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Drug Trends Impacting the Pharmacy Benefit and How to Manage Them

September 27, 2018

DUO_iStock-641194956_modern-office-millenials_1900x986Formularies have grown in importance for prescription benefit management over the past 30 years, as both drug-selection and cost-control tools have evolved. With the ever-changing healthcare landscape and more and more drug therapies becoming available, it is important to reevaluate formulary strategies and apply innovative cost-controls to ensure your members get the right drug, at the right time and the right cost. The following are developing trends in formulary design.

Biosimilars as preferred products

Specialty medications were shown to be linked to 42.6% of net drug spend in 2016.[1] Typically only 1-2% of the U.S. population is treated with a specialty drug each year, however, these often very expensive drugs accounted for 70% of drug spend growth between 2010 and 2015.[2]

One particular category of specialty drugs is biologics. The term “biosimilar” refers to a Food and Drug Administration (FDA) approved biologic product that is highly similar to a reference biologic product approved by the FDA. In 2009, Congress passed the Biologics Price Competition and Innovation Act (BPCI), which created an abbreviated approval pathway for biological products that are shown to be biosimilar, or interchangeable, in order to increase access and lower health care costs due to increased competition.

In order for a biosimilar to be FDA approved, the manufacturer must demonstrate that its product is highly similar by extensively analyzing the structure and function of the reference product (originally licensed drug) and the biosimilar for purity, chemical identity and bioactivity.[3] Initially, the launch of biosimilars in the U.S. was delayed due to patent litigation from manufacturers with FDA-approved biosimilars.[4] Even with 12 FDA-approved biosimilars, only half of those products have launched, demonstrating the additional barriers and complexities of bringing a biosimilar to market.

The delays in market launches have stalled the potential for cost savings, which was the intention of the FDA approval pathway. Currently, with three biosimilars used to boost white blood cell production, primarily to treat neutropenia (low white blood cells), EnvisionRx is poised to confidently prefer a biosimilar, enhancing cost-control measures without sacrificing patient safety or satisfaction. With over 300 biosimilars in the development pipeline, we will continue to prefer these medications when value can be added without compromising patient satisfaction and safety.

Non-essential drug management

The FDA is currently approving products at a rapid rate, with the number approvals so far this year already exceeding the number of approvals for all of 2017.[5] While innovation is exciting, some of these approvals are the same active ingredients of products already approved, but with slight modifications. These slight modifications can come with a significantly higher cost without the corresponding benefit.

EnvisionRx developed the Non-Essential Drug (NED) program to block these unnecessary medications and provide safe and cost-effective alternatives. With the NED program, a group of Envision clinicians continually monitors the pharmaceutical landscape, identifying non-essential drugs to be added to the NED list. The current list, which is reviewed by our Pharmacy & Therapeutics (P&T) committee, contains approximately 180 non-essential medications and includes new formulations and combination packages, as well as high-inflation products. Part of the review process for a non-essential drug is that the product provides little to no clinical value over lower cost alternatives readily available.

Members are notified of any non-essential drugs on the exclusion list and provided with a list of safe, effective, lower cost alternatives approved by our P&T committee. Member communications are proactive and ensure engagement through messaging at the pharmacy counter, as well as when claims data is processed and added interventions are identified.

Specialty medication billing

An abundance of recently approved specialty drugs are highly effective, breakthrough advances in treatment, however, the cost of these drugs remains high, with some orphan drugs for rare chronic diseases costing up to $750,000 per year. Specialty drugs can be covered under the pharmacy benefit, the medical benefit or both, depending on the benefit design of the payer. On average, up to 50% of specialty drugs are currently covered under the medical benefit and, due to the complexity of care needed to administer these drugs, a significant percentage of these medications will continue to be covered that way.[6]

With the extremely high volume of specialty drugs covered under the medical benefit, it is difficult to identify if medications are potentially being billed under both benefit designs. To address this issue, we implemented and continue to monitor a Medical Only Drug (MOD) list that ensures medications aren’t being billed as a prescription benefit when it’s not appropriate. By directing identified drugs to the appropriate site of care, EnvisionRx can assist in managing specialty drugs from both a clinical and cost-savings perspective, providing added protection and value for our clients.

Indication-based formulary management

An FDA-approved drug may have multiple indications, or disease states, but may not be as effective with certain indications as other available medications. To address this issue, the Centers for Medicare and Medicaid Services (CMS) recently announced that Medicare Part D plans can begin applying indication-based criteria to formulary designs beginning in 2020.[7] With a plan sponsor's adoption of an indication-based formulary, rather than a list of all preferred drugs, there are preferred drugs for a specific indication, such as rheumatoid arthritis.

The announcement from CMS further validates our indication-based formulary approach that was implemented in 2017. This approach allows us to precisely manage the formulary and can improve access to drugs that are more narrowly indicated, which may have been blocked otherwise.

From a clinical perspective, by designing a formulary by indication, when appropriate, we can create safety mechanisms to ensure patients are being treated by an appropriate specialist and connected to advocacy groups, support programs and specialty pharmacies as needed.

At Envision, we always strive to be as flexible as possible and nimbly respond to new industry challenges. Our visibly different approach guarantees bottom line impact, while helping our clients provide the prescription coverage their members’ need, at a price everyone can better afford.

[1] Medicines use and Spending in the U.S. A Review of 2016 and Outlook to 2021. (2017). [ebook] QuintilesIMS, IMS Health.

[2] Mulcahy, Andrew W., Jakub P. Hlavka, and Spencer R. Case, Biosimilar Cost Savings in the United States: Initial Experience and Future Potential. Santa Monica, CA: RAND Corporation, 2017.

[3] (2018). Biosimilars.

[4] Sandoz Inc. v. Amgen Inc., 2015.

[5] (2018). About FDA.

[6] Pharmacy Benefit Management Institute (2016). Trends in Specialty Drug Benefits.

[7] Indication-Based Formulary Design Beginning in Contract Year (CY) 2020 | CMS. (2018).