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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.

The Importance Of Specialty Medication Management

January 03, 2013 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Navitus Clinical Journal, Vol. 9 – January 2013

Approximately one to five percent of the population uses specialty medications. Nonetheless, spending for specialty medications has increased between 15 and 20% for the last several years and is expected to represent up to 40% of an employer’s total medical spend by 2020. Controlling specialty medication cost is therefore a critical focus area for plan sponsors. With more and more specialty drugs coming down the pipeline, it will be increasingly important for plan sponsors to manage this area of their drug spend.

Managing this highly complex area involves coordination among multiple parties, including plan sponsor, pharmacy benefit manager (PBM), medical administrator, specialty pharmacy and the patient.

Benefits of Specialty Drug Control
Growth in specialty spending is expected to outpace non-specialty spending due to:

  1. High proportion of newly approved drugs in the specialty market
  2. Complex and expensive manufacturing processes
  3. Limited competition within specialty medication therapy classes

It is clear that plan sponsors can benefit from managing specialty costs. While specialty medications may represent a low percentage of the drugs purchased by the plan sponsor’s members, the cost of these medications represents much more than the actual percentage of medications purchased.

In addition to cost control, helping members adhere to their regimens with specialty medications is essential, as high adherence rates have been shown to reduce hospitalizations, promote better health outcomes and lower overall health care costs.

Ways to Manage Specialty Medications

1. Implement a Mandatory Program

We recommend that plan sponsors implement a SpecialtyRx program as mandatory for members with specialty needs. Specialty programs coordinate personalized support for patients impacted by chronic and complex diseases, such as rheumatoid arthritis, multiple sclerosis and cancer. Such diseases often require complicated medication regimens that include specialty medications. By mandating use of a specialty pharmacy vendor, plan sponsors reap the benefits of reduced drug discounts with specialty pharmacy partners (versus the typically higher retail pharmacy pricing), superior clinical oversight, and individual member case management

2. Incorporate a Split-Fill Program

A  Specialty Split-Fill Program reduces days’ supply to 15-day intervals for qualifying high-cost specialty medications that typically have high discontinuation rates within the first three months of therapy. This prevents unnecessary dispensing of two weeks of therapy, should therapy be discontinued within the first half of the first three months of a prescription. This program also allows specialty pharmacy to initiate earlier clinical interventions due to medication side effects that require dose modification or therapy discontinuation. According to the May 2012 issue of Managed Care, a health plan with about 500,000 members saved approximately $300,000 in its first year with a split-fill program.

3. Know your Specialty Costs Through Pharmacy & Medical

Plan sponsors should equip themselves with information about their specialty drug spend and track specialty costs not only through their PBM but through their medical vendor as well. Less than 20% of health plans and employers currently receive reporting from their PBMs or other health care vendors on medical specialty utilization. Given that plan sponsors identified specialty drug costs as one of their two most important outcomes for specialty management, and that 50% or more of the specialty spend resides on the medical side, this gap represents a critical area of opportunity.

4. Managed Specialty Programs relieve clients of the burden of managing their specialty populations and assume this responsibility through a comprehensive, patient-centric program that offers:

  • Built-in utilization management edits (e.g., prior authorization, step therapy) to ensure members use lower cost specialty products, where appropriate.
  • Continually negotiated lower discounts with specialty pharmacies.
  • Price increase protection built into rebate contracts for specialty drugs, where available, to account for price inflation; that is, when certain products increase in price, rebates for those products automatically increase as well.
  • Continual monitoring of new drugs entering the pipeline. Their Pharmacy & Therapeutics Committee will continue to monitor and evaluate specialty drugs, including any biosimilars being released. Biosimilars are products that are chemically similar to other products; very few have received FDA approval at this point. We expect biosimilars will be significantly less expensive than their specialty brand medication alternatives and will play a bigger role in controlling specialty trend in the future.

As an example, a plan sponsor’s employee has a very expensive specialty medication. This specialty drug utilization represents less than 2% of total utilization, but accounts for, on average, half of the plan sponosor’s drug spend. The previous discount for the drug was under 20% off the average wholesale price. After its transition to a managed specialty program, the discount for this drug rose to 47% off the average wholesale price, providing a savings of more than $140,000 in the first three quarters.

How to Begin to Control Specialty

If you do not currently use a mandatory program, talk to your provider today to implement the program. Plan sponsors can reap the benefits of  preferred pricing via a specialty pharmacy, and their members can benefit from the one-on-one specialized care from the case managers available through  specialty pharmacy vendors.

Be proactive and take control of this sector of your plan’s drug spend. By maintaining a tightly managed specialty program, not only will plan sponsors benefit from reduced costs, but their members will also benefit from improved overall health.

Pharmacy Benefit Manager Fees Must Be Reported on Schedule C

February 22, 2010 By: Nadia Category: Medtipster, Prescription News

Source: U.S. Department of Labor, 2/2010

The Department of Labor published FAQs to supplement FAQs published in July 2008, and to provide further guidance in response to additional questions from plans and service providers on the requirements for reporting service provider fees and other compensation on the Schedule C of the 2009 Form 5500 Annual Return/Report of Employee Benefit Plan. Inquiries regarding these supplemental FAQs may be directed to EBSA’s Office of Regulations and Interpretations at 202.693.8523.

The new FAQs — numbers 26 and 27 — note that PBMs perform many services for which they are compensated, including services as a third-party administrator, claims processor, and developer of the plan’s formulary and pharmacy network. The FAQs make clear that fees for these services would be reportable as direct compensation on Schedule C.

Q26: Pharmacy Benefit Managers (PBMs) provide services to plans and are compensated for these services in various ways. How should this compensation be reported?

PBMs often act as third party administrators for ERISA plan prescription drug programs and perform many activities to manage their clients’ prescription drug insurance coverage. They are generally engaged to be responsible for processing and paying prescription drug claims. They can also be engaged to develop and maintain the plan’s formulary and assemble networks of retail pharmacies that a plan sponsor’s members can use to fill prescriptions. PBMs receive fees for these services that are reportable compensation for Schedule C purposes. For example, dispensing fees charged by the PBM for each prescription filled by its mail-order pharmacy, specialty pharmacy, or a pharmacy that is a member of the PBM’s retail network and paid with plan assets would be reportable as direct compensation. Likewise, administrative fees paid with plan assets, whether or not reflected as part of the dispensing fee, would be reportable direct compensation on the Schedule C. Payments by the plan or payments by the plan sponsor that are reimbursed by the plan for ancillary administrative services such as recordkeeping, data management and information reporting, formulary management, participant health desk service, benefit education, utilization review, claims adjudication, participant communications, reporting services, website services, prior authorization, clinical programs, pharmacy audits, and other services would also be reportable direct compensation.

Q27: PBMs may receive rebates or discounts from the pharmaceutical manufacturers based on the amount of drugs a PBM purchases or other factors. Do such rebates and discounts need to be reported as indirect compensation on Schedule C?

Because formulary listings will affect a drug’s sales, pharmaceutical manufacturers compete to ensure that their products are included on PBM formularies. For example, PBMs often negotiate discounts and rebates with drug manufacturers based on the drugs bought and sold by PBMs or dispensed under ERISA plans administered by a PBM. These discounts and rebates go under various names, for example, “formulary payments” to obtain formulary status and “market-share payments” to encourage PBMs to dispense particular drugs. The Department is currently considering the extent to which PBM discount and rebate revenue attributable to a PBM’s business with ERISA plans may properly be classified as compensation related to services provided to the plans. Thus, in the absence of further guidance from the Department, discount and rebate revenue received by PBMs from pharmaceutical companies generally do not need to be treated as reportable indirect compensation for Schedule C purposes, even if the discount or rebate may be based in part of the quantity of drugs dispensed under ERISA plans administered by the PBM. If, however, the plan and the PBM agree that such rebates or discounts (or earnings on rebates and discounts held by the PBM) would be used to compensate the PBM for managing the plan’s prescription drug coverage, dispensing prescriptions or other administrative and ancillary services, that revenue would be reportable indirect compensation notwithstanding that the funds were derived from rebates or discounts.

More information to follow via our blog at www.medtipster.com

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