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Will New Approaches to Medical Benefit Contracting Help Control Specialty Drug Spend?

By John Griggs and Denise Zomorrodian

Pharmacy benefit contracting has always been a mechanism for payers to offset the cost of small-molecule therapeutic areas. Payers have looked to manufacturers to negotiate contracts that would prevent their products from being placed on a restrictive tier, or subject them to step edits or an NDC block.

But with the emergence of biologics driving the cost of specialty drugs managed under the medical benefit, more payers are looking for ways to implement tighter controls. This has now forced manufacturers to evaluate their current coverage and reimbursement strategy to determine whether medical benefit contracting could enhance their products’ positioning or protect existing coverage.

The Emergence of Medical Benefit Contracting

Understanding the shift toward medical benefit contracting is very important to manufacturers, especially when launching new biologics into the medical benefit space. It must be part of the discussion early on in pipeline development to ensure that coverage and reimbursement can be secured once the product is approved and commercialized in the U.S.

Payer control and policy development within the medical benefit space began with site-of-care restrictions. Payers began publishing medical policies with adjacent prior authorization requirements to control the high cost associated with patients being treated within the hospital outpatient department, limiting reimbursement to the most cost-effective sites of care. Many payers created drug-specific restrictions to prevent the acquisition of office-administered brands reimbursed under the buy-and-bill reimbursement model through the implementation of specialty pharmacy mandates.

More recently, biosimilars became the first products to undergo restrictive step edits within payer policies. Medical benefit contracts now exist across a variety of indications including immunology, virology, neurology and even oncology. Only 10% of all PD1/PDL-1 messaging from manufacturers to payers now address costs and financials related to their brands, while 98% of all messaging to payers continue to discuss clinical value, according to MMIT Message Monitor data. The rising costs of specialty brands have forced payers to mitigate shrinking margins through the implementation of both traditional rebate contracts and non-traditional portfolio or value-based agreements. However, proving the clinical value first is needed before payers are open to addressing ways to control medical benefit spend through such agreements.

New Approaches, Better Results

Contracting within the medical benefit space has manifested into three specific areas:

  1. Preferred product positioning: Product positioning requires a significant rebate contract that would place your brand as the single preferred product or one of two preferred products within a drug category. This is done via a traditional step-edit requirement within the aligned medical policy and prior authorization criteria. As a result, it’s a significant hassle for an HCP to abide by these requirements to prescribe a non-preferred brand. This mechanism has become very successful for biosimilar products.
  2. Preferred reimbursement: Many payers have also contracted for enhanced reimbursement. The drugs within the therapeutic category are evaluated based on their efficacy and safety profile and then a preferred product is designated. The preferred product is then reimbursed at a higher ASP rate than the competitor products. This becomes even more important when payers are looking to prefer the increasing number of combination therapies across the pharmacy and medical benefit.
  3. Removal of prior authorization: Lastly, payers have begun accepting contracts to remove prior authorizations for medical benefit products. Payers then do a retrospective review to ensure proper utilization of office-administered brands through published clinical criteria that often aligns to the approved agent’s label. This allows for significantly shortened periods of time to get patients on therapy and reduces administrative burden within the practice to process the prior authorizations. As a result, it creates a cost savings of resources for both the payer and the practice.When it comes to new product launches for infused agents, some payers have begun to manage with strict exemption processes through “not covered” new-to-market policies, according to data from MMIT’s Strategic Launch Report. As a result, it’s crucial for brand teams to identify these payers and understand if they will have to contract for favorable coverage at launch. Tracking “no prior authorization” decisions for competitors or analog products can help inform payer segmentation strategies for your own brand. Payers covering nearly 20% of lives have removed prior authorization requirements for newly launched, high-cost infused brands, according to data from MMIT Analytics.

Securing optimal coverage and reimbursement immediately following FDA approval will determine the ease in which HCPs can start patients on these life-changing therapies. And as contracting becomes an increasingly important part of a drug’s successful launch—and the entire brand life cycle—it’s critical that manufacturers keep abreast of anticipated management and other emerging medical benefit trends throughout 2022 and in the years to come.

Attending AMCP? Our market access experts will be there to discuss trends within medical benefit contracting and how MMIT can optimize your approach to market access. Schedule a meeting today.

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John Griggs

John Griggs

John Griggs has a chemistry research background and graduated from Stevens Institute of Technology with a Master of Engineering in Materials Engineering. He has been with MMIT for over 7 years in various roles and has extensive experience in market access trends within oncology, immunology, and the changing dynamic between payers and IDNs. As a Senior Solutions Consultant, he supports aligning MMIT solutions to pharma business needs and questions during the entire life-cycle of specialty medications from pre-launch to LOE.

Denise Zomorrodian

Denise Zomorrodian is a Vice President of Strategic Solutions on MMIT’s commercial team.

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