Pharmaceutical manufacturers that are nearing the commercialization stage of pre-approval planning are faced with a lot of realities about managed markets. Manufacturers are so engrossed in the details of a clinical trial, and its eventual success, that beginning to plan for commercialization can be daunting. However, for physician-administered therapies or IV therapies, understanding and navigating the nuances at play in the medical benefit landscape of payer organizations can significantly impact a product’s success.
Historically, access for medical benefit therapies was largely through buy-and-bill. Providers (integrated delivery networks [IDNs], clinics and practices) would acquire the product from the manufacturer via the manufacturer’s contracted specialty pharmacy wholesaler. The provider would hold that therapy at a financial risk but make up for it on the back end. Providers would seek reimbursement for administration and the cost of the therapy from the payer, and then they could mark up the cost of the therapy. This meant that reimbursement for a physician was largely impacted by how they negotiated the reimbursement rates with payer organizations.
According to MMIT’s Managed Care Oncology Index, it’s typical for providers to request ASP x 106% reimbursement from Medicare Part B payers. For commercial payers, the reimbursement rate is negotiated and contracted by payers typically using AWP. For branded oncology agents, commercial payers controlling approximately 52 million lives reported using AWP when contracting for physician reimbursement. In the AWP framework, payers representing 30 million lives report using AWP minus anywhere between 16 to 19%; payers controlling 54 million lives report reimbursing at a rate of AWP minus 15% or less.
With all this said, here’s what it boils down to: Buy-and-bill has major cost implications for payers, especially when more and more specialized medicines enter the market (such as CAR-T therapies, immuno-oncology agents, upcoming gene therapies and injectable rare disease therapies). Consider this scenario: A payer must negotiate with a large IDN for a reimbursement rate for a therapy and the administration. In this scenario, the IDN can flex its muscles and hold out for a higher reimbursement if it is large enough and has enough penetration in the patient population.
You might wonder how payers will combat this because, as we all know, payers do not like high costs. According to MMIT’s specialty pharmacy Rapid Response survey, payers are shifting to employing specialty pharmacies and white bagging to control costs. When white bagging, payers distribute the specialty therapy directly to the provider organization for use. Providers are then only able to request reimbursement for the administration services they provided the patient and lose out on the therapy’s mark-up. In this modality, payers route access to these specialty therapeutics through their preferred specialty pharmacy and, increasingly, they intend on mandating access through their partnered specialty pharmacies.
Providers stand to lose out on a lot of revenue if payers intend to increase white bagging and rely on the revenue of buy-and-bill. Many IDN and vertically integrated practices have invested a lot of money in developing the capabilities to store, distribute and administer these specialty products, so those financial implications will draw a lot of pushback from providers.
Moreover, pharmaceutical manufacturers will likely get caught in this power struggle between payers and IDNs, and navigating these nuances could have significant implications on a product’s market access. There are many oncology products, orphan drugs and gene therapies in the pipeline that will be reimbursed on the medical benefit. These agents will come with very high price tags, which will pressure payers to lower costs. Since payers are already increasingly requiring the use of white bagging, they will likely continue to do this. This will put providers in a tough spot, leaving them looking for alternative sources of revenue. Since IDNs have leverage, they are well positioned to have a “buy-and-bill policy only” to combat the payers’ policies. This adds a layer of complexity for manufacturers when contracting because payers may offer more pull through for white bagging. As a result, providers will seek to prescribe agents routed through buy-and-bill.
Going forward, it’s clear that manufacturers with upcoming drugs on the medical benefit will need to be ready for this trend while also staying abreast of the evolutions in the market. Having a plan of action for the commercialization of a pipeline medical benefit therapy nearing launch is imperative.
By Saket Patel