Employers should start thinking about their specialty drug benefit design differently, recommended an industry expert at a recent conference. That includes not only reconsidering tiering but also coverage of biosimilars, as well as disease categories that increasingly will contribute to their specialty spend.
Alex Jung, founder of Alex Jung Consulting LLC and member of the Midwest Business Group on Health’s board, opened her session at the MBGH Employer Forum on Pharmacy Benefits, Specialty Drugs & Biopharma: How PBMs Control Prices & What Employers Can Do About It by explaining that she is “try[ing] to correct a lot of the things that became misaligned incentives or…business practices that have resulted in exploitation of employers and their employees.” She expressed an interest in getting public policy experts to “understand that they need to step up and put in some governance and controls so that the burden doesn’t always fall on the employer” because they have enough to deal with.
Jung maintained that specialty pharmacy doesn’t exist anymore, which “is a controversial thing to say because we have these categories of specialty pharmacy in our benefits design. But when every drug that gets introduced into the market is now over $600 — which is the typical threshold of a PBM’s specialty designation — and those drugs require special handling because the majority of the products are now either injectables or infusibles, do we really have a specialty drug category anymore? Or should we start thinking about this as a subject that needs to be abandoned, and then just start calling these drugs what they really are, which is patent-protected brands?”
She noted that while the definition of specialty drugs varies, it usually includes three criteria: (1) The agent’s price is more than $600, (2) the drug treats a specialty condition or is prescribed by a specialist, and (3) the product requires special handling. These qualities, she argued, describe the current market of specialty pharmaceuticals.
Over the last five to seven years, most new launches have been priced at tens of thousands, sometimes hundreds of thousands a year, so using price as a threshold doesn’t make sense. And with all the investment in and success of chronic disease management, most new drugs are for rare diseases or ones not chronically managed, she said. And “most of these drugs are not oral solids anymore, so they do require special handling from a transportation, a storage, an administration perspective and modality for dosing, and most of those modalities are now in liquid or compounded form. So I would urge you to start thinking about potentially abandoning the title of specialty.”
Specialty drugs now represent about 53% of employers’ drug spend, so “when it’s more than half, is it really special, or is it the norm?” asked Jung. The term “specialty” was coined more than 15 years ago to set apart those drugs representing only about 2% to 3% of spend, but now, “this is the norm.”
So rather than calling these agents specialty drugs, she argued, why not simply call them branded drugs? “There are brands and generics — that’s all that really exists in the market. They’re either protected by a patent or they’re not.”
According to Jung, “oncology drugs are no longer specialty medications. Oral oncolytics are now generic. So is that a specialty drug just because it’s a cancer drug? It’s a generic.”
She continued: “What we all need to start thinking about is the costs from a threshold perspective in terms of affordability. And that’s going to have to play into your plan design, because affordability is a huge problem for your employees. And you might want to consider whether your pharmacy benefits should have different coinsurance and copay thresholds for generics and brands.”
She proposed the possibility of introducing a cash-pay generic benefit, noting that many generics today cost less when a person pays for them in cash instead of paying a copay. “This is a category where there’s a significant amount of spread being made between the pharmacy and the PBM. Why are you putting your employees in a position of having to pay for that spread because the majority of the time it’s coming out of their copay?”
This also contributes to direct and indirect remuneration (DIR) clawbacks at the pharmacy “because some of the dollars that are the difference between the copay and the price of the drug gets clawed back by the PBM. So you are perpetuating a business practice, unknowingly, that disadvantages your employees. So I would strongly urge you to think about your categories of tiers, not as generics, brand and specialty, but as cash generics, covered generics and brands.”
In light of the shift from population health to precision medicine, Jung also called on employers to abandon “population health paradigms that really don’t matter anymore.…Because going forward, everything is going to be about the precision of your own physiology. Cell and gene therapies are just the beginning.”
Autoimmune Conditions Are Driving Costs
Progress is being made in certain diseases, she asserted:
- Inflammatory bowel disease
- Plaque psoriasis
- Atopic dermatitis
- Hereditary transthyretin-mediated (ATTR) amyloidosis
Drugs to treat these conditions are going to start showing up in claims — if they haven’t already — and those agents are going to drive employer costs, she stated.
While employers obviously will be concerned about prices, many of the autoimmune drugs are very effective, she noted. “Price is one thing,” she said. “But don’t let price get in the way of making a good decision around clinical efficacy. I find employers always prioritize price versus medical necessity and clinical efficacy. It is a short-term saving strategy that can result in serious long-term costs.
“Because what happens with autoimmune disorders is when they are not controlled, not only do they become lifelong, but they create irreversible damage to the human body,” continued Jung. “You cannot fix it once it gets worse. And that is creating a much more higher acuity, higher mortality and higher morbidity patient in your population. You are creating a monster when you cut them off of a product that you think is too expensive. So when you are looking at your step therapies and your prior authorizations, I implore you not to make the financial choice over the clinical efficacy choice. Because the reason your costs are going up is because that’s what you’ve been doing. And you’ve created a bunch of people who are coming back to haunt you.”
She also pointed out that employers are not likely to be better off if a person on a specialty drug leaves the company because of the nature of disease prevalence. “If you think that those people are better off leaving your company, let me explain something to you: Disease prevalence in the United States is consistent. So everyone who leaves your company that has a specific profile, the person replacing them is going to have a very similar profile.”
Jung acknowledged the controversy surrounding some Alzheimer’s agents, which focus on plaque that forms in the brain. She noted that some people are referring to the condition as diabetes type 3 because “there is a similar [to type 1 and type 2 diabetes] function in your ability to process insulin that creates plaque in the brain. So this is going to be a chronic disease.”
Employers Should Lobby for Collective National Risk Pool for Hemophilia
Hemophilia, she said, “is one of the best researched genetic diseases there is. And this condition is debilitating for children in particular.” Gene therapies offer the promise of a cure — but with multimillion dollar price tags.
“What do you do about that as an employer? How many hemophiliacs are you likely to have in your population? It’s a small number,” she noted. “But here’s where you, as plan sponsors, need to start thinking differently about how much risk you want to assume. I have not seen the plan sponsor community come together and say that there are certain conditions — and this is one of them — that are genetic in nature, but the prevalence rate is so low, and the price of therapy and treatment is so high, that there ought to be a collective national risk pool.”
Jung implored plan sponsors to lobby for such a risk pool. She explained that she testifies before Congress often, and members have asked her why employers haven’t come to them with a request to put together a national risk pool that can be funded through appropriations.
“Did you know that the Congress would do that for you if you just asked? They think you’re morons. They tell me that: ‘Employers are morons. They never come to us with any of their needs. They’re afraid to talk to Congress; they’re afraid to talk to their politicians; they’re afraid to take a public position.’…My point is, you don’t have to absorb all these, what you call specialty, costs. You just have to think differently about how you want to assume the risk for them.”
Hereditary ATTR amyloidosis is another rare disease, impacting about 200,000 in the U.S. Jung questioned why employers would cover drugs for the condition, noting that there is a “very low likelihood” that one of their members would have it. “So for the things you don’t want to cover, instead of just saying it’s not covered, work for advocacy, so that it can be covered at the national level. Because these researchers and these drug companies aren’t going to stop doing research just because you don’t want to pay for it. They want to cure diseases; they want to have an impact.”
She noted that specialty drug prescription growth per member per month (PMPM) continues to increase, doubling from 2016 to 2021, with a current trend of 20%. “Would you pay 20% inflation rates on anything else?…No. Why are you paying for it in your drugs? You accept it. Stop taking it; stop accepting it,” she urged. “There are ways to control these costs.”
Jung encouraged employers to “do something different” with their benefits design, pointing out that they don’t have to finalize anything until open enrollment later in the year. “Sit down and look at your specialty benefits design and ask yourself is this the right way to go? Because your PMPM doubled from $600 to $1,200 in a period of five years. And in five years, it’s going to double again. How sustainable is this?”
Payers’ Rebate Preferences Are ‘Killing the Biosimilar Market’
The FDA has approved more than 40 biosimilars, and most of them have launched onto the U.S. market. But some haven’t gotten much uptake because payers often prefer the high-rebate reference drugs. By doing this, payers are “killing the biosimilar market,” she asserted. “It’s probably going to die.” Jung said that a biosimilar shouldn’t be called that. “It is a generic drug. Why are you asking for a rebate on a generic drug? Do you get rebates on any of your other generics?”
Employers, she said, need to ask “what are the highest value drugs that ought to be on my formulary, not just from a price perspective, but from a long-term risk management perspective for that reserve pool that that actuary is calculating on that spreadsheet with those patients in those rows on the Excel spreadsheet with that little risk factor assigned to them that are going to be on this drug for a very long time? Am I affecting that risk score?” Each time employers “mess with someone’s meds,” the risk score goes up. And actuaries must prepare self-insured employers’ reserves “for the potential incurred but not reported claims,” she explained.
“If you’re a self-insured employer under ERISA, you have a compliance requirement,” she stated, noting that they are “legally bound” by the reserve their actuary has calculated to make sure they can pay their premiums and don’t bankrupt the plan. If that happens, she said, “you breach your fiduciary duty, and your plan becomes disqualified, and you’re no longer self-insured.”
If plan sponsors put biosimilars on their formularies, “we should start seeing price declines,” she contended.
One attendee noted that the expertise around formularies often sits with PBMs and consultants, so how can employers gain leverage in discussions on making formulary changes? Jung advised employers to go directly to pharma manufacturers, which “are the source of the research. They’re the source of the price. They’re the source of the market access strategy. Why aren’t you talking to them? Why are you trusting someone else to have a conversation with a company that is selling you a product?
“You don’t think you’re buying from them? You absolutely are buying from them,” she continued. “You ought to get better informed about what their strategy is, so that you understand what are their intentions in the market. I have worked with drug companies for 12 years. They are not bad people. In fact, most of the people I’ve worked with at the drug companies are better, nicer, more honest, have higher integrity, are 10 times smarter than anyone I’ve ever worked with at a PBM, and I’m saying that on camera and in front of you. Talk to them.”
This article was reprinted from AIS Health’s monthly publication RADAR on Specialty Pharmacy.