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Pharmacy Trends for 2013 and Beyond

May 29, 2013 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

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As pharmacy trends shift and costs for plan sponsors increase, we continue to maintain a panoramic view of the industry to control medication spend for our clients. By keeping plan sponsors informed of these shifts and our strategies for handling them, plan sponsors are empowered to make informed choices about their pharmacy benefit plans. In the spirit of our transparent business approach, following are some key trends we foresee occurring in this marketplace.

Generics Plateau

In 2012, new generics entering the market reached record highs, with more than 80% market share as two major brand products (Lipitor and Plavix) lost their patents. The product with the fastest growth in 2012 was atorvastatin  – the generic version of Lipitor. The medications were considered blockbuster agents, with more than $1 billion in annual sales before turning generic.

While sales of generics grew, sales of brands decreased. Because of the influx of generic products, 2012 was a marquee year. As such, we expect fewer generics exclusivity periods in coming years, and generics are expected to reach a ceiling where they can no longer surpass their current market saturation.

Growth & Trend by Therapy Class

Therapy classes with the most growth in 2012, based on total scripts dispensed, included:

• Anti-depressants • Seizure disorders • Proton Pump Inhibitors

The top five therapy classes, which accounted for one-third of plan sponsor drug spend, included:

• Oncologics  (used to treat cancer) • Respiratory agents (used to treat asthma and Chronic   Obstructive Pulmonary Disease (COPD)) • Antidiabetics (used to lower elevated blood sugars) • Lipid regulators (used to lower high cholesterol or related   disorders) • Antipsychotics (used to treat schizophrenia and related   disorders)

Trends in Specialty

Less than one percent of the U.S. population uses specialty medications, but these products account for 25% of all pharmacy spend. As you are aware, the staggering costs in this pharmacy channel are not new. The good news is that we hope to see increased competition soon, with 38 specialty products expected to have patent expirations through 2017, and new legislation that will promote competition in this therapeutic space.

At the same time, the FDA has approved many more drugs in recent years that treat oncology and orphan diseases. Orphan drugs are used in treating very rare diseases, known as orphan diseases. Because of the niche market on these products, the cost to produce and sell them is very high. For instance, five of the most recently approved orphan drugs will cost at least $150,000 per patient per year. Costs for these products will only continue to rise, since drug makers and biotechnology companies for these products currently have no competition.

Specialty Drug Management, Spending and Trend Explored

May 14, 2012 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News

www.Medtipster.com Source: Ha T. Tu, Divya R. Samuel, Health System Change, April 2012

Spending on specialty drugs — typically high-cost biologic medications to treat complex medical conditions — is growing at a high rate and represents an increasing share of U.S. pharmaceutical spending and overall health spending.

Absence of generic substitutes, or even brand-name therapeutic equivalents in many cases, gives drug manufacturers near-monopoly pricing power and makes conventional tools of benefit design and utilization management less effective, according to a new qualitative study from the Center for Studying Health System Change (HSC).

Despite the dearth of substitutes, cost pressures have prompted some employers to increase patient cost sharing for specialty drugs. Some believe this is counter-productive, since it can expose patients to large financial obligations and may reduce patient adherence, which in turn may lead to higher costs.

Utilization management has focused on prior authorization and quantity limits, rather than step-therapy approaches — where lower-cost options must first be tried — that are prevalent with conventional drugs.

Unlike conventional drugs, a substantial share of specialty drugs — typically clinician-administered drugs — are covered under the medical benefit rather than the pharmacy benefit.

The challenges of such coverage — high drug markups by physicians, less utilization data, less control for health plans and employers — have led to attempts to integrate medical and pharmacy benefits, but such efforts are still in early development.

Health plans are experimenting with a range of innovations to control spending, but the most meaningful, wide-ranging innovations may not be feasible until substitutes, such as biosimilars, become widely available, which for many specialty drugs will not occur for many years.

High and Rising Specialty Drug Spending

Specialty drugs — typically high-cost biologic medications used to treat a variety of serious, complex conditions ranging from cancer to rheumatoid arthritis to blood disorders — are an increasing concern for employers and other purchasers.

  • While specialty drugs are prescribed for only one in every 100 commercial health plan enrollees, these drugs account for an estimated 12% to 16% of commercial prescription drug spending today.
  • The monthly spending per patient for a specialty drug typically exceeds $1,200.

Spending on specialty drugs is expected to rise dramatically as drugs currently in development come to market during the next decade and beyond.

Benefit Design Strategies

Mainstream commercial insurance products rarely exclude specialty drugs from their formularies. Once a new specialty drug receives approval from the Food and Drug Administration (FDA) and the health plan’s pharmacy and therapeutics (P&T) committee, its addition to the formulary is typically assured. P&T committee review typically focuses on ensuring safe and appropriate use and preventing off-label use, rather than restricting access to specialty drugs. The rare exceptions to this pattern of comprehensive formulary inclusion are found in the few specialty drug classes where many close substitutes exist — for example, growth hormone — and some niche insurance products aimed at individual and small-group purchasers that provide limited benefits to achieve much lower premiums.

Four-tier pharmacy benefit design. For specialty drugs covered under the pharmacy benefit, some employers choose to transfer a portion of the high costs to patients by adding another, higher cost-sharing tier to the standard three-tier pharmacy benefit design. While it is hard to generalize about the multitude of four-tier designs, the practice of transitioning from flat-dollar copayments in the lowest three tiers to coinsurance, where the patient pays a percentage of the total drug cost, in the fourth tier is quite common.

  • A typical design might require a generic copayment of $15,
  • a preferred brand copayment of $30,
  • a nonpreferred-brand copayment of $60, and
  • specialty drug coinsurance in the range of 10% to 25 percent.

Within the fourth tier, some employers — especially large employers — retain a degree of financial protection for patients by applying out-of-pocket maximums per prescription fill — for example, $100 to $250 — or per year — perhaps, $5,000.

Pricing

Obtaining lowest unit price. For specialty drugs covered under the pharmacy benefit, health plans take different approaches to obtain discounted prices from specialty drug manufacturers. It is common for smaller health plans to turn to one of the major PBMs — which all have acquired or developed their own specialty pharmacy divisions — to negotiate unit prices on their behalf, since the largest PBMs are best able to leverage their high volumes to obtain the steepest discounts from manufacturers.

Health plans with high volumes overall — such as the major national plans — or large regional market shares — such as some Blue Cross Blue Shield plans — often find it more advantageous to negotiate prices with manufacturers directly rather than relying on a PBM. Whatever their approach to price negotiations, when it comes to the distribution of specialty drugs to patients, most health plans contract with specialty pharmacies, since these entities have expertise on such matters as special drug handling and patient education.

Some specialty drugs are eligible for rebates on top of the discounted prices. These rebates are typically negotiated by whichever entity — PBM or health plan — is responsible for setting up the formulary and are paid to that entity after the drug has been purchased. Manufacturers are much more likely to offer rebates in drug classes where substitutes are available — for example, rheumatoid arthritis, multiple sclerosis and growth hormone deficiency. The size of rebates typically depends on the PBM or health plan’s willingness to grant the drug preferred-product status and place it in lower cost-sharing tiers.

Utilization and Care Management

Utilization management. Specialty drugs covered under the pharmacy benefit are subject to more pervasive and stringent utilization management (UM) than those under the medical benefit. Prior authorization, for example, is widely practiced — “nearly universal,” according to one respondent — under the pharmacy benefit but far less prevalent under the medical benefit, where retrospective review remains more common. One benefits consultant estimated that specialty drugs under the medical benefit are subject to prior authorization only about 5% of the time.

A major reason is that most contracts between health plans and providers contain no provisions for prior authorization or other UM protocols for specialty drugs under the medical benefit. Health plans are concerned that pushing to add a prior-authorization provision will result in provider resistance and perhaps provider exit from health plan networks. As with provider payment methods discussed previously, respondents suggested that implementing prior authorization under the medical benefit appears to be easier for regional Blue Cross Blue Shield plans whose large market shares give them leverage over providers.

Care management. Experts viewed strong clinical care management as critical to promoting both good health outcomes and cost containment. Key challenges include very sick patients with complex chronic conditions requiring complicated drug regimens, the need to adjust drugs or fine-tune dosage, and strong side effects leading patients to abandon drug regimens. Experts cited cancer and hepatitis C as examples where medications caused such unpleasant, sustained side effects that keeping patients compliant over time was particularly difficult. Several respondents emphasized the importance of a “high-touch” approach to care management, where staff not only has clinical expertise but also the ability to “form personal connections with patients” and motivate them to adhere to demanding drug regimens.

Key Takeaways

Among the common themes that emerged from interviews with industry experts, the following stand out:

Key drug management strategies that have proven effective for conventional drugs often are less applicable to specialty drugs: The lack of close substitutes for most specialty drugs greatly reduces, or eliminates altogether, the ability of tools like cost-sharing tiers and step therapy to steer patients and providers to cost-effective alternatives. It also sharply limits incentives for drug manufacturers to offer substantial price concessions. In contrast, other tools, such as prior authorization and quantity limits — which can help curb unnecessary or inappropriate use, improve patient safety, and reduce waste — are emphasized more in the management of specialty drugs.

Biosimilars are expected to lead to key breakthroughs in specialty drug management, but their impact won’t be seen for many years: The introduction of generic substitutes should allow payers to broaden the use of preferred drug tiers and step therapy, thereby exerting downward pressure on prices. However, achieving therapeutic equivalence — for biosimilar manufacturers — and assessing therapeutic equivalence — for regulators — are likely to be difficult, given the complex nature of biologics. Also, the expensive manufacturing process means that biosimilars may not yield savings as sizable as those achieved by conventional generic drugs. And, it will be an uncertain number of years before biosimilars can make an impact on competition and cost, because (1) innovator products are granted 12 years of market exclusivity and often are protected by patents lasting years beyond that; and (2) the FDA approval process — which has yet to be finalized — is expected to be rigorous and lengthy.

Integration of medical and pharmacy benefits is a goal worth pursuing, but how to achieve it isn’t clear: Efforts to overhaul the currently fragmented benefit structure — which can misalign incentives for patients and providers and result in uncoordinated patient management — are in the early stages of development, and results are uneven at best. Equalizing patient cost sharing for specialty drugs regardless of whether they are covered under the pharmacy or medical benefit is probably the most straightforward dimension of integration. Other aspects of integration present tougher challenges. The ability to track utilization and spending under the medical benefit remains limited, which in turn hinders the ability to manage a large segment of specialty drug utilization. Real-time integration of utilization data remains hampered by limitations in claims and billing systems. Also, as office-administered drugs are moved out of the medical benefit’s buy-and-bill approach, health plans will have to deal with fallout from physicians who see both their margins and clinical autonomy eroding.

Patient adherence is critical to good health outcomes: As one pharmacy consultant observed, “Price tags and performance guarantees [from PBMs] are one thing, but if you [can’t achieve] compliance, it’s all a waste.” Both financial factors — high out-of-pocket costs — and nonfinancial factors — strong side effects — pose formidable barriers to patient adherence and positive health outcomes. A combination of non-punitive cost sharing and strong care management may reduce these barriers. One benefit design approach that can help make financial burden more manageable is an income-based cost-sharing structure.

Employers should ensure that their specialty drug strategies are aligned with their overall benefits and business strategies: Decisions on specialty drug coverage require tough trade-offs between cost and access. Which cost-access combination an employer chooses will be heavily influenced by competitive conditions in the industry and the geographic and labor markets where an employer operates. Short-term cost containment can have unintended consequences — for example, increased cost sharing leading to reduced adherence to drug regimen, in turn leading to high-cost complications. Such negative impacts come more into play for employers with low worker turnover and those still offering comprehensive retiree health benefits, as these are the employers likely to be paying the bill in the long term for patients currently taking specialty drugs. Cost-benefit comparisons of different drug coverage options will be more accurate if they are able to account for impact on employee productivity — which is hard to measure — as well as direct medical costs.

PBMs’ interests may not align with employers’ interests: Some employers may be relying heavily on their PBMs to set specialty drug policies, determine specialty drug lists, and pass through discounts from manufacturers, without independently verifying whether their own needs are best served in these arrangements. Employers need to recognize that PBMs’ interests can diverge sharply from their own interests, as PBMs don’t have the same incentives as employers to limit the volume and the prices of drugs. Because the specialty drug sector is complex and the vast majority of employers lack the in-house expertise to deal with PBMs on an equal footing, many employers likely would benefit from having independent experts assess their PBM contract terms and audit compliance with those terms.

Generic Drug Prices Drop, Brand Prices Continue Rising

May 25, 2010 By: Nadia Category: HealthCare, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: FDAnews.com – Washington Drug Letter, 5.25.2010

AARP: Generic Drug Prices Drop, Brand Prices Continue Rising

The prices of brand-name prescription drugs most often used by Medicare beneficiaries increased nearly 10 percent over the 12-month period ending in March, an AARP report says.

While generic drug prices fell during the April 2009 to March 2010 period, the average price of top brand drugs used by Medicare beneficiaries rose 9.7 percent, continuing an upward trend in annual drug price increases, according to the AARP Public Policy Institute Rx Watchdog Report released last week.

Prices of generic drugs most widely used by Medicare beneficiaries dropped 9.7 percent while prices for widely used specialty drugs rose by 9.2 percent.
“These trends resulted in an average annual rate of increase of 5.3 percent for manufacturer drug prices during the 12 months ending with the first quarter of 2010 despite an extremely low rate of general inflation for all consumer goods and services,” the report says.

Drug companies raised the price of about two-thirds (90 of 144) of specialty drugs studied in the one-year period. Two of the 144 specialty drugs had a drop in price, and both were generics. For an individual taking one specialty medication, the average annual increase in cost of therapy rose by $2,760 during the study period.

AARP’s analysis echoes that of pharmacy benefit managerExpress Scripts’ 2009 Drug Trend Report, released last month. Prices of drugs in the most popular therapeutic classes increased 9.1 percent in 2009, according to that report.

PhRMA, however, said the AARP report is misleading and based on incomplete information. The report fails to take into account discounts and rebates generally negotiated between drug manufacturers and payers, which can significantly lower the cost of brand-name medicines, ultimately benefiting patients, Senior Vice President Ken Johnson said.

“Also, the report’s conclusions ignore the reality that prescription medicines represent a small and decreasing share of growth in overall health care costs in the United States,” Johnson said. “Not only is the current rate of growth for prescription medicines historically low, but the recent decline in drug spending growth has contributed to the lowest rate of total health care growth in almost 50 years.”

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