Employers Shift More Drug Cost Control Efforts From PBMs to Medical Plans

In 2021, prescription drugs accounted for a median of 21% of large employers’ health care costs, and a full 100% of firms said they were concerned about prescription drug spending trends, according to the Business Group on Health’s 2023 Large Employers’ Health Care Strategy and Plan Design Survey.

Yet the rising cost of specialty medications — which are often covered by medical rather than pharmacy benefits — has forced companies to think differently about how to curtail drug spending, the organization found. According to the survey, specialty medications account for 56% of all pharmacy spending by polled employers.

“Many employers, for years, have been focused on price- and cost-mitigation efforts related to working with our pharmacy benefit managers, or PBMs, and doing a lot of things to address cost increases through their PBM partners,” Business Group on Health President and CEO Ellen Kelsay said during an Aug. 23 media briefing about the survey results. “But what we see here is that 20% of overall pharmacy spend is actually through the medical plan — it’s not managed by the PBM. It’s through their health carrier or TPA [third-party administrator],” Kelsay continued. Therefore, employers are increasingly shifting their cost-control efforts “on the health plan side of things related to pharmacy spend, not solely on the PBM alone.”

That fact hasn’t gone unnoticed by the diversified companies that own the three largest PBMs, including CVS Health Corp. (Caremark), UnitedHealth Group (OptumRx) and Cigna Corp. (Express Scripts). Product offerings like Optum Specialty Fusion, for example, promise to deliver 17% total cost savings across health plans’ medical and pharmacy spend. And discussion of specialty pharmacy trends and solutions has been a heavily emphasized theme during publicly traded managed care companies’ earnings conference calls.

Employers Eye Biosimilars for Savings

In this year’s survey, the Business Group on Health “did ask about biosimilars in particular,” Kelsay said during the group’s media briefing, in response to a question from AIS Health. “That is an area that employers are taking a more concerted look at.”

When asked for more details about employers’ approach to biosimilars, Kelsay tells AIS Health that employers are “pursuing adding biosimilars to their formularies, working with their PBM partners on flexible contract guarantees to better promote biosimilars and offering incentives to switch to a biosimilar from a branded drug.”

In fact, the increasing availability of biosimilars — drugs that are an almost-identical copy of biologic medicines — has led some employers to structure a three-tier specialty benefit with biosimilars on the lowest tier, followed by specialty preferred drugs and specialty non-preferred drugs, as Paul Burns, a pharmacy practice leader at the HR consulting firm Buck, told AIS Health in June.

According to the Business Group on Health survey, employers are using a variety of strategies to manage specialty pharmacy spending. It found that prior authorization — through both the pharmacy and medical benefit — continued to be the most common tactic with 96% of employers using it. Other tactics included approving only a limited initial supply for specialty drugs (69%), site-of-care management (67%) and high-touch case management (67%). Rarer tactics included requiring specialty medications to only be obtained through a carved-out specialty pharmacy, requiring the use of a pharmacogenomic or other companion test to determine whether a specialty treatment is appropriate, and contracting (either directly or through a PBM) with specialty drug manufacturers on outcome- or indication-based pricing.

Gene Therapies Spark Cost Concerns

On a more general level, the survey asked about what concerned employers the most when it comes to their pharmacy benefits. 100% of companies said they were either very or somewhat concerned about pharmacy cost trends, but another top concern was about a more specific issue: “patient and plan affordability of gene and cell-based therapies in the pipeline.” During the media briefing, Kelsay described the therapies in question as “multimillion-dollar drugs that are curative and life-saving for the patients that need them but are at quite excessive price points when they do come to market.”

The FDA on Aug. 19 approved a $2.8 million gene therapy from bluebird bio for the treatment of beta-thalassemia, a rare condition requiring regular blood transfusions, and the agency is slated to rule on another gene therapy from the company in September. With its nearly $3 million price tag for a one-time treatment, the beta-thalassemia drug, Zynteglo, will unseat another gene therapy, the spinal muscular atrophy treatment Zolgensma, as the most expensive drug.

The two other major concerns cited by employers related to their pharmacy benefits were “complexity of the pharmacy supply chain,” followed by “patient affordability of maintenance medications.”

“Accordingly, employers continue to make strides in terms of affordability, including plan design changes, pursuing contracting strategies, and calling for both market- and policy-based reform efforts to address underlying prescription drug prices,” Kelsay tells AIS Health. Those reforms are detailed in the executive summary of the Business Group on Health’s “Pharmaceutical Supply Chain Leadership Forum: Reforms Required for Transformation,” and include suggestions such as realigning financial incentives across the pharmaceutical supply chain to prioritize lowest-cost drug options when clinical outcomes are similar.

Contact Kelsay via Alissa Kaplan Michaels at alissa@albertcommunications.com.

This article was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.

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