In 2024, Payers Refined Specialty Management Tactics By Taking More Active Role
Reprinted with AIS Health permission from the December 2024 issue of Radar on Specialty Pharmacy
As more specialty drugs and cell and gene therapies launch onto the U.S. market, payers are increasingly deploying utilization management (UM) tactics in order to focus more on targeted clinical criteria to manage them. Other strategies include shifting medical benefit drugs to the pharmacy benefit and implementing value-based contracts (VBCs). AIS Health, a division of MMIT, asked industry experts about these approaches and others that payers are taking in their management of specialty drugs for our annual look back at the year. (Editor’s note: These comments have been edited for length and clarity.)
AIS Health: What have been the most noteworthy payer actions with respect to specialty drugs in 2024?
Renee Rayburg, R.Ph., vice president of specialty clinical consulting at Pharmaceutical Strategies Group (PSG), an EPIC company: Payers have taken a more active role in communicating and working with their PBMs in some larger coverage decisions, such as biosimilar strategy. In our experience, some payers have made custom changes regarding biosimilar choices, and some have even asked their PBM for changes, including removal from the formulary and/or more stringent UM for remaining branded products in categories such as inflammatory conditions. There is a lot of focus on what these coverage decisions mean for their members, especially for groups that have benefit designs where patients have cost shares that could benefit from coverage of the lowest net cost products.
Andy Szczotka, Pharm.D., chief pharmacy officer at AscellaHealth: The growth in the number of specialty medicines has increased by 280% in the last 20 years, and as of August 2024, 29 additional specialty drugs have been approved. The treatment landscape of specialty medicines has also changed with more specialty drugs being developed for chronic inflammatory conditions, such as eczema and rheumatoid arthritis. Additionally, another growing segment of specialty medicines are the cell and gene therapies, typically with seven-figure price tags, typically for rare and orphan diseases.
One of the most notable payer actions with respect to specialty drugs in 2024 is the growing [amount] of drugs previously administered under the medical benefit shifting to the pharmacy benefit. This allows opportunities to integrate the different benefits to a seamless patient care model, single point of contact, reduce costs, ensure appropriate use of specialty drugs, encourage biosimilar options and enhance the patient experience and improve health outcomes. Specialty pharmacies are managing these integrated benefits seamlessly and assisting the patient, physician and payer in enhancing the quality and cost of the specialty drug therapy regardless of the benefit and providing cost savings to the patient and payer. Included in this integration is ensuring that the appropriate site of care for therapy administration is utilized, providing incentives for both the patient and provider for cost savings. This allows payers to optimize existing UM programs, utilize existing specialty pharmacy network relationships and discounts and access available patient assistance programs and rebate management programs. This provides cost savings opportunities for payers and plan sponsors.
With the growing number of specialty drug products, payers are using more widespread UM programs, including prior authorization practices through the implementation of targeted clinical criteria. The clinical criteria incorporate the clinical trial study design’s inclusion and exclusion criteria, available biomarkers and clinical results in the target patient population to ensure the potential for positive patient outcomes. In addition, step therapy, product quantity limits and/or dose optimization programs are being more widely adopted to assist in mitigating the rising cost of the specialty products.
Payers have more broadly adopted biosimilars to aid in reducing health care costs. With increased availability of multiple products along with greater price competition, biosimilar market shares have increased in 2024 (e.g., adalimumab, infliximab, bevacizumab, filgrastim). It is estimated that overall, biosimilars have already contributed an estimated $36 billion in savings to the U.S. health care market. Payers are using various biosimilar strategies, which include incentivizing the use of biosimilars through formulary and benefit design, streamlining the approval and review process for new agents and simplifying the administration of these biosimilars for pharmacies and providers.
Additionally, with the growth of cell and gene therapy products and their respective high price tags (either one-time or long-term), the use and adoption of VBCs is growing. With VBCs, the pharmaceutical manufacturer and the payer take on a level of risk; if the drug does not perform as expected through agreed-upon, predefined metrics, the manufacturer likely reimburses the payer for a portion or all the costs. VBCs help payers with the uncertainty about a drug’s efficacy in a real-world setting as compared to the well-controlled clinical trial settings. To date, many of the VBCs have been in oncology and hematology, but this is expanding to new disease treatments.
Mesfin Tegenu, R.Ph., CEO and chairman of RxParadigm, Inc.: Payers have taken several noteworthy actions to manage the rising costs of specialty drugs. UM has become more prevalent, with payers increasingly implementing strategies such as prior authorization, step therapy and quantity limits to effectively manage the cost and use of specialty drugs. Additionally, there has been a significant push toward the adoption of biosimilars to reduce costs. Many plans have implemented strategies to increase biosimilar uptake, such as placing them as preferred products on formularies and excluding their reference product, thereby reducing costs and expanding treatment options for patients. Lastly, VBCs have gained more traction. Payers are negotiating value-based contracts with manufacturers, which link reimbursement to clinical outcomes and effectiveness.
AIS Health: Were there any notable specialty drug benefit design trends in 2024?
Morgan Lee, Ph.D., senior director of research and strategy at PSG: Payers are working to provide members with access to needed specialty medications while maintaining an affordable drug benefit. Their top goals in 2024 focused on managing total cost of care and overall specialty trend/drug costs. They used many strategies toward that end, including a lowest net cost approach to biosimilars, site-of-care programs and UM programs (including increased use of copay accumulator programs). Payers also showed increased interest in breaking from their current pharmacy benefit arrangements; for example, although few had actually carved out any UM services from their PBM to a specialized vendor, one in four were considering doing so.
Szczotka: The specialty market continues to gain momentum, and specialty medications currently represent over 50% of the total drug spend. Specialty drugs tend to have reimbursement methodologies in which they can either be paid under the medical benefit, pharmacy benefit or, in some cases, both. This benefit payment methodology depends on multiple factors including but not limited to the plan sponsor design, the specific drug, the route of administration, product distribution requirements and the site of care.
Some core specialty benefit trends continuing to expand include having more than a single benefit tier for specialty drugs. More benefit [designs] are including both a preferred specialty and nonpreferred specialty tier, similar to the more traditional preferred brand and nonpreferred brand tiers for nonspecialty drug products. This is creating more five- or six-tier prescription drug benefit designs for plan sponsors.
Another notable trend is shifting more of the cost of the specialty medications to the patient. This is being accomplished through either higher fixed dollar copays or through the use of percentage copays where the patient is paying a predefined portion of the drug cost, typically up to the plan benefit maximum out-of-pocket costs.
Additionally, the use of traditional pharmacy benefit tools for utilization management and adherence monitoring continues to expand to specialty agents and cell and gene therapy products, including prior authorization, step therapy and quantity limits. These provide mechanisms to ensure that the appropriate drug therapy is being utilized for each patient and to help minimize, detect and/or manage any patient adverse events and help enhance positive health outcomes.
Rebates continue to be a key component of the specialty pharmacy space to help manage drug costs, and the trend is increasing each year. Rebates deliver discounts on specialty drugs and promote competition in the drug supply chain. The savings from the rebates reduce the plan sponsor’s cost of the drug. Additionally, rebates for drugs administered under the medical benefit have also been increasing each year. The use of specialty drug carveouts for oversight and rebates for products under the medical benefit has been a notable growing trend in 2024. Plan sponsors have been carving out the medical benefit drug rebate services to providers who specialize in this arena. Alternatively, with the availability of multiple biosimilar agents, some plan sponsors are preferring the lower cost drugs that do not offer rebates in exchange for lower upfront costs of drugs at the point of dispensing.
Additional trends include the addition of the growing number of biosimilars products into the specialty benefit offerings and formulary adoption and the use of different financial models to help patients with specialty drug affordability.
As noted above, payers are increasingly engaged in VBCs with pharmaceutical manufacturers. According to the PSG consulting report, only 6% of payers used VBCs as of 2023. However, almost 40% of responders were either moderately or very interested in participating in VBCs. The adoption and use of VBCs grew in 2024, and this trend is expected to continue in 2025 with the continued growth of higher cost drug therapies, particularly the cell and gene therapies.
Tegenu: In 2024, several notable trends emerged in specialty drug benefit design. One trend was the shift toward pharmacy benefits, with more specialty drugs being covered under pharmacy benefits rather than medical benefits. This shift was largely driven by the increasing availability of self-administered formulations, which offer better cost control and improve patient access.
Another notable trend was the increasing use of tiered cost sharing for specialty drugs to differentiate drugs based on cost and value, such as favoring biosimilars over their reference products. In the past, most specialty drugs were often placed on a single tier within formularies, resulting in higher out-of-pocket costs for patients and increased financial burden on payers. This shift from a single-tier strategy allows for improved cost management, enhanced patient access and affordability, and greater negotiation leverage with drug manufacturers.
By Angela Maas