The Lynx Group

To Many Employers, Specialty Pharmacy Is a Vague Concept

November 2012, Vol 3, No 8

Houston, TX—Most employers do not understand biologics and specialty pharmacy well enough to use services appropriately and to take advantage of their benefits, said F. Randy Vogenberg, RPh, PhD, Principal, Institute for Integrated Healthcare, Sharon, MA, an employer benefit consulting company.

Speaking at the Second Annual Association for Value-Based Cancer Care Conference, Dr Vogenberg drew from a recent survey of employers to suggest actions that need to be taken to better integrate healthcare stakeholders.

In 2011, the Midwest Business Group on Health (MBGH), which evaluates issues from an employer point of view, saw a growing lack of understanding among employers regarding biologics and specialty pharmacy. A significant part of any health plan, biologics and specialty pharmacy currently account for approximately 25% of today’s spending but are projected to represent 50% by 2030; the average annual per-user cost today is $12,500.

With product growth within biologics and specialty pharmacy anticipated to be a top concern, MBGH partnered with Dr Vogenberg on research that would help employers to understand the role of biologics and specialty pharmacy, to prepare for challenges, to manage benefits through plan design innovation and partnering with specialty vendors in contracting and patient management, to better manage the at-risk population, and to more effectively communicate specialty benefits to employees.

Part of the difficulty, said Dr Vogenberg, is the lack of a single, standard definition of biologics and specialty pharmacy.

Additional challenges are posed by the existence of various delivery channels, sites of care, the US Food and Drug Administration requirements, and reimbursement schemes, and by innovations in formulations, drug delivery systems, and companion diagnostics—all contributing to cost and to the dilemma of determining what benefits are appropriate for employees.

National Employer Survey on Biologics

The MBGH’s National Employer Survey on biologics and specialty pharmacy, in which 120 national employers participated, revealed that:

  • In the past 5 years, specialty drug plan spending rose by more than 15%, several times more than the overall drug trend
  • Employers are unaware of their spending on biologics and whether that spending is effective
  • Employers are unsure how to design appropriate benefits regarding biologics, and how to effectively communicate this information to their employees.

More than 50% of the participating employers indicated that their level of understanding of specialty pharmacy is “low.” This low level of understanding was much more likely to be reported by very small companies (<500 employees), whereas the greatest understanding was observed among very large companies (>25,000 employees), possibly because large companies get more support from benefit advisors. “Still, we saw a significant lack of understanding of the whole area,” Dr Vogenberg said.

Based on this survey, more than 66% of employers offer case management services, disease management, or drug utilization management. Benefits and services provided around specialty pharmacy, for the most part, rely on pharmacy benefit managers (PBMs), he said. “This linkage, taking traditional pharmacy management and applying it to specialty pharmacy, is the standard in the marketplace, and it is probably not the appropriate way to spend resources, time, and money in managing these categories,” Dr Vogenberg suggested.

In addition, more than 50% of employers require that employees use specialty pharmacy to receive coverage, but 75% offer no incentives for doing so.

Level of Importance for Key Areas When Contracting with Biologics and Specialty Pharmacy Vendors
View larger version

The survey also sought to determine what employers consider important when contracting with biologics and specialty pharmacy vendors (Figure). The majority of respondents consider vendor cost to be a critical factor.

“They said they could not differentiate between Plan A versus Plan B, or PBM A versus PBM B, based on performance, so they look at cost when making decisions,” Dr Vogenberg said about the employers who were surveyed.

“This survey suggests that employers have not moved away from traditional benefit designs to take advantage of the benefits that specialty pharmacy vendors could provide,” he observed. “And it suggests there is a need to close the knowledge gap regarding healthcare benefits coverage, spending, and costs, to identify potential improvements to benefit strategies, and to shift coverage decisions to better benefit employers and their employees.”

Action Points

Dr Vogenberg suggests “key themes for action” for tightening the distance between employers and the management of biologics and specialty pharmacy:

  • Fill in gaps in understanding cancer related benefit coverage, spending, and the total cost of healthcare for self-funded plans
  • Determine key areas of utilization trends that are important to an employer organization and the organization’s success as a business
  • Identify short- and longer-term opportunities for improving benefit strategies or the use of support resources as part of a holistic approach
  • Choose how best to optimize benefit spending based on technology trends
  • Use knowledge gained in cancer care to incrementally shift benefit decisions and press for changes, such as benefit design and insurance innovation.

“Cancer is a good opportunity and starting point for employers around biologics, and experience gained here can be leveraged into other therapeutic areas,” Dr Vogenberg said.

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