Biotechnology advances have resulted in many new treatments for serious diseases. Among them are biologic products, a large subset of specialty pharmacy products (SPPs). There are now more than 750 of these SPPs, and nearly one third of the drugs in the current pipeline are considered SPPs.
These agents are characteristically derived from live organisms. Many require special storage and/or handling. They are administered either in an infusion center or by the patient at home. Coverage and category definitions in this area of pharmacy products remain unclear and are likely to continue so as biologic or injectable products become more available in patient-administered formulations.
Specialty pharmacy products are used to treat a variety of diseases; however, more than half of spending is for the treatment of hepatitis C, rheumatoid arthritis and other autoimmune conditions, multiple sclerosis, cancer, and respiratory conditions (ESI/Medco 2012 Drug Trend Report). Whereas the early biologic products were solely injectables or infusions administered by physicians, advances in medical technology have expanded the types of formulations, which now include oral formulations and vaccines.
Additionally, unit-based costs have been reported to be rising by 18%–30% per year, placing greater pressure on benefit coverage for these treatments. Accounting for 18.4% of prescription spending and 24.5% of total per-member, per-month spending, SPPs are the fastest-growing drug area (ESI/Medco 2012 Drug Trend Report). SPPs will continue to grow as a percentage of drug spending, and their growth will in turn affect overall medical spending. Despite the availability of new generics pushing the generic dispensing rate (GDR) higher, general economic factors along with the rising use of SPPs will tend to cause continuing growth in pharmacy spending (CVS/Caremark 2012 Insights Report).
The cost of specialty pharmacy products typically ranges from $6,000 to $350,000 per employee or dependent per year, in a pharmacy benefit, for those who use the products, and accounts for major increases in overall spending growth of prescription benefit plans (+18.7%), whereas in 2011 (as reflected in the 2012 report), the traditional drug component of prescription benefit plans declined 2.2% by (ESI/Medco 2012 Drug Trend Report).
Inflammatory conditions such as rheumatoid arthritis continue to account for the highest spending, followed by cancer (ESI/Medco 2012 Drug Trend Report). Among the top 10 class contributors to this trend were rheumatoid arthritis and other autoimmune conditions (such as lupus, Crohn’s disease, and ulcerative colitis), cancer, hepatitis C, respiratory conditions, multiple sclerosis, and pulmonary hypertension (ESI/Medco 2012 Drug Trend Report).
Coverage for SPPs varies based on the site of service and method of contracting, and that variation makes accurate analysis of spending difficult. Patient-administered drugs are often billed under the pharmacy plan, whereas infused or injected oncology agents and drugs for immune disorders are usually billed under the medical plan, making a complete analysis of information on cost and utilization difficult for purchasers — and a challenge to payers in terms of managing coverage, patients, and payments.
This report describes findings of a Web-based survey of employers. It was conducted by the Midwest Business Group on Health (MBGH), a Chicago-based not-for-profit coalition of more than 120 large private and public employers, and was led by Cheryl Larson in collaboration with the Institute for Integrated Healthcare (IIH), led by F. Randy Vogenberg, RPh, PhD, from summer into late fall of 2012.
Why employers matter
Employers as purchasers of health care are key stakeholders in the SPP environment, as they sponsor many of the plans that provide health care benefits for employees and their families. Tracking employers’ perceptions and attitudes along with changes in access and provider payments resulting from benefit designs should be seen as important. Until recently, however, employers were largely neglected as a group in benchmark surveys on benefit coverage. The purpose here was to build upon the 2011 baseline understanding of biologic and specialty pharmacy drug benefit coverage from the perspective of the employer (i.e., commercial benefit plan sponsors). Such information would help employers in understanding the value and benefits of SPPs.
MBGH and IIH conducted the first national employer survey in 2011, and this 2012 survey would continue to assist employers in: understanding what SPPs are; managing the unique challenges posed by SPPs; identifying plan design innovation opportunities through collaboration with or by partnering with vendors for contracting and patient management; and understanding the importance of managing their at-risk population using SPPs as well as more effectively communicating SPP benefits to employees.
The survey’s scope
MBGH worked with IIH, with an employer project advisory council, and with 15 other business coalitions across the United States to distribute a Web-based survey to their employer members. A total of 69 employers, representing more than 1 million employee lives, completed the survey. Participating companies represented most states, with half based in the Midwest. The active employee populations that were represented ranged from fewer than 500 to more than 25,000 employees.
In 2011, all standard industrial categories were represented in the survey. But the 2012 survey dealt with a different mix and a demographic skewed towards manufacturing and large employers.
HR executives who responded in 2012 indicate a higher understanding than 2011, when 25% of employers had “little to no understanding” and 53% had only “moderate understanding.”
Employer-reported understanding of specialty pharmacy benefits
No respondents indicated “low“ or “don’t know”
Executive leadership’s level of interest in understanding specialty pharmacy benefits was reported as “average” to “low” by 53% of respondents. This indicates again that employers need to engage senior leadership in this conversation.
Executive leadership’s reported level of interest in understanding specialty pharmacy benefits
Employers’ reported level of involvement in working with specialty pharmacy benefits
Twenty-five percent don’t know what their cost increases have been over the past three years — these are missed opportunities for better managing the benefit.
Thirty-five percent are experiencing cost increases of 11% to 30%, while 10% are experiencing 31%–50% cost increases — making it critical to focus on understanding the benefit and on working more closely with service providers.
Increase of specialty pharmacy benefit costs, 2009–12
In addition, 36% do not know what their company-paid medical costs are specific to specialty pharmacy drugs and related services. This probably reflects confusion about what specialty benefit costs are paid through the medical benefit and what costs are paid through the pharmacy plan.
Managing costs continues to be important, but measuring performance is emphasized too. Reducing inappropriate utilization, for example, was cited as very important by 72%. Unit cost is important, but patient management is the key to long-term success.
Current specialty pharmacy plan design
In addition, 35% use traditional pharmacy tiers, co-insurance, and/or copayments for specialty pharmacy. Only 21% use special tiers with copayments and/or co-insurance. This underscores the need for benefit design innovation.
The majority of employers are still not offering incentives for using a specialty pharmacy, participating in case management, or adhering to medications — a missed opportunity for improved outcomes.
|Use of incentives to encourage certain actions (e.g. waiver of co-payments/co-insurance) |
| ||Incentives offered ||Incentives not offered ||Don’t know |
|Using specialty pharmacy ||30% ||47% ||23% |
|Receiving higher value meds at lower cost share ||23% ||51% ||26% |
|Participating in case or disease management ||37% ||41% ||22% |
|Adhering to medication ||30% ||48% ||22% |
|Complying with medical therapy program ||28% ||48% ||24% |
Case management, drug utilization, and cost sharing are the top three priorities for managing specialty pharmacy benefits. All three are essential to managing costs and patient outcomes.
SPPs continue to be the fastest-growing area of pharmacy benefits and one in which drugs in the pipeline are increasingly being marketed to consumers who have rare diseases. Unfortunately, self-funded plan sponsors do not completely understand specialty pharmacy and SPPs.
Both the 2011 and 2012 MBGH/IIH surveys showed key gaps in understanding appropriate coverage. One gap is that many employers are unaware of how effective or valuable to their business their specialty pharmacy spending is, so they are not sure how to design innovative benefits or how to best manage them in the face of total care cost increases. Nor do they know how to effectively communicate benefit coverage information or support about SPPs to their employees or their families.
With a large number of employers’ HR specialists, along with company executives, continuing to claim “little to no understanding” or even a “moderate understanding” of SPPs, it is clear that efforts are needed to fill in these knowledge gaps to enable employers to design useful benefit programs, offer appropriate support services and technologies for employee care or benefit management, and devise vendor contracting options.
All stakeholders will want to optimize outcomes. Educating employers to ensure effective communications between them and their employees will also be necessary.
Aside from the rising issues associated with SPPs, requirements in the Affordable Care Act including communication of mandated coverage have captured the attention of HR professionals in the self-funded companies.
If employers’ knowledge gaps are allowed to continue, it will be too late to address the problems they will have created by not addressing the new mainstream use of SPPs that are emerging from the R&D pipeline. Furthermore, they will not be able to adequately communicate with employees about SPPs to determine whether these employees understand their specialty pharmacy benefits and whether these products improve the employees’ health.
Tools for employers
From these findings and discussions with several hundred employers during 2012, MBGH/IIH has planned three efforts to help employers:
- Address the educational gaps related to understanding benefit coverage, spending, and health care costs
- Identify short- and long-term opportunities for improving benefit strategies and examining the resources that are available before executing the strategies
- Determine how to optimize benefit spending based on technology trends and continue to measure any shift in benefit decisions as they gain knowledge
In January, a new employer-focused informational resource toolkit was launched by MBGH with IIH — it is at www.specialtyrxtoolkit.com. This resource will continue to evolve and be updated with SPP-related information.
The toolkit aims to provide employers with timely information, trends, and best practices for the management of specialty pharmacy benefits and resources.
It is time to move beyond potential and into optimizing health care outcomes, reduce employee risk factors and/or the progression of disease, and link health with wellness along the continuum of care.
These objectives help define the next work streams for MBGH/IIH. The current work stream of the SPP initiative project will be completed in 2013. It includes working with an employer advisory council to advise employers and drive elements of the 2012 survey research, enhancing the Web-based employer educational toolkit resource, building upon the pilot educational outreach programs in 2011–’12 designed to disseminate research findings and assist in conducting employer pilots to determine the efficacy of various benefit design approaches.
It is hoped that these efforts will help employers develop a better understanding of ways to improve benefit design and delivery of effective benefits for SPPs.
- ESI/Medco Drug Trend Report 2013. Accessed March 21, 2013. http://www.drugtrendreport.com/commercial.
- CVS/Caremark 2012 Insights Report. Accessed March 21, 2013. http://www.cvscaremarkfyi.com/blogs/cvs-caremark-2012-insights-report-reviews-pbm-trends.