Specialty pharmaceuticals: Solving top challenges

Over the past year, the healthcare industry made little progress in managing the high cost of specialty drugs.

According to UnitedHealth Group, growth in specialty pharmacy spending could quadruple by 2020, reaching $400 billion or 9.1% of national healthcare spending in the United States.

Industry experts have predicted that specialty drugs will represent 45% of pharmaceutical manufacturer sales by 2017.

And, Artemetrx expects specialty drug spend to surpass traditional drug spend for most plan sponsors due to double-digit growth in specialty that will continue for the foreseeable future across both the pharmacy and medical benefit.

Managed Healthcare Executive recently invited a panel of experts representing different sectors of the healthcare industry to explore these challenges and identify potential solutions.

The following experts served on the panel which was moderated by Perry Cohen, CEO of The Pharmacy Group:

• Ken Schaecher, MD, medical director, SelectHealth

• David Calabrese, RPh, MHP, chief pharmacy officer, OptumRx
• Bobby Dubois, MD, PhD, chief science officer, National Pharmaceutical Council

• Cheryl Larson, vice president, Midwest Business Group on Health

Next: What can stakeholders do to help manage the costs of specialty drugs?

Question: What can stakeholders do together to most effectively manage the costs of specialty drugs and patient outcomes?

As medical director of an HMO and an integrated delivery network, Schaecher said he didn’t presume to represent every managed care plan around the country but that collaborative communication and quality care initiatives-pay-for-value activities-seem to be solutions.

“I think everyone recognizes the cost of healthcare in the United States is excessive and as a consequence, we have to work together to find solutions, such as oncology pathways, formulary design and step edits-that make sense for everyone, and that no one solution is necessarily going to work,” he said.

As a pharmacy benefits manager (PBM), OptumRx is attempting to tap into the vast resources that it has at its disposal via our larger Optum enterprise system, bringing many different stakeholders to the table.

The PBM owns a specialty pharmacy distribution service; has home infusion capabilities; provides data integration and analysis; behavioral health services; health and wellness capabilities, a case management component, etc., that can deliver a much more integrated and holistic solution to support this patient population.

 “On the pharma side,” Calabrese said, “we're working close to the pharmaceutical manufacturers around things such as innovative outcomes and value-based contracting, price protection and other things that are critical in the specialty area.”  

He explained that OptumRx is also collaborating with external organizations that have expertise in value-based contracting, such as the Institute for Clinical and Economic Review (ICER), to leverage their capabilities and understanding of cost effectiveness of specialty therapies. These efforts should help the PBM better position products going forward and manage them based on their inherent value supported by available evidence.

“In addition, we are working aggressively on site-of-care channel management to try and ensure that drugs-especially infusibles-are being dispensed and administered in the sites of care that make the most amount of sense from both patient access and cost perspectives,” Calabrese said.

In approaching the value and utilization of specialty drugs, Dubois divided activities into three types-unilateral, bilateral and multilateral. On the unilateral front, he said there is a lot of attention being paid to the development and use of value framework, each developed by individual organizations-especially in the oncology area-by the American Society of Clinical Oncology; the National Comprehensive Cancer Network (NCCN); Sloan Kettering’s Drug Abacus, an interactive drug price comparison tool based on value; and ICER.

An example of bilateral approaches are the manufacturer-payer risk-sharing relationships such as the one between Harvard Pilgrim Health Care and Amgen in the use of its PCSK9 drug Repatha and Aetna’s and Cigna’s pay-for-performance arrangement with Novartis for its heart drug Entresto. In an ideal world, we would have not unilateral or bilateral approaches, but truly multilateral ones where payers, providers, and patients engage in both the dialogue and exploration of solutions. “There needs to be a forum and focal point where this can occur.”

Larson said that employers, in particular, are usually considered an afterthought in involvement in initiatives that impact providers and the drug industry. She is optimistic, however, that the scenario is changing.

“The reality is that self-insured employers represent a little over half of all healthcare spending in this country which means we’re paying the lion’s share of biologic and specialty drug costs,” Larson said. “In fact, in my world, employers are the real purchasers and payers of healthcare, while health plans and PBMs serve as the middlemen. As purchasers, we care about the health and productivity of our employees and family members and seek to put the right benefits packages together to do that. Specialty drug and treatment costs, however, are making it more difficult to do that, especially for the small and mid-sized employer.”

Larson coleads an employer-led, national research project, the “National Employer Initiative on Biologics and Specialty Drugs,” that focuses on educating employers about the specialty benefits marketplace; researching and piloting new strategic approaches; and bringing stakeholders together to discuss value and address the main issues that are driving care and cost increases.

She acknowledged that her organization cannot control drug costs, but it can, she says, do something about the stakeholders who are adding to these costs by not sharing rebates with employers or by purchasing drugs from a manufacturer and hiking up the cost of the drug-all at the expense of the employer who keeps paying more each year.   

Next: Does the value of specialty drugs justify the costs?

Question: Have specialty drugs, such as new high-cost hepatitis C drugs, indicated sufficient value to merit their high costs?

Schaecher said it depends on the stakeholder. “Value is a judgment, and there are a lot of judgments out there. I think on the whole, there's grave concerns about the cost of specialty drugs. When you're seeing 15% to 20% to 25% annual increases in the cost of specialty drugs added to some of the limitations put on us by ACA [Affordable Care Act] legislation, such as having to use community ratings instead of individually rated plans, it's really a struggle,” he said.

Calabrese agreed that value is in the eye of the beholder. “Certainly, taken as a whole, specialty drugs have enhanced our ability to manage a number of key conditions that in the past were not well-managed or where we had few if any treatment options,” he said. “They have brought value to the table not only in terms of their efficacy, but also in areas such as quality of life and daily functioning. Whether the cost justifies the added value, particularly the annual increases in cost we continue to see, remains a largely unanswered question”

As a result, he sees organizations, such as ICER and NCCN in the oncology space, building tools and resources into their support services that will help to answer some of those questions when new drugs are being introduced to the market.

Most health plans, Schaecher said the value of specialty drugs does not justify their costs, that they are overvalued and overpriced for their clinical results.

He said that clinical studies are often conducted to bring drugs to market that meet regulatory requirements without concern for whether plans will receive adequate clinical value.

 “If a drug improves any patient’s health-even by a little-providers consider that it has value,” Schaecher said. “But when we're asked to make population-based decisions and those population costs result in potentially the inability to provide other benefits that may be of greater value, it's a real challenge. For example, for some patients, the new high-cost drugs for hepatitis C are cost-effective and for others, they aren’t.”

He blames it on inflation. “While we are seeing these types of inflation rates, we’re not seeing additional data coming to the table that says the clinical value has increased 15% to 25% a year,” Calabrese said, noting that this forces PBMs to take a much more aggressive stance, as illustrated by the evolution of exclusionary formularies and more aggressive utilization management programs.

“So there's a lot of work to be done here and that the onus is on the manufacturer,” he continued. “They establish this initial pricing and annualized price increases. They have to be the ones to to invest in the type of sound comparative pharmacoeconomic analyses that will justify such increases”

Dubois said it is important to separate the cost of drugs for an individual patient from the cost for a population. For an individual patient, a drug may provide real benefit and be cost effective.  However, if there are many patients who might benefit from the therapy, that can lead to substantial budget impact.  It is a payment challenge but not a value one.  He also raised the point that what are deemed costly branded agents today will become generic drugs in the future.

“We found if you look at every brand to generic conversion over the last 20 years and you average the drug’s price over the lifecycle of those products, you end up with costs that are about half of what people think,” he said. “It is important to examine drug costs longitudinally as you think about the cost per patient. A few challenge relates to the coming availability of high-cost, curative interventions like gene therapy, where the insurer paying the bill for a patient might not be the insurer that receives the economic benefits.”

Schaecher said it is important to consider the repercussions on small and mid-sized employer groups who must compensate for the high cost of drugs by raising premiums or eliminating coverage, thus increasing the number of uninsured. While the ACA was implemented to prevent that, he said, many plans have pulled out of the exchanges because they have proved to be unprofitable. In addition, he pointed out that utilization of specialty drugs is higher among exchange members.

Next: How can cancer drugs be adequately managed as demand increases?

Question: How can cancer drugs be adequately managed as the pipeline fills and demand increases?

Schaecher said that drug management doesn’t depend too much on the pipeline but rather on a societal point of view and the willingness of providers, patients and society to look at cancer differently and realize that not all conditions can be cured, a belief that often creates waste in the use of drugs.

“There is a lot of cancer therapy administered that has zero effect or perhaps even a negative effect on health outcomes or quality near the end of life. And I think that's where we need to focus our efforts to try to reduce the unnecessary therapies that don't improve health outcomes,” Schaecher said.

He also noted that as cancer becomes a chronic disease, short-term spend on drugs has changed into a long-term, annualized process while prices keep rising with the reiteration and development of drugs.

Calabrese is confident that the oncology space can be managed but is not sure to what degree. He said that as the pipeline provides more therapeutic options, there will be more competition. Add that to the fact that cancer has largely become in many instances more of  a chronic condition, and there is more opportunity to deploy management strategies that have proved successful in other categories, he said.

Calabrese also sees a chance to choose preferred products and drive their use when they offer the same benefits as some comparable but higher priced options used to treat the same cancer type. He expects to see PBMs use these management tools while relying on value assessments from ASCO and other organizations to support such efforts.

Dubois emphasized the industry’s move toward risk sharing and indication-specific pricing, through which costs for a specific drug depend on its effectiveness in treating a cancer type.

Another risk-sharing models he mentioned-although not yet commonly accepted in the U.S. healthcare industry-are not paying until a patient shows a definite response to a drug.   Risk sharing can also address unexpected utilization, where a manufacturer agrees to only charge for a certain number of cancer treatment cycles for an individual patient If that patient needs more than anticipated, the drug is provided at no additional cost.

Larson expressed the challenges employers face in the oncology space. Instead of telling their covered populations where to go for treatment or which drug or treatment to take, employers usually rely on physicians to drive decisions about the best and most cost-effective alternatives, but they might not be what motivates them, she said.

“Hopefully cancer drugs can prove their value because industry product costs are too high, and this comes at a time of poor economic growth and lack of information on care costs to make more informed decisions,” Larson said.

She used the high costs of hospital-based infusion centers compared to home-based infusions or those administered in a doctor’s office as an example.

“Those are likely unnecessary costs to the plan sponsor and the employer as the purchaser is looking at ways to drive people to lower cost options that provide the same results,” she said. “Health plans and PBMs need to do a better job in helping employers and their plan members make more informed decisions.”

Next: What are some solutions to these problems?

Question: What can be done to ensure effective cost management of specialty drugs while not taking advantage of payers?

From the PBM perspective, Calabrese said that his organization is offering a greater level of transparency in its processes by meeting with clients and providing information about how the company factors in rebates. The PBM also is aggressively negotiating with manufacturers to build in price protection to ensure that if the cost of drugs increases, a client receives appropriate reimbursement.

OptumRx, Calabrese said, is also now helping to manage drugs that typically fall outside the pharmacy benefit-especially infused products that land in the medical benefit and represent more than 50% of specialty spend-and coordinating both sides of benefits to deliver the most value clinically and financially for a client. He added that the PBM’s National Pharmacy & Therapeutics Committee operates in a fully transparent fashion, allowing clients the opportunity to observe first-hand the clinical deliberations that drive formulary and utilization management programs.  The organization also deploys a highly proactive approach to major pipeline drugs, advising clients before drugs come to market in the evaluation of drugs’ clinical merits based on published evidence and on how these new drugs might best be used, and conducting critical clinical appraisal of these drugs via P&T prior to FDA approval.

Schaecher puts his money on collaboration between specialty pharmacies, PBMs and health plans working with providers to ensure drugs are being used appropriately and responsibly. “It comes down to getting the right drug to the right patient in the right amount at the right time for the right duration, and means having those honest discussions to say how can we do it, recognizing that each drug may have some unique aspects to it that don't allow you to just take a singular, cookie-cutter approach,” Schaecher concluded.

Larson agreed that to ensure healthcare delivery is optimized and customized, stakeholders need to address the whole process and use of specialty drugs

“Some employers, such as manufacturing firms, focus heavily on productivity so the right drug at the right time is very important,” she said. “Others are only focused on costs and shifting more cost to the consumer, which is resulting in people not filling their drug prescriptions or getting needed treatment. This doesn’t help anyone except vendors that make money on the drug.

“Strategies that align with all stakeholders through collaboration are critical, and we still don’t see much of that happening,” Larson continued. “In the end, stakeholders may need to make a little less money so that employers can stay in the benefits game. If employers choose to walk away from offering healthcare benefits because they can no longer afford them, we are talking about a major tipping point for us all!”

She said that employers need to be educated about avoiding financial risk in the system such as by eliminating vendor drug cost waste caused by overcharging, nontransparent contracts, and iron-clad PBM contracts that only benefit the PBM.

“Employer education is key; taking action is key; stakeholder collaboration for effective cost management is key. For the employer plan sponsor, doing nothing is no longer an option,” Larson concluded.

Next: How can multidisciplinary care teams best treat patients with complex medical conditions?

Question: How can multidisciplinary care teams-pharmacists, doctors, nurses, social workers, home health aides-best treat patients with complex medical conditions?

Schaecher said that multidisciplinary team management is no longer a fad but has become a well-accepted model for most health plans. “I believe it's been woven into the fabric of education of a new generation of providers and that healthcare systems throughout the country are looking at this as the solution instead of siloing care,” he said. “They’re trying to manage it from cradle to grave in a multidisciplinary environment, recognizing the connections to improve the health, welfare and outcomes for patients, while at the same time, recognizing you are reducing redundancy, waste and costs.”

Calabrese agrees with Schaecher that it is difficult to assess how well the industry is doing, but that his organization is creating a level of connectivity across the healthcare continuum, from the pharmacy to the provider to the nurses to the social workers to the primary care and specialists, and so on.

“As a PBM with pharmaceutical care as our primary touch point, we believe we're in a unique position to help drive this type of multidisciplinary care that should inevitably drive improved outcomes for patients and allow them to be more engaged in and educated about their care which are critical,” he said.

Dubois said that bundled payments are offering a model for eliminating silos of care and supporting a multidisciplinary approach. He used UnitedHealthcare and its bundled payment model for oncology that provides a fixed amount to medical groups to most effectively manage care.  He also raised a note of caution that bundled payment could lead to withholding of necessary but costly care.  To address this concern, there needs to be “a robust set of quality measures” to ensure that we don’t move from incentives for overuse to ones encouraging underuse.

Mari Edlin, a frequent contributor to Managed Healthcare Executive, is based in Sonoma, California.