Communities: Pharmacy Benefit Management

8 Ways Pharmacy Benefit Design May Evolve in 2013

By Shelly Carrey, Research Director, Pharmacy Benefit Management Institute (PBMI)

In the past, employers simply shifted more of the cost to members through higher copays, preferred products, and/or a drug benefit- specific deductible. But, that can only go so far. Pharmacy benefit programs are advancing, evolving from simply cost-shifting to more complex offerings and adopting new management tools. Pharmacy benefit plan sponsors continue, however, to shift to higher member cost-sharing, a pattern similar to overall trends in employer health benefits: reducing benefits and raising the member contribution.

Specialty pharmacy continues to be the fastest growing and one of the most complex market segments in the health care landscape. Employer adoption of several specialty management strategies is growing, but lags behind management of non-specialty medications. In addition, the management of specialty drugs under the medical benefit trails management under the pharmacy benefit.

Cost-Sharing Widens Between Tiers

Cost-share tier structures have changed over the years. Pharmacy Benefit Management Institute’s (PBMI) annual Prescription Drug Benefit Cost and Plan Design report shows continued decline in the use of two-tier, cost-share structures while the use of four-tier, copay designs continues to grow, fueled by the addition of a separate tier for specialty drugs

The most common cost-share tier among plan sponsors answering the survey was three-tier — generics, preferred brands, non- preferred brands. We are starting to see the emergence of innovative cost-share structures with five or more tiers, but it is unclear whether these will grow to become mainstay. Tier categories include preferred and non-preferred generics as well as splitting by clinically and cost-effective therapies.

In addition, the copay differential between tiers continues to widen. The average differential between generic and preferred brand copays has increased to $19 (compared to $7 about ten years ago). The average differential between preferred and non-preferred brand copays is $23, compared to $13 a decade ago.

As benefit designs move towards more tiers, the use of coinsurance designs — where a member pays a percentage of the overall drug claim cost — are declining. This may be due to concerns over member out-of-pocket costs as typically one of the higher tiers is for specialty drugs.

Alternative Incentives for Behavioral Change

During the last several years employers have begun to experiment with various types of incentives intended to reward healthy behaviors that can lead to improved health outcomes. The use of copay waivers for specific drug classes and/or health conditions (e.g., diabetes) has decreased over the past few years. The decline may be a reflection of the growing question about the value of reducing copays.

Several studies have emerged on this topic in the last 18 months, which have challenged the assumption that copay waivers increase medication adherence or help to contain overall health care costs. However, when alternative incentives are provided, most employers still focus the incentives on participation whereas less than 10 percent of employers tie incentives to actual changes in behavior.

Managing Purchasing Channels

Overall member cost share is around 25 percent, but this amount often varies by type of pharmacy in order to incentivize members to use certain channels. Historically copays for a 90-day supply filled in a mail pharmacy have been less than filling a 30- day prescription three times at a retail pharmacy. A new trend is varying within channel — incentivizing the use of particular brick and mortar retail pharmacies. This allows plan sponsors to keep the broad network while still managing costs as the preferred retailers typically offer better pricing.

Limited Networks

After cost-sharing, establishing pharmacy networks has been a popular approach to cost management. Limited pharmacy networks, not talked of much before 2012, are more of a consideration after the contract dispute between Walgreens and Express Scripts. Providing the broadest access to members may no longer trump the more favorable pricing of a narrowed network. A large and growing supply of retail pharmacies makes the limited network approach possible: there are four to five times as many retail pharmacies as there are McDonalds (~ 13,000 vs. 56,000). Have you ever heard anyone complain about not being able to find a McDonalds?

Trend Management Programs

Trend management tools have grown in popularity in the last decade, now becoming a mainstay of effective pharmacy benefit management. There are two general types of trend management programs — utilization management and clinical/educational programs.

Well-managed drug benefit plans include a variety of drug inclusions, exclusions, and utilization management tools. Excluded drugs often include medications deemed nonessential (e.g., hair growth treatment, experimental/investigational drugs, and over-the-counter medications). Even when medications are covered, employers use a range of coverage limitations to promote appropriate use. These include prior authorization, quantity limits, refill-too-soon limits, and step therapy.

This type of program is on the rise due to its effectiveness, which can outweigh any member disruption. Prior authorization, refill-too-soon, and quantity limits are used by the vast majority of plan sponsors already, while step therapy is used by 65 percent of plans. The one exception is pill splitting, which has never experienced widespread adoption as PBMs generally do not promote these programs due to safety concerns.

The main goal of education programs is to improve quality of care. They include disease management, fraud/waste/abuse, therapy adherence, retrospective DUR, prescriber profiling, and medication therapy management. They typically intervene with the patient and/or physician after a medication has been dispensed.

Education programs have experienced considerably lower adoption. Given their retrospective nature, the effectiveness of these programs is often less than utilization management programs administered during the point-of-sale. Use has declined in recent years, perhaps reflecting ongoing questions about the value that some provide. Disease management is the most commonly used educational program, with 70 percent of plan sponsors offering it. The remainder of educational programs has been adopted by less than half of plan sponsors.

Specialty Drugs

Employer adoption of management strategies specific to specialty mediations has grown over the past year, but management of specialty drugs under the medical benefit still lags behind the pharmacy benefit. At the core of this gap is the problem that employers cannot measure specialty drug spend under the medical benefit — only 25 percent of employers have any visibility

Plan sponsors are challenged with balancing the costs of specialty medications while providing coverage for their members. Traditional pharmacy benefit management strategies, such as pharmacy networks, formulary management, prior authorization, and step therapy programs are now widely used for specialty drugs (see Figure 3). Quantity limits, in the form of limiting specialty products to a 30-day supply, are also common. Another quantity limit strategy is to limit the first fill to one to two weeks to ensure the patient tolerates the medication.

This approach ensures dosage safety and minimizes waste of expensive drugs in situations where the regimen needs to be changed due to poor tolerability or lack of efficacy. In order to be advantageous all around, it is important that the plan design accommodates this policy such that the patient does not pay a regular/full copay for the lesser quantity.

Site-of-Care and White Bagging

Payer cost varies considerably depending on the setting where the specialty drugs are administered. Many plan sponsors are not sure which site-of-care has the lowest cost under the medical benefit. Of those that do know, one-quarter say that their medical benefit is designed to encourage selecting the lower-cost site of care for infusion services.

A fairly new strategy which has gained ground recently is white bagging. White bagging is the term used when patient-specific medications are purchased through a specialty pharmacy and shipped to the provider to administer. This process eliminates the buy- and-bill model used by physicians, where drug reimbursement is typically equal to the cost of the medication plus a fixed percentage. White bagging is designed to allow the payer to purchase the drugs at a lower cost from a specialty pharmacy versus the provider. It also offers the ability to shift coverage of drugs from the medical benefit to the pharmacy benefit.

There are potential drawbacks, such as patient safety, wasted medication, and operational headaches for the provider. Patient safety concerns are largely related to the integrity of the drug supply chain and proper handling procedures. Once a drug is received, providers bear the additional burden of storing it separate from their regular inventory until it is time to be administered. If a last minute change is made to the patient’s treatment plan, then a new drug or additional drug may need to be ordered, resulting in delays in care.

Copay Assistance Programs

Specialty drug manufacturers frequently offer copay assistance programs that cover the member’s cost share. These programs have become popular due to the increase in member’s cost share for specialty drugs and manufacturers’ concern that higher copays could result in members not taking their medications. By subsidizing the member copay, manufacturers maintain demand for their drug at a low cost relative to the total selling price of the drug.

Many of the programs will cover member cost share up to $500/month, and very few have a maximum income requirement. The extent these programs are used by members is unknown to employers, but it may be an effective strategy to maintain patient adherence. Many employers, however, view the programs as adding a layer of complexity that is not worthwhile and do not see them as a good way for patients to save money.

Of course, copay programs also exist for non-specialty medications. They too are aimed at offsetting the patient’s copay at the point-of-sale. The number of these programs has increased significantly over the past few years, mainly due to many brand drugs coming off patent. Opinions differ as their intent and usefulness for pharmacy benefit management. Plan sponsors say they undermine copay tier structures, which are designed to incentivize the use of lower-cost alternatives, and increase costs due to members taking brand drugs over the generic alternatives. Proponents of coupons advocate that they are legitimate tools to make drugs more affordable for patients, thereby increasing adherence. Plan sponsors would be prudent to proactively develop their position and strategy for drug coupons on the traditional pharmacy side.

Shelly Carey, MMR, is is responsible for all research conducted by PBMI an writing resulting reports. Before joining PBMI, Shelly held various market research roles on both the client and supplier side. Her experience includes research design, execution, and analysis.

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