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Health Plans’ Strategies For Managing Outpatient Specialty Pharmaceuticals
Balancing increased spending for specialty pharmaceuticals while providing affordable and equitable coverage for consumers is a key issue for public and private payers. Health plans rely on an array of strategies, including both medical management and those used for more traditional pharmaceuticals. To explore specific management strategies for outpatient specialty pharmaceuticals, a survey was administered to thirty-eight Blue Cross and Blue Shield plans, focused on identifying core strategies. Prior authorization was the most commonly used strategy, implemented by 83.3 percent of respondents. Other frequently implemented management strategies included claims review (82.8 percent), formulary management (76.7 percent), and utilization review (70 percent).
SPECIALTY PHARMACEUTICALS LONG HAVE BEEN synonymous with bio-tech drugs used in the treatment of clinically complex conditions. They typically are characterized as high-cost agents often requiring special delivery and handling as well as additional patient and provider education.1 Specialty pharmacies now dispense a number of small-molecule drugs that are not technically biologics, and "specialty pharmaceuticals" are a growing and dynamic component of the prescription drug market. Spending on specialty pharmaceuticals is rising rapidly. IMS Health, a nationally recognized pharmaceutical data repository, reported that $37.7 billion was spent on specialty drugs in 2003, an increase of 26.6 percent from 2002.2 A similar result for outpatient specialty pharmacy trends was reported by ten Blue Cross and Blue Shield plans in a benchmarking study of twenty high-cost/high-trend outpatient specialty pharmaceutical categories, which found a 34.5 percent increase in spending on specialty drugs between 2002 and 2003.3 Because this trend poses major challenges to the efficient delivery of health care, Blue Cross and Blue Shield (BCBS) plans have participated in a systematic research study identifying successful approaches to the management and delivery of these therapies. The approval and marketing of new specialty pharmaceutical products, combined with projected increases in use and spending, present unique challenges as health plans work to ensure that members have access to therapies while managing overall spending to maintain affordability.4 To explore strategies that have been implemented to manage outpatient specialty pharmaceuticals, we administered a survey to thirty-eight BCBS plans that focused on identifying core specialty pharmacy management strategies.
The Blue Cross Blue Shield Association (BCBSA) developed a thirty-item survey to identify and examine management strategies used by participating Blues plans to manage rising spending and to encourage appropriate use of specialty pharmaceuticals. The survey questions were designed to address specific issues pertaining to benefit design, operational trends, vendor service use, in-house operations development, member and employer communication, and provider relations issues. The survey also asked plans to indicate the year in which strategy changes were made with regard to specialty pharmacy. The reported strategies were grouped into three domains: (1) traditional pharmacy management; (2) payment, pricing, and product distribution; and (3) medical and disease management. The questions were developed using a modified Delphi method.5 Experts in pharmacy management and survey design were consulted on the survey content and structure. Upon their consensus, a Web-based survey was developed and pilot-tested by three Blues plans, one coinvestigator, and several BCBSA researchers. On 20 July 2005, an e-mail message was sent by the BCBSA to all BCBS plans requesting voluntary participation in the Web-based survey on outpatient specialty pharmaceutical strategies. A reminder e-mail message was sent to non-respondents. Follow-up calls were made to plans that did not respond. Survey results were compiled into Microsoft Excel and SAS databases. Descriptive statistics were generated for survey responses from all participating plans.
Thirty of thirty-eight BCBS plans responded (79 percent response rate) to the outpatient specialty pharmaceutical survey between 20 July and 23 August 2005. The responding plans collectively cover approximately sixty-three million lives across twenty-five states. More than 60 percent of plan respondents were managers, directors, or vice presidents of pharmacy services, and more than half reported being in their current position for more than four years. Early management strategies for outpatient specialty pharmacy (2000–2003). Plans were asked to identify the specialty pharmacy initiatives that delivered the most value to plans and in what year specific new strategies were implemented. Plans indicated the use of specialty pharmacy management programs as early as 2000. In general, there was variation in the timing and types of management strategies implemented. Prior authorization requirements were the single most common strategy implemented. However, plans moved increasingly toward the use of multiple preferred vendors and specialty pharmacy benefit administration (application of medical policies) over time to further manage the spending and use rates for these drugs.
Two specific methods for carrying out specialty pharmacy management programs were explored in the survey: developing in-house capacity and use of specialty pharmacy vendors. Prior to 2003, plans reported the development of in-house programs more than use of vendor services. In 2003, program implementation increased markedly for both in-house and vendor services (Exhibit 1
Contemporary trends in outpatient specialty pharmacy management (2003–2004). The most common approach—reported by more than 70 percent of plans—reflects a core set of four traditional pharmacy management strategies: (1) prior authorization, (2) formulary management, (3) utilization review, and (4) claims review for appropriate dosage. Exhibit 2  highlights plans’ implementation of these 2003–2004 strategies for both in-house capacity and specialty vendor services. Prior authorization was implemented by 83.3 percent of respondents, representing the most common strategy. Other frequently implemented management strategies included claims review (82.8 percent), formulary management (76.7 percent), and utilization review (70 percent). Plans more often indicated development of in-house capacity rather than use of vendor services for these core specialty pharmacy management strategies. In contrast, for purchasing and product distribution to patients and providers, twenty of twenty-one plans (95 percent) used a specialty vendor. These are strategies that can be more easily outsourced for operational efficiencies.
Plans continue to implement and improve traditional techniques of pharmacy and medical management in response to increased use of specialty pharmaceutical products. The survey specifically addressed twenty-one drug categories to identify variation in the use of management strategies across therapeutic areas (Exhibit 3 ). Fifteen or more respondents (half) indicated the use of disease management strategies in 2003–2004 to help manage chronic conditions by targeting drug categories such as anti-arthritics, antivirals, anti-asthmatics, interferons, and growth hormone. Plans were least likely to focus on anticoagulants and anti-emetics.
In addition to developing internal management strategies for specialty pharmacy, some plans also reported working with providers and patients to manage use of specialty pharmaceuticals. Most plans that encourage physicians’ use of specialty pharmacy programs do so by providing educational materials. More recent approaches such as using provider incentives to encourage use of specific places of service (home versus hospital versus physician’s office) were reported by three of the thirty plans. Only two plans reported using provider incentives for use of "preferred network status." The majority of plans (nineteen of thirty) reported communicating with members about specialty pharmacy issues. Nine of these nineteen plans, however, communicate only with members receiving specialty pharmacy products, rather than all enrollees. Information provided to members primarily focuses on location and method of obtaining drug products, understanding benefit design and place of service, and the importance of drug regimen compliance. Survey inquiries into plans’ incentives directed toward consumers were limited to incentives for use of certain places of service and use of preferred vendors. Six of the thirty plans (20 percent) reported using these strategies to encourage consumers to use specialty pharmacy programs. Four of the six plans used incentives for both place of service and use of specialty pharmacy vendors. Future directions and challenges for managing outpatient specialty pharmaceuticals. Plans were asked to indicate which management strategies were being considered for implementation in 2005 and 2006. Fifty-seven percent of respondents indicated that changing pricing strategies using current providers was the primary strategy being considered. Additional strategies being considered include benefit design changes (50 percent), refinements to prior authorization requirements (47 percent), and use of multiple preferred vendors (37 percent).
Exhibit 4
In addition to identifying potential impediments to implementing management strategies, plans were also asked to indicate which specialty drug categories represented a concern in 2006. They were asked to select from a list of drug use categories including ophthalmology, endocrinology, oncology, pulmonology, and enzyme replacement drugs. More than three-fourths (78 percent) of plans listed oncology as a concern for 2006. Additionally, plans indicated concern for the management of endocrinology (50 percent), ophthalmology (46.4 percent), pulmonology (42.9 percent), and enzyme replacement drugs (42.9 percent). Finally, plans were asked how they viewed the impact of Medicare Part D on specialty pharmacy management. Thirty-eight percent of plans anticipate that payment strategies will change as Medicare Part D is implemented nationwide. Also, 44.8 percent of plans expect that payment methods will shift toward average sales price (ASP) methods for physician-administered drugs, following Medicare pricing strategies. One-third of plans expressed concern for the coordination and structure of benefits under Medicare Part D.
It is clear that the BCBS plans participating in the study were actively engaged in finding ways to address the rapid increase in spending for specialty pharmaceuticals. Feedback from survey respondents indicates that the timing and choice of strategies implemented are based on individual plans’ needs and awareness of growing spending trends. This is supported by the sharp increase in the initiation of management strategies in 2003, when many plans were facing increased spending related to the use of specialty pharmacy.6 Nearly three-fourths of the thirty BCBS plan respondents have implemented a common approach to managing specialty pharmacy using a core set of four strategies to manage spending for and use and appropriateness of treatment. These include prior authorization, formulary management, utilization review, and claims review. More than 40 percent of BCBS plans have implemented more recent strategies that include disease management and specialty pharmacy benefit administration (application of medical policies). Many of the strategies used by plans are similar to those used for traditional pharmacy products. Prior authorization requirements were the single most common specialty pharmacy management strategy implemented "early on" (that is, in 2000). While this remains a common strategy, plans have moved toward adopting the use of multiple vendors for product distribution and pricing strategies to further manage specialty pharmacy in recent years and toward increased use of disease management and special pharmacy benefit administration strategies. Plans were more likely to report management strategies for drugs that targeted medical conditions that have alternative therapies available or that use a step-therapy approach to treatment, such as anti-arthritics, anti-asthmatics, and antivirals. In addition, products with management strategies in place were more commonly used in the treatment of chronic diseases. Looking forward, plans are anticipating the challenges of managing newer agents that are entering the market. The majority of plans indicated concerns about oncology drugs, while half indicated concerns about newer agents in endocrinology. Both areas of medicine have demonstrated a rapidly growing market for specialty pharmaceuticals. Increased use of specialty pharmaceuticals will likely have important implications for employers and could result in sizable increases in employers’ health care budgets. This is highlighted by the fact that 90 percent of plans reported employer interest in specialty pharmacy with respect to trends in spending and use. Specifically, employers are interested in how BCBS plans are managing benefits and the use and availability of disease-state management programs available for members. The findings in this study provide a foundation for future quantitative research to increase our understanding of the impact and effectiveness of these strategies and new benefit designs. The research underscores the need to identify innovative and effective approaches to maintain affordability for the growing number and use of specialty pharmaceuticals. The introduction of Medicare Part D drug coverage further expands the demand for specialty pharmaceuticals. This, too, has important implications for the management of specialty pharmacy.
Daniel Mullins (dmullins{at}rx.umaryland.edu) is a professor and chair of the Pharmaceutical Health Services Research Department at the University of Maryland School of Pharmacy in Baltimore. Danielle Lavallee is a doctoral candidate in that program, and Françoise Pradel is an associate professor. Andrea DeVries is a research outcomes manager at HealthCore Inc. in Wilmington, Delaware. Nadine Caputo is a research manager at the Health Research and Educational Trust in Chicago; she was research manager at the Blue Cross Blue Shield Association when this research was conducted. The authors gratefully acknowledge the assistance of Mary Madison, formerly at the Blue Cross and Blue Shield Foundation on Health Care, and Lisa Mendelsohn at the Blue Cross Blue Shield Association, as well as the Blue Cross and Blue Shield plans that participated in the Outpatient Specialty Pharmaceutical Strategy Survey: Blue Cross and Blue Shield of Alabama, Blue Shield of California, Blue Cross and Blue Shield of Florida, Blue Cross and Blue Shield of Hawaii, Blue Cross of Idaho, Blue Cross and Blue Shield of Illinois, Blue Cross and Blue Shield of Kansas City, Blue Cross Blue Shield of Michigan, Blue Care Network of Michigan, BlueCross BlueShield of Minnesota, Blue Cross and Blue Shield of Mississippi, Blue Cross and Blue Shield of Nebraska, Blue Cross and Blue Shield of North Carolina, Blue Cross Blue Shield of North Dakota, Blue Cross and Blue Shield of Oklahoma, Blue Cross of Northeastern Pennsylvania, Blue Cross and Blue Shield of Rhode Island, BlueCross BlueShield of Tennessee, Blue Cross and Blue Shield of Vermont, CareFirst BlueCross BlueShield (Maryland), Excellus BlueCross BlueShield (New York), Highmark Inc. (Pennsylvania), Independence Blue Cross (Pennsylvania), Horizon Blue Cross and Blue Shield (New Jersey), Premera Blue Cross (Washington), the Regence Group (Idaho, Oregon, Utah, Washington), Triple-S Inc. (Puerto Rico), Wellmark Blue Cross and Blue Shield of Iowa, Wellmark Blue Cross and Blue Shield of South Dakota, and WellPoint Inc. (Blue Cross of California). The authors received funding for this research from the Blue Cross Blue Shield Association, an association of independent Blue Cross and Blue Shield plans.
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