reflects how specialty drugs constitute “a very manufacturer-influenced market,” says Russek. Manufacturers use a number of strategies to keep control of distribution and administration of their products. Manufacturers also keep a hand in patient treatment by setting up referral centers and through regular telephone calls to patients to help them adhere to therapy. “It’s a much different model than traditional pharmaceuticals,” says Russek.
Indeed, one challenge for health plans is to recognize the value of injectable-compliance programs as part of the patient’s complete and often varied treatment program. ”You need to look at the entire patient,” says Sicilian.
“No one disputes that Enbrel [etanercept] extends the quality of life for people with rheumatoid arthritis, even though it costs $1,000 a month,” says Greg Weishar, president of PharmaCare. “That’s what health insurance is all about.”
Last year, Pharma-Care processed 1 million prescriptions, for more than $1 billion dollars in sales, focusing on hepatitis and immune diseases. “Cost is a big issue — making sure you’re buying it right,” he says, but so is “making sure these drugs are taken right. There’s a high propensity for adverse reactions.”
CONCERN #3: LACK OF COHESIVENESS
Specialty drugs are subject to the same issue that has bedeviled the U.S. healthcare system for ages — in this case, says Russek, the “fragmentation of specialty distribution” among pharmacies, physician offices, home health agencies, and SPs, Russek says. “This is a huge challenge, because it creates an opaqueness to data about utilization,” especially when 70 percent of drug costs are hidden in the medical side.
CONCERN #4: OUTCOMES MEASUREMENT
Yet another issue is obtaining maximum therapeutic outcomes from biologics and other specialty drugs. For example, a patient’s biologic therapy for hepatitis C might cost a health plan $15,000, yet the drug might not deliver the appropriate therapeutic benefit for that patient. Even a patient who complies with the drug regimen might wind up undergoing a transplant. If no one monitors how well the patient responds to the specialty therapy, “the plan could pay twice,” says Russek.
CONCERN #5: CONSISTENCY OF BENEFIT
Employees may face different coverage rules and copayment amounts under medical and pharmacy benefits for the same drug. While some employees may get coverage for a biotech drug through an SP, others might find that their prescriptions are getting rejected. “A lot of employers are concerned about this. They like a consistency of benefit,” says Russek.
Because of these challenges that are facing employers and plans, Medco is trying to differentiate itself with a more comprehensive and condition-focused approach to its SP patients, rather than a single-specialty product focus. This holistic approach benefits specialty patients, who might be prescribed up to a dozen different drugs — for pain, nausea, inflammation, depression — in combination with their specialty medication.
Other SPs may be moving in the same direction. “Over time, everybody’s becoming more of a generalist,” says PharmaCare’s Weishar. The cost of biotech therapy keeps employers and plan executives awake at night, he says, because most patients who take biologics fall into the mere 1 percent of patients that accounts for 30 percent of care. Manufacturing biotech drugs is expensive partly because developing the proteins that make up biologics tends to have a high failure rate. As a result, much of biotech drug development is aimed at high-paying areas like cancer.
HOW DID WE GET HERE?
The challenges of biotech therapies for employers and health plans arise from their very nature. Many are orphan drugs for which it is impractical to amass a large panel of patients for trial. Traditional pharmaceuticals typically can undergo phase 1 safety testing for 30 to 50 patients; phase 2 effectiveness testing involving about 200 patients; and phase 3 testing of both safety and effectiveness among a population of 3,000 or more patients.
Orphan drug status shortcuts that process, where there’s a small phase 1 and then the drug goes directly to phase 3.
In addition to smaller-scale testing for biotech drugs, the bar for proving effectiveness is lowered due to the variability among patient responses to biologics. It all adds up to a greater need on the part of everybody — patients, physicians, plans, and employers — to understand appropriate use of biotech medication and to manage potential side effects. That’s where SPs come in.
Despite some similarities, SPs claim that what they do is fundamentally different from disease management. “Disease management is more of a global strategy, more about compliance with regimens,” says Weishar. “What we do is more targeted to the individual.”
Robin Smith, president of Biologics Inc., a Raleigh, N.C.-based SP that specializes in oncology, agrees. “Specialty pharmacy really involves an individualized approach to care. It goes back to case management, as opposed to disease management.” She says that disease management is more population- and education-based, and that it does not involve as much of an overall approach to treatment.
Biologics’ work with cancer patients will become even more individualized with the advent of new drugs and multidimensional therapies. “More and more biotech products work in combination, and there are not only new drugs coming but new combinations of drugs,” she says, which will require plans to rely on the expertise of SPs.
Bevacizumab (Avastin), cetuximab (Erbitux), and bortezomib (Velcade) are examples of recently introduced anticancer drugs that fuel medication costs. “The cost of therapy will increase,” because of these new drugs and the increased complexity of their use, she says. “Cancer is a very emotional disease, and a lot of patients have invested a lot in understanding it,” which reinforces the need for individualized treatment regimens.
Cancer is more than 300 diseases, and each one has its own clinical guidelines, complex new products, and the challenge of fitting into an individualized treatment program.
Patients are asking for these new products, while oncologists are seeing their clinical relevance for a subgroup of those patients. One cancer patient may respond to a protocol, while a seemingly similar patient might not.
The numbers tell the story. A typical employer group experiences a cancer incidence rate of 1 percent, but that translates into 10 percent of an employer group’s overall healthcare costs. Of the $8.4 billion that Medicare spends on drugs each year, 77 percent is for cancer drugs, and, of that amount, Procrit, an anemia drug, accounts for 17 percent.
Smith cites industry studies predicting that new cancer cases will double by the year 2050 to 2.6 million annually.
“For employer groups and MCOs alike, it’s important to know how many members have cancer, what types of cancer they have, and what their individualized treatment plans are. They also have to ask themselves if they are willing to spend money that may not cure the disease but will lengthen a person’s life,” she says.
Budgeting will be critical; managing the pipeline will be important. Knowing what drugs are in the pipeline, what drugs will be replaced, and what the costs and clinical outcomes are calls for an individualized approach to patients that helps control costs and compliance.
Says Smith, “The good news is that patients diagnosed with cancer will start living longer as many types of cancer become chronic disease as opposed to a death sentence. The bad news is that we must proceed with caution.”