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Specialty Drugs Paid Under Medical Benefit Thwart Cost Control Measures

Analysis  |  By Gregory A. Freeman  
   November 22, 2017

Expensive specialty drugs are increasingly falling under medical benefits rather than pharmacy. This means health plans end up paying more for overutilization that could have been avoided.

Health plans are facing increased costs from specialty drugs, which are expected to represent 55% of all drug costs in a few years, with about half of that managed under the medical benefit and paid for the same way as medical services, according to claims data that was analyzed by CVS Health and cited in its publication Insightsfeature. That means many of those pricey medications are skirting the safeguards put in place to manage the cost of other drugs.

Drugs that are injected or infused in a medical facility often are billed under the medical benefit portion of a health plan rather than the pharmacy benefit, and that can complicate cost-saving utilization management programs, says Trip Hofer, vice president of CVS Health and president of Accordant, the company's disease management operation. The issue first arose about 10 years ago and has become more problematic each year with the development of improved medications that must be administered by clinicians, he says.

"This is a little-known phenomenon that continues to grow, with more of these specialty drugs managed under the medical benefit. The majority of these drugs are from oncology but also other categories like autoimmune," Hofer says. "Unlike the pharmacy benefit, which is fairly well managed through formulary, prior authorization, and other cost-utilization techniques, the medical benefit is more like the Wild West. It's not been managed as closely and health plans don't know what's happening until the claims come in and, even then, they don't really know if it was clinically appropriate."

One example is Remicade, an infusion therapy with multiple specialty indications such as ulcerative colitis. In its analysis of claims data, CVS found significant variation in dosing and medical claims pricing for the same indication, with dosing often exceeding clinically appropriate levels, Hofer says.

CVS is working with health plans to improve the process of prior authorization, Hofer says.  The prior authorization process has typically been a manual process, but CVS has been refining its digital portals to improve effective dosing. Hofer says the improvements have the potential to save up to significant sums for a health plan.

"With the improved prior authorization, we're seeing a denial rate of about 5% to 8%, and even that can lead to millions of dollars of clinically appropriate cost savings for a health plan," Hofer says. "There is the potential for millions and millions in savings even when the denial rate is that small, and you're not denying anyone appropriate care. This is only from weeding out the claims that are clinically inappropriate and directing them to other care options."

The improved prior authorization process also steers providers to less costly specialty-drug administering locations for their patients, such as an outpatient medical facility or even the home.

"Health plans are recognizing the importance of managing the medical benefit in the same way as pharmacy. The increasing use of these specialty drugs is driving health plans to adopt the same cost-utilization strategies for medical that are already second nature under the pharmacy benefit," Hofer says.

CVS is currently working with about 30 health plans representing 64 million lives to address specialty drug utilization.

"Health plans have woken up to this and are realizing that this is a major cost concern. They're looking at managing drugs under the medical benefit as one of their biggest concerns," Hofer says. "This is something that takes time to address because you have to communicate well with your providers about implementing any new tool or process for claims. You can't disrupt your relationship with providers, but health plans are realizing they have to do something about this."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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