Tuesday, June 07, 2011

The Future of Buy-and-Bill According to Payers and Oncology Practices

The new issue of Specialty Pharmacy Times has a must-read article for those who develop commercial strategies for specialty drugs: Payer Management of Oncology Gets Serious.

The article has some neat data from The Zitter Group’s (TZG) most recent survey of payers, oncologists, and oncology practice managers. The good folks at TZG provided me with the full report so that I can share some additional details with you.

Here are three noteworthy conclusions about buy-and-bill for infused cancer drugs:

  • Expected: The majority of infused cancer therapy volume is still distributed through buy-and-bill channels, although buy-and-bill continues to drop.
  • Hmmm... About one-third of practice managers report that insurers are limiting buy-and-bill through contract terms.
  • Really?!? A majority of payers and almost half of oncology practice managers want buy-and-bill to end for infused cancer therapies.
It’s clearly ludicrous to believe that buy-and-bill will end completely given the prevalence of infused products. But it’s also dangerously na├»ve to insist that buy-and-bill is “here to stay” and will remain the same in the future. And you don't even have to read my mind to find out.

PROFESSOR X'S RESEARCH DATA

The charts below come from The Managed Care Oncology Index: Winter 2011, a 245-page report published by The Zitter Group.
The payer perspective is represented by Pharmacy Directors, CMOs/Medical Directors, and others at plans representing 156 million covered lives. The practice manager perspective comes from Office Managers, Practice Managers, Head Nurse/Nurse Manager/Nurse Practitioner, and others at oncology practices. Sample sizes appear next to each question.

THE FIRST CLASS RESULTS

The charts below show the answer to the following question that was posed to both payers and oncology practice managers: “What percentage of infused cancer therapies are distributed through each of the following pathways?

The first chart appears in the Specialty Pharmacy Times article as Figure 2, while the second chart comes from page 136 of the complete report. (Click the charts to enlarge.)

Pay attention to the red dot in each chart, which shows the answer to an especially-interesting question: “What is your organization’s preferred method of infused therapy distribution?” (for current infused volume).


As you can see, 53% of payers and 45% of oncology practice managers would prefer to get oncologists out of the business of buy-and-bill. As the article notes:
“Already, 30% of practice managers have experienced payer attempts to limit their ability to buy and bill for oncology therapies through contract terms. The majority of these contract terms specified either voluntary or mandatory vendor requirements, e.g., specialty pharmacy. This trend has been well established with oral oncology therapy distribution, and payers anticipate a further shift away from off-site retail in favor of the specialty vendor channel for oral distribution over the next year.”
It’s not really a shock given what has happened to physician reimbursement after the 2005 Medicare Part B changes. In 2005, Medicare Part B switched to an Average Sales Price (ASP)-based reimbursement method for physician-administered injectable drugs as well as some self-administered drugs such as oral anticancer drugs and immunosuppressive drugs.

This switch dramatically slowed the growth of Medicare Part B drug spending by reducing the healthcare provider’s profits from dispensing these drugs rather than reducing the costs of the drugs themselves. See the chart in “COST PLUS = COST CONTROL” from UnitedHealthcare: Cost-Plus for Cancer Drugs.

The Zitter group’s survey data support this view. Among the 54% of practice managers acknowledging a loss in revenue since the adoption of ASP, the majority report a 10% to 30% decline.

EVOLUTION

Buy-and-bill will continue to lose share due the many forces of change aligned against the practice. These include the preferences of payers and oncology practice managers (documented above) as well as the business strategies of PBMs such as Express Scripts (Express Scripts' Disruptive Specialty Strategy) and Medco Health Solutions (Cancer Care and the Future of PBMs).

Another challenging twist: some specialty products end up flowing through multiple channels to the patients—physician office, inpatient care, specialty pharmacy, or possibly even retail pharmacies—due to non-aligned benefit designs or the business strategies of pharmacies and distributors.

Just to be clear, this does not mean that buy-and-bill will end for all physician-infused drugs. Sometimes I am misunderstood or misquoted on this issue when a reader inadvertently takes my rhetorical flourishes a bit too literally. For instance, when I use a provocative title such as Get Your Specialty Strategy Ready for the End of Buy-and-Bill, I don’t really mean that buy-and-bill will end tomorrow (as the text of that article explains).

This is the nuanced message that I deliver to my consulting clients, nearly all of whom are executives and managers at biopharmaceutical manufacturers. Commercial strategies for specialty drugs are one of the most complex parts of the pharmaceutical industry. Launch plans and tactics are unique and different—a mutant strategy, if you will. I trust Drug Channels readers will see the intricacies and not let their blue fur get ruffled.

P.S. Yes, X-Men: First Class is really good.

2 comments:

  1. Adam HartJune 07, 2011

    Great post Adam. The recent EMD Serono Specialty digest has reported that 22% of payer respondents have implemented strategies to eliminate "buy-and-bill" imposing mandatory SP for some or all drug categories. Unfortunately, they did not report a trend on that figure.

    ReplyDelete
  2. AnonymousJune 07, 2011

    Adam,

    Nice article!

    Best,

    Glenn (fellow Wharton alum)

    ReplyDelete

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