Payers Must Step Up Their Utilization Management Programs

Caroline Helwick

July 2013, Vol 4, No 6 - AVBCC 2013 3rd Annual Conference

Hollywood, FL—With the Affordable Care Act about to be fully enacted, and growing concerns about managing oncology costs, health plans will put simple processes in place ahead of new drug approvals to more actively manage these medications, said James T. Kenney, Jr, RPh, MBA, Pharmacy Operations Manager, Harvard Pilgrim Health Care, Wellesley, MA, at the Third Annual Conference of the Association for Value-Based Cancer Care.

“This is not something that we’ve seen in the past,” Mr Kenney noted. “It’s going to be an interesting road for all of us as we determine how to effectively manage the medical drug side, but not disrupt the practice and the patients in the process.”

Mr Kenney described the resources that payers apply to manage drugs, including cancer drugs, on the medical and on the pharmacy sides. For payers, utilization management is much simpler on the pharmacy benefits side than on the medical side, he said.

Medical benefits include products that are covered and provided commensurate to some type of physician or practitioner service. This can create confusion in tracking and monitoring. “We may have, actually, 2 products that share a J code,” Mr Kenney noted. “When that happens, there’s not an easy way for the plan to figure out what was actually provided. When you add to this mix the different strengths and dosage units of a product, it creates a bit of a challenge to manage drugs on the medical side. Historically, there has not been a lot of management on the medical side.”

The pharmacy side is easier. Phar­macy benefit managers (PBMs) can capably handle tracking and monitoring in real time. All claims from pharmacy channels run through the PBM contracts, and all drugs are tracked by national drug codes. Drugs can be managed down to their individual unit, strength, dosage, and package size. Data management and reporting can be easily handled.

“Also, if we want to cover a drug that’s oral, but not cover a nasal route, then we can do that. That’s not a luxury we have on the medical side with the current systems,” he said.

Drug Management Strategies
There will be growing emphasis on coordinated drug management, which includes the site of care, the utilization management component, and reimbursement. Some health plans will start shifting their strategies from the physician buy-and-bill model to “white bagging” (ie, the pharmacy ships the drug directly to the practice and the patient receives the drug at the office), as well as shifting from office to home infusion, which is cost-saving for the plan. Shifts in sites of care are being done selectively at this point by different plans, Mr Kenney pointed out.

Utilization management allows the payer to limit coverage for a particular drug for its US Food and Drug Administration (FDA)-approved indication only, and to use dose management strategies to ensure proper prescribing practices. For example, if the drug’s label indicates a maximum dose of 10 mg/kg, then the payer may cap the reimbursement for that drug at that dose. “This is difficult to do using the medical claim system, and a lot easier to do on the pharmacy side,” Mr Kenney pointed out.

Reimbursement management occurs at the claims level and involves things such as adjusting fee schedules as they relate to specific products.

Utilization Management Options
Much of utilization management involves benefit design, which encompasses:

  • Drug formularies (open or closed)
  • High-cost specialty tiers for expensive specialty drugs
  • Coinsurance and deductibles
  • Retrospective drug utilization review (ie, evaluating the historical claims activity)
  • Dose optimization (eg, providing a week’s supply only of an oral oncolytic drug, shipped from a specialty pharmacy)
  • Diagnostic tests that match the drug to the suitable patient’s adherence to FDA approval
  • Mandatory substitution and interchange of drugs (which will be increasingly important once biosimilars arrive on the market).

Additional utilization management options include step-edits, quantity limits, use of preferred products, use of tiered formularies, cycle management, oncology first-fill programs, buy-and-bill management, and prior authorization.

“The degree to which utilization management is applied can have a significant impact on physician practices,” Mr Kenney noted. “From a plan perspective, ideally, what we want is not to disrupt the practice, not to disrupt the patient flow, but to put reasonable controls in place to manage utiliza­tion. We monitor these constantly and make changes.”

Table: Specific Prior Authorization Criteria, by Total Lives Covered.
View larger version

Many criteria can be applied to prior authorizations. A 2011 trend survey from ICORE Healthcare described the respondents’ prior authorization criteria for injectables (Table).

It is probably easiest for plans to simply state that no prior authorization will be required when drugs are used according to the FDA indication, Mr Kenney suggested.

When practices show good compliance with the appropriate use of a drug, and few requests are made outside of guidance, prior authorizations can be lifted. Prior authorizations should be periodically reevaluated, largely because new drugs become available, Mr Kenney added.

Quality standards and quality measures are also incorporated into practices, along with performance incentives that can be built into contracts.

The Medical Benefit Is Expanding
It is likely that much of the resources and tools that have historically been applied to the pharmacy benefit will increasingly be moved to the medical side, Mr Kenney predicted, especially with the increase in oral therapies and new modes of administration, including self-administration of injectables. “The medical benefit, which no one has paid much attention to, is expanding, thanks to new drugs, infusible products, and so forth,” he said.

Although many of the new oncology drugs will be orals, there will remain a significant amount of drug utilization on the medical side, requiring some level of control and management.