Jun 28, 2021 2:47:44 PM | 9 Min Read

Is your specialty drug management program only addressing half of your specialty spend?

Is your specialty drug management program only addressing half of your specialty spend?

Questions you should ask to assess the robustness of your medical benefit specialty drug management program

Advances in understanding of the human genome, medical science and pharmaceutical research innovation has led to:

  • Doubling of the hepatitis C cure rate to greater than 90% in less than half the time via oral therapy¹
  • Quadrupling response duration from 6 to 24 months in select patients with metastatic non-small cell lung cancer with combination oncology immunotherapy infusions of Opdivo® (nivolumab) and Yervoy® (ipilimumab) compared to standard therapy²
  • Hope for retaining and restoring some vision via a one-time gene therapy injection in each eye with Luxturna® (voretigene neparvovec-rzyl) for individuals with a rare congenital retinal degenerative disorder
  • A gene therapy treatment option for infants and toddlers with spinal muscular atrophy (SMA), which, if left untreated, generally leads to death prior to 2 years of age. This treatment, Zolgensma® (onasemnogene abeparvovec-xioi) requires just one infusion

These break-through medications are considered “specialty drugs”. Specialty drugs are high-cost medications used to treat complex, chronic or rare conditions. The medications may require special handling and close oversight and supervision by specialist health care providers. Specialty drugs may be covered under the pharmacy benefit, as in the case for the hepatitis C therapies or the medical benefit, as is often the case for Opdivo®, Yervoy®, Luxturna® and Zolgensma®.

With medical advancements come high costs: the average cost of an 8 week course to treat hepatitis C is $34,000 with some hepatitis C cases requiring 12 weeks of therapy increasing cost, annual cost for combination Opdivo® and Yervoy® therapy is in excess of $150,000 and Luxturna® therapy cost exceeds $850,000. The cost for a Zolgensma® infusion is a record-breaking $2.1 million. The drug pipeline is full of specialty drugs with potential to provide hope for cures for those who previously had none. Globally, specialty drugs are expected to represent nearly two-thirds of newly launched medicines over the 5 years spanning 2019 – 2023, with oncology products representing 30% of newly launched medicines.³(p15) It is expected that the median annual price for newly launched oncology products in the United States will be well above $100,000 by 2023.³(p10)

You worked hard to implement programs under your pharmacy benefit to manage the cost of specialty drugs: you instituted formulary management with preferred products, prior authorization and step therapy; deployed exclusive specialty pharmacy distribution channel arrangements with known product discounts and high touch, disease focused patient care programs; leveraged pharmaceutical company assistance programs via copayment maximizers and obtained specialty drug rebates. Your plan is in place and you feel confident that you have covered all the bases to address rising specialty drug spend. But have you? Specialty drugs may be covered under the pharmacy benefit or the medical benefit. In fact, up to 50% of specialty drug spend may be through your medical benefit.

Moving medical benefit specialty drugs to the pharmacy benefit may reduce drug spend but is not a viable solution for all such drugs and may result in reduced care efficiencies. Therefore, before making changes in benefit coverage, it is important to understand the controls your medical carrier has in place to manage the cost of specialty drugs under the medical benefit. What questions should you ask to assess the robustness of your medical benefit specialty drug management program?

Key differences between pharmacy benefit and medical benefit drug claims
There are material differences in how medications are processed and billed under the pharmacy and medical benefits that influence approach and efficiency to managing specialty drugs under each benefit (Table 1). For example, pharmacy benefit claims use consistent, standard processes for drug identification via the 11-digit National Drug Code (NDC-11) and are processed real-time with pre-service (prior to dispensing) editing to enforce pricing accuracy at the specific pharmacy negotiated discount and patient cost share/deductible status. Specialty pharmacy fee schedules are negotiated as part of the pharmacy benefit management contract and defined at the drug and specific specialty pharmacy level. The rates are typically negotiated as a percentage of average wholesale price (AWP) for brand drugs or a maximum allowable cost (MAC) for generic drugs. Drug reference pricing databases are updated on a weekly basis to assure AWP unit costs reflect the current market rates.

Medical benefit claims, on the other hand, are typically submitted electronically days to weeks after the drug was administered to the patient. Depending on your medical carrier, post service editing to assure pricing accuracy may be used only selectively depending on claim cost. There are also wide variances in how medical carriers enforce claim-based utilization management controls. The Healthcare Common Procedure Coding System (HCPCS) is used to identify medications billed under the medical benefit. Unlike the NDC-11, HCPCS codes are not specific to manufacturer, strength or package size. It takes months to years for newly launched products to receive a unique drug or drug class specific HCPCS code. Until unique codes are assigned, products are grouped under the “not otherwise classified” codes (NOC) of J3490, J3590, J9999. This lack of HCPCS specificity creates data barriers for efficient claims pricing, formulary controls, utilization management programs and medical claim rebate administration. To address this, government programs such as Medicare and Medicaid require physicians and facilities to submit HCPCS, NDC-11 and associated billing units/unit quantities on medical claims for drugs. Taking the cue from Medicare and Medicaid, some medical carriers require the same for their commercial plans.

Unlike the pharmacy benefit where there is uniformity in the drug pricing reference (AWP) and updates, medical plans typically do not have a uniform drug pricing reference for drugs across all providers, facilities and other sites of services. Contract rates for medical benefit drug costs may be based on a markup or discount off the average sales price (ASP) published by CMS, markup or discount off the wholesale acquisition cost (WAC), markup or discount off AWP, a percent of “billed charges” in which the provider or facility establishes their own drug reference price, or a bundled rate which combines medical services and the cost of the specialty drug. This wide variation in drug reference pricing is one of the factors that motivated the development of ‘site of care’ programs under the medical benefit. Instead of standardizing drug pricing references and negotiated medical benefit drug costs across providers and facilities, medical benefit prior authorization programs evaluate both the clinical appropriateness of the specialty drug and most cost-effective site of care. One survey reported an average savings of 23% for site of care programs focused on moving services away from hospital outpatient facilities (typically the highest cost site of care) to home infusion, ambulatory infusions suites or independent physician offices.4

Table 1: Differences in pharmacy and medical benefit drug claim submission, editing, coding and pricing


Source: Confidio
NCPDP=National Council for Prescription Drug Programs
NDC=National Drug Code
HCPCS = Healthcare Common Procedure Coding System

What questions should you ask of your medical carrier to assess the robustness of your medical benefit specialty drug management program?

Now that you understand the differences between pharmacy and medical benefit drug claims. It is time to assess the robustness of your medical benefit specialty drug program. There are 10 key questions you need to ask:

  1. What utilization management and claims edits are in place to ensure accuracy of medical benefit drug claims pricing?
  2. How are specialty medications processed under the medical benefit? For example, are HCPCS, NDC-11 drug identifiers and quantities required on all medical benefit drug claims?
  3. Is there a formulary with product referencing inclusive of biosimilars under the medical benefit?
  4. Is prior authorization or step therapy in place for medical benefit drugs? Is this coordinated with the prescription drug plan?
  5. Is there a process in place to use the least restrictive, most cost-effective site of care? Is this part of the initial prior authorization review process?
  6. Are programs in place to leverage copayment maximizers, pharmaceutical manufacturer or other foundation assistance programs to help offset patient and plan costs?
  7. Are rebates collected based on my plan’s utilization and how are these rebates passed back to my plan?
  8. What other targeted strategies are in place to manage utilization and address waste?
  9. What care and case management programs are in place for patients utilizing specialty drugs under the medical benefit? How do these programs impact quality, outcomes and total cost of care?
  10. What is my plan’s medical specialty drug cost and trend and how have your programs helped to manage the trend?

Now that you are armed with this information and key questions, have a conversation with your Confidio consultant. They can help you set up a plan to investigate the robustness of your medical benefit specialty drug management program. It is time to make sure that your specialty drug management program addresses 100% of your specialty spend regardless of pharmacy or medical benefit coverage.

Reference List
  1. 1What is Hepatitis C – FAQ. Centers for Disease Control and Prevention. https://www.cdc.gov/hepatitis/hcv/cfaq.htm. Published July 28, 2020. Accessed December 6, 2020.
  2. Center for Drug Evaluation and Research. FDA approves nivolumab plus ipilimumab for first-line mNSCLC (PD-L1 tu. U.S. Food and Drug Administration. https://www.fda.gov/drugs/drug-approvals-and-databases/fda-approves-nivolumab-plus-ipilimumab-first-line-mnsclc-pd-l1-tumor-expression-1. Accessed December 6, 2020
  3. The Global Use of Medicine in 2019 and Outlook to 2023. IQVIA. https://www.iqvia.com/insights/the-iqvia-institute/reports/the-global-use-of-medicine-in-2019-and-outlook-to-2023. Published January 2019. Accessed December 6, 2020.
  4. Medical Pharmacy Trend Report. Magellan Rx Management. https://www1.magellanrx.com/documents/2020/03/mrx-medical-pharmacy-trend-report-2019.pdf/. Published 2019. Accessed December 6, 2020

Topics: Drug Management

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