How Health Plans Manage Specialty Drugs

I’m a bit tardy is writing about the 2012 edition of the EMD Serono Specialty Digest, a valuable report on payer and managed care strategies for specialty drugs. (Free with registration. Warning: the site is kludgy and doesn’t play nicely with all browsers.)

The report is chock full o’ data, so below I pluck out a few interesting factoids about benefit coverage and health plan tactics. To manage specialty drugs, plans are focusing on both utilization management and channel management.

I encourage you to read the whole report because it shows how benefit coverage, patient out-of-pocket costs, and reimbursement methods for specialty drugs vary dramatically among plans. These differences, along with health plan tactics, highlight contracting and channel strategy challenges that I encounter in my consulting work with biopharm manufacturers.

THE DATA

This year’s report is based on responses from 102 health plans representing more than 122 million covered lives across the following spectrum of plan types:

• 83.8 million commercial lives (healthcare maintenance organization or preferred provider organization)
• 12.6 million Medicare Advantage prescription drug plan lives
• 19.7 million managed Medicaid lives
• 6.5 million other (unspecified) lives

Full demographics are on page 18.

Two warnings before you interpret the results:

• Each plan has equal weight in the results. In other words, a national plan with 2 million lives has the same weight in the results as a regional plan with 20,000 lives. Keep this computation issue in mind before overgeneralizing the results. Rxperts’ Debbie Stern, who helped prepare the report, told me that EMD Serono plans to release a survey analysis with results weighted by number of covered lives.
• Be careful with time trends because the sample base continues to shift over time. For example, the percentage of commercial lives in the sample has dropped from 82% (2008 data) to 74% (2009) to 61% (2010), then bounced back up to 68% (2011).

BENEFIT COVERAGE

Despite my caveats about time trends, it does appear that plans are more clearly defining coverage under either the medical or the pharmacy benefit. Self-administered specialty drugs are increasingly covered only under a patient’s pharmacy benefit, while provider-administered specialty drugs are increasingly covered only under a patient’s medical benefit.

The chart above shows the variations in benefit coverage for specialty drugs:

In summary:

• 82% of the plans cover self-administered agents (oral and injected medications) under the pharmacy benefit only
• 76% of the plans cover office-administered agents (infused or healthcare practitioner-administered medications) under the medical benefit only
• 64% of the plans cover home-health administered agents under a medical benefit

In practice, the coverage decisions line up imperfectly with the distribution channel. A patient may have insurance coverage for a specialty drug under a medical benefit, a pharmacy benefit, under both a medical and a pharmacy benefit, or a stand-alone specialty benefit.

PAYER STRATEGIES FOR SPECIALTY PHARMACY

The report has more detail on payer strategies than I can cover in this brief article. Figure 7 (page 22) shows the prevalence of these strategies within the EMD Serono sample. I classify the tactics as either "utilization management" or "channel management" to arrive at this alternative presentation of the commercial plan data:

Note that payers are keeping multiple channels open, but ratcheting back reimbursement or tightening oversight. In addition to the items listed above, the report provides fresh data on topics that I’ve addressed in previous articles, including:

• New Data on Specialty Pharmacy’s Challenge to Buy-and-Bill 

• More Formulary Exclusions for Many Drug Therapies 

• Oral Oncology Channel Battle: Payers vs. Providers 

While other surveys show that payers know little about specialty drug spending, I presume they know that biological drugs are not made from licorice and gummy bears, as pictured on the cover of the EMD Serono Digest. ;)

P.S. Happy 141st birthday, Marcel Proust!