The report adds new insights into specialty drug management. Most noteworthy: Payers apparently know surprisingly little about their own specialty spending:
- 2 out of 3 employers and health plans lack visibility to specialty spend covered by a medical benefit.
- Almost 9 out of 10 don't know the medical benefit specialty drug trend for their own beneficiaries.
The 2012 Specialty Drug Benefit Report is based on self-reported survey responses from 122 employers and 60 health plans, TPAs, or insurance companies. There were 59 responses classified as “Other” (employer coalitions, consultants, PBMs, and others) and 50 respondents who (oddly) didn’t provide demographic information.
Given the results below, I asked PBMI for additional data on individual respondents’ knowledge level and job titles. Based on what they shared with me, the vast majority of survey respondents are in an organizational role where they (theoretically) should know about plan design and specialty spending.
THE PLAN WHO KNEW TOO LITTLE
As Figure 19 shows, about two-thirds of employers and health plans lack visibility to specialty spend covered by a medical benefit.
Is Caremark really better at managing drug trend?
The report doesn’t explain this sad state of affairs, so here’s my brief summary of medical benefit visibility challenges:
- Unlike highly automated, relatively standardized pharmacy adjudication systems, medical claims are submitted in multiple formats (paper or electronic), using multiple technology platforms.
- It is difficult to administer utilization management programs, because claims are submitted after a service has been administered, not in real-time electronic format. Plus, physicians are not big fans of insurance company oversight.
- Drug information is typically recorded using a Healthcare Common Procedure Coding System (HCPCS) J code, which can include multiple drugs of different package sizes. Newly launched drugs may lack a J-code for 12 months or more and be billed using a “not otherwise classified” (NOC) miscellaneous code, which lacks specific information about the product utilized.
The payers’ ignorance translates into a business opportunity for PBMs, and a business risk for specialty distributors.
Specialty pharmaceutical spending today is split nearly equally between a pharmacy benefit and a medical benefit, although the proportion varies dramatically based on drug and therapeutic condition. Here's Exhibit 56 from the 2011-12 Economic Report on Retail and Specialty Pharmacies:
- Express Scripts (NASDAQ: ESRX) launched Specialty Benefit Services to combine PBM and specialty pharmacy services with the management of specialty drugs covered under the medical benefit.
- Medco Health Solutions (NYSE: MHS) offers a service called Medical Channel Management to plan sponsors.
- CVS Caremark (NYSE: CVS) offers a Medical Benefit Management service aimed at oncology products paid via buy-and-bill under a patient’s medical benefit.
This trend, which is encouraged by the lack of visibility into medical benefit spending, is bad news for companies such as AmerisourceBergen (NYSE:ABC) and McKesson (NYSE:MCK) See the 2011-12 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors for more details on specialty distribution.
Do payers really know this little about their own spending? As Cher Horowitz would say: Whatever.