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Providers can expect insurers to put the squeeze on them over the increasing costs for specialty pharmaceuticals
With specialty pharmaceuticals taking an increasingly bigger bite out of payers' pockets, pharmacies that supply these products can expect mounting pressure from insurers to put them on a short leash. That's one message that can be drawn from several presentations, all devoted to the topic of how to manage these high-maintenance drugs, given at the recent Academy of Managed Care Pharmacy educational conference in Washington, D.C.
According to Bettina Armour, project manager, operational excellence, at Aetna, specialty pharmaceuticals are used by only 0.2% of patients, but they account for 8% of health plans' medical costs. These products are costly because they're injected, infused, or require special handling, such as refrigeration. Examples range from blood factors for hemophilia to products for multiple sclerosis. Nationally, the cost for specialty pharmaceuticals is expected to rise from 20% to 40% annually as compared with only 15% to 18% for traditional medications, she said. She added that while there are about 80 specialty pharmaceuticals available now, 350 products are in phase III trials. So urgent action is needed to control these low-volume, but high-cost, drugs.
What's the best method to reduce the tab for these medical injectables? Using a specialty pharmacy network is the single most effective way, recommended Kjel Johnson, Pharm.D., a consultant with Deloitte Consulting. He estimated that 50% of what an insurer could save lies in contracting with such a network. "It's easy to do, and it covers a lot of real estate," he said. Other ways to cut costs include improvements in claims processing, involving NDC versus J-code billing, and better benefit design, such as requiring patients to assume a greater share of the costs, he added.
At present, there are about a dozen specialty pharmacies insurers could choose from (see the "A sampling of specialty pharmacy providers" box), said Debbie Stern, R.Ph., v.p., Rxperts. Some are national in scope, others regional. Four companies are independent, such as Priority Healthcare and Chronimed. A few belong to chains, to wit, CVS ProCare and Walgreens Specialty Pharmacy. Then there are providers that are extensions of pharmacy benefit managers, such as AdvancePCS SpecialtyRX and Caremark Therapeutic Services. Some of these companies handle narrow drug niches, while others cover a broad spectrum. Many companies offer limited services, while others supply more extensive benefits, ranging from furnishing hotlines to helping with billing to even providing retail sites for patients.
Of course, specialty pharmaceuticals can also be dispensed by community pharmacies, hospitals, home care providers, physician offices, and other vendors.
Right now, specialty pharmacy providers are used by managed care mostly on a voluntary, rather than mandatory, basis, Stern noted. She believes health plans should offer patients at least two specialty pharmacies, to ensure coverage of all drugs and facilitate fast shipping.
Independent Health, a health maintenance organization in Buffalo, is one group that has taken steps to tame its specialty pharmaceutical costs. The HMO targeted 10 drugs, the "low-hanging fruit," for a medication management project last year. As part of this project, the HMO sent out a request for proposal to selected providers, said its pharmacy director John Rodgers, R.Ph., MBA.
What lessons did Independent Health learn from this project? It can obtain better pricing and stronger drug utilization management by contracting with a small number of specialty pharmacies. However, it also alienated providers that were excluded, including several community pharmacies whose livelihood had hitherto depended largely on the HMO's business. These local pharmacies were "devastated" and "upset," when they were not invited to take part in the RFP, Rodgers told the audience. In hindsight, he conceded that Independent Health should have engaged in some discussion with those players before going ahead with its plan.
Another thing the HMO learned is that it's imperative that there be a local pharmacy to provide backup. This was driven home when Buffalo was buried in 84 inches of snow in four days last year and Federal Express could not get through with its shipments. The burden of delivering product reverted back to the HMO during the snowstorm, Rodgers recounted.
Reinforcing the need for a backup system was Peter Kwok, Pharm.D., v.p., Health Plan of the Redwoods, Santa Rosa, Calif. He said his regional health plan uses a specialty pharmacy as its primary vendor and a retail pharmacy as a secondary supplier. Specialty pharmacies can't provide drugs for emergencies on weekends, he explained. That's why a secondary source is needed. "If possible, multiple vendors are the way to go," he advised, since they prevent health plans from running into a drug shortage.
Looking into the future, Stern said specialty pharmacies could expect insurers to demand more aggressive pricing. This will put the squeeze on vendors to consolidate. Already the industry has seen several mergers, including McKesson's absorbing VitaRx and AdvancePCS' picking up TheraCom. Specialty pharmacies, such as those servicing hemophilia and HIV patients, will continue to be prime acquisition targets, she said.
Another trend providers can expect is the development of formularies for specialty pharmaceuticals, Stern said. Deloitte's Johnson added that he knows of some health plans that will be making significant benefit changes, including the establishment of a formulary, next January.
Gentiva Specialty Rx
Caremark Therapeutic Services
Express Scripts SDS
Judy Chi. Specialty pharmaceuticals: A growing concern. Drug Topics 2002;21:58.