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PERSPECTIVEManaging Biotechnology In A Network-Model Health Plan: A U.S. Private Payer Perspective
Emerging biotechnology poses challenges to payers, including access, coverage, reimbursement, patient selection, and affordability. Premera Blue Cross, a private regional health plan, developed an integrated cross-functional approach to managing biologics, built around a robust formulary process that is fast, flexible, fair, and transparent to stakeholders. Results are monitored by cost and use reporting from merged pharmacy and medical claims. Utilization management and case management strategies will integrate with specialty pharmacy programs to improve outcomes and cost-effectiveness. Creative approaches to provider reimbursement can align providers’ incentives with those of the plan. Redesign of member benefits can also encourage appropriate use of biotechnology.
MORE THAN A HUNDRED biopharmaceuticals are now approved by the Food and Drug Administration (FDA) for use in the United States.1 In late 2005 there were 349 biologics in Phase III trials or undergoing FDA review, and more than 2,000 others are in earlier stages of development.2 Some of these products offer lifesaving and quality-improving benefits, while others offer more modest clinical benefits when compared with current treatments. The principal challenge facing public and private payers relates to affordability of these products. A recent pronouncement on the price of Avastin by William Burns, chief executive officer of Roche’s pharmaceutical division and a member of Genentech’s board, in the New York Times, illustrates this: "As we look at Avastin...pricing, right now the health economics hold up," he stated. "And therefore I don’t see any reason to be touching them."3 The price tag for Avastin for lung and breast cancer will reach $100,000 per year.4 The unique characteristics of the U.S. health care and health insurance markets further complicate the task of paying for the rising cost of biotechnology. Limited data on meaningful clinical outcomes, long-term safety, and rare but serious adverse events make critical appraisal of biologics for coverage difficult. High market-entry prices and later expansion of approved indications without corresponding price decreases threaten the stability of our employer- and government-funded systems. Small employers in our market are facing the choice between curtailing pharmacy benefits and complete elimination of drug coverage. Large corporations will soon be in the same position. Manufacturers spend large sums advertising to providers and consumers to create the illusion that new products are better, simply because of their newness and technological sophistication. Unlike its European counterparts, the U.S. government has not developed a process for approving follow-on biologics, and the issue of patent protection is being debated, delaying the availability of generic alternatives.5 The U.S. health care system rewards providers for delivering more care, rather than the most appropriate level of care. Our patchwork of outdated billing systems inhibits efforts to establish consistently accurate reimbursement for clinic-administered biologics. The existence of separate claims processes for physician-administered drugs as opposed to patient self-administered drugs complicates payers’ utilization management programs. A strong entitlement mentality leads health plan members to expect full coverage regardless of cost. Most do not understand that every intervention carries potential risk as well as benefit; therefore, they assume that more is better.6 The current funding system lacks economic drivers that affect price through the interaction of supply and demand. The result is unbridled demand that is, for all practical purposes, insensitive to price, since both member and provider are shielded from the true costs of care. This is true even when a drug confers marginal benefit.
Premera Blue Cross is a nonprofit health plan with 1.6 million members, with operations in Washington State, Alaska, Oregon, and Arizona. Its membership consists of commercial groups and individual members, with a few Medicare beneficiaries. Premera has experienced annual increases greater than 35 percent in the cost of biologics per member per month since 2001, while overall medical and pharmacy benefit trends both averaged about 10 percent. Biotech drugs now make up 15 percent of Premera’s overall pharmacy budget, but only 1 percent of prescription volume. With the recent introduction of several new expensive oncology products and expanded indications for existing ones such as Avastin, this trend is projected to continue. To select, reimburse, and manage biopharmaceuticals within budgetary constraints, payers must develop scientifically sound technology assessment processes that are fast, flexible, fair, and transparent to external stakeholders. Formulary committees must determine the value of a new biologic using evidence from clinical trials and other sources, comparing clinical endpoints with those achieved using existing alternatives. Premera defines value according to the Academy of Managed Care Pharmacy (AMCP) Format for Formulary Submissions: "Value in health care relates to whether a medical intervention...improves health outcomes enough to justify the additional dollars spent compared to another intervention."7 Using the entire database of information available at the time of a coverage decision, we compute the number needed to treat (NNT) and number needed to harm (NNH) for clinically relevant endpoints to estimate the attributable risk-benefit equation of a new technology. To place these values in some context, we benchmark the NNT and NNH figures against those of other treatments. We then compute the incremental cost-effectiveness ratio (ICER) of the intervention compared with currently accepted treatment, as an approximation of value for money. Then, for coverage and reimbursement decisions, we attempt to maximize the overall value to the health plan and its members by using evidence to identify clinically appropriate populations and subgroups in whom the NNT is maximized and the NNH is minimized, and for which the ICER and budgetary impact are within an acceptable range. Although it can be argued that the determination of "enough improvement" is subjective, the value of biologics can be improved by targeting treatment to a subset of patients in whom the clinical response is greater. The management approaches attempted by U.S. private payers to achieve this goal fall into three broad categories: patient and disease management, provider-focused strategies, and benefit redesign. Some have used specialty pharmaceutical providers to coordinate distribution and patient selection. Others have taken a more piecemeal approach. Here we describe the comprehensive integrated biotechnology initiative approach taken by Premera. We defined biotechnology to include high-cost small molecules (such as Tarceva) that may be interchanged with biologics (such as Avastin). However, we excluded drugs that cost less than $500 a month, even those of biologic origin (such as human insulin).
Integrated approach. This paper describes the framework and process used to develop Premera’s biotechnology initiative. The approach is general enough to be applied by most U.S. payers to develop strategies consistent with the organization’s strengths, mission, vision, and market position. Many of the interventions discussed are still being implemented, but we report results where available. Executive sponsorship. We began by establishing a corporate initiative with executive sponsorship, thus ensuring alignment with the corporate strategic platform and commitment of adequate resources. Many health plans have outsourced the management of biologics to specialty pharmacy providers, but because of our existing collaborative relationships with medical groups and our evidence-based formulary process, it made sense to manage the program ourselves. Collaborative relationships with providers. Premera has engaged in a number of partnership projects with local medical groups. Our Polypharmacy Brown Bag program, cosponsored by the Washington State Medical Association, has received national attention.8 In 2005, thirteen Washington medical groups participated in our Quality Score Card program, a tool that presents robust provider quality metrics to the public. The medical groups helped determine and test the metrics prior to publication.9 Premera’s pharmacy program provider satisfaction scores are high and consistently improving. We were thus able to build on this foundation of solid provider relationships. Sound formulary process. In 2001, Premera adopted the AMCP’s Format for Formulary Submissions.10 Premera pharmacists review the manufacturer’s dossier, conduct independent literature research, and prepare evidence summaries. The pharmacy and therapeutics (P&T) committee members, leading physicians and pharmacists from our community, set the formulary and approve medical necessity criteria. No voting member of this committee has a financial interest in any health plan. In 2003 we began replacing outgoing P&T committee members with physicians from specialties that use a large volume of biologics, resulting in the addition of oncologist, rheumatologist, and neurologist members. Stakeholders and incentives. Early identification of internal and external stakeholders is a key success factor. A comprehensive strategy should align business incentives of as many external stakeholders as possible with the health plan’s program, so that they can become partners in addressing rising biotechnology costs. We identified the following departments as internal stakeholders: actuarial, broker relations, care management, corporate communications, disease management, health care economics, health care delivery services (manages provider networks), information technology (IT), knowledge services, legal, medical services, operations, product development, sales, and strategic development. Major external stakeholders include employers, members, medical groups, pharmacies, and our pharmacy benefit manager (PBM). Limitations of our approach. Rising health technology costs present a complex challenge with no quick fixes. Comprehensive solutions require time to develop and implement. It takes at least six months to evaluate strategic recommendations and two years to implement language changes in provider and member contracts. Our specific strategies might not work in every organization, and substantial resources from many departments will be required, including IT resources to update antiquated claims systems to meet the new process requirements. Capital expenditures and external consultants might also be called for.
Our Biotechnology Task Force, representing all internal stakeholder departments, has included more than seventy-five associates in work groups, three of which are ongoing. In Phase I we developed a working definition and list of biotech drugs to compute 2001–2002 baseline biotech cost and demonstrate the magnitude of the problem. Task force members brainstormed solutions and grouped them into four focus areas, each assigned to a Phase II work group. The Technology Assessment group revised our process to improve the early identification and evaluation of new products and rapid, flexible formulary decision making. The Patient Focus group examined strategies to promote effective use of high-cost drugs, selecting appropriate patients and working to achieve successful outcomes cost-effectively through disease management and case management programs. The Provider Focus group worked to improve communication with providers, improve claims processing efficiency, reduce medical office drug cost, and create provider incentives for cost-effective use. The Benefits group developed medical and pharmacy benefit designs with cost sharing and continuity between pharmacy and medical benefits. Continuity is particularly important with biotech drugs because treatments for one disease often include drugs from both benefits: For example, Avastin (infused) and Tarceva (oral) may both be used for lung cancer. A recent survey showed that most oncologists do not consider the overall cost of drug therapy but that 81 percent were sensitive to the member’s out-of-pocket cost, so if benefits are not coordinated, physicians will choose based on patient cost rather than safety and effectiveness.11 Strategic planning. The groups analyzed the feasibility of each proposed strategy and developed a business case for those worth pursuing, thus generating a final list of recommendations approved by executive leadership in July 2004. These included implementation of a more robust P&T process with better linkage to the Medical Policy Committee, rapid interim policy development, and utilization reports combining medical and pharmacy claims information to track high-cost drugs.12 The medical policy process was restructured to bring together criteria for clinically related biologics, regardless of which benefit applies to them. Greater use of specialty pharmacies and linkage to Premera case management were approved as patient management strategies. Improvements in provider drug claims systems and pay-for-performance initiatives for high-utilizing specialties such as oncology were the key provider-focused strategies. Premera leadership also approved benefit redesign, including creation of a separate category and greater cost shares for specialty drugs. In the next two to three years, differences between medical and pharmacy benefit coverage for biologics will be reconciled so that therapeutic choices are made based on clinical and cost-effectiveness. Implementation. Phase III, implementation, began in August 2004 and continues. Eight work groups implemented the various strategies with some support from external consultants. One consultant studied our medical claims and billing processes. Another consultant group modeled biotechnology costs and predicted Premera’s top biotech drugs and classes by combining historical medical and pharmacy claims analysis with biotechnology pipeline information. This allows us to focus proactively on the future highest-cost drugs, maximizing return on our utilization management efforts. For example, Remicade accounted for 25 percent of the medical office biotech drug cost increase in 2003, and five oncology drugs made up the next 25 percent. Therefore, when we implemented new prior authorizations, Remicade was the first drug targeted. The model projected drug cost per member per month for the top fifteen biotech drug classes through 2006: rheumatoid arthritis, oncology, multiple sclerosis, immune deficiencies, anemia, neutropenia, hepatitis C, transplants, deep vein thrombosis, growth hormone deficiency, infertility, Gaucher disease, dermatologic diseases, neurologic diseases, and cardiovascular diseases.
Accomplishments. In 2005 we implemented formulary process improvements, biotech drug utilization reporting, and implementation of a coordinated system of medical necessity criteria for medical and pharmacy drugs. The same criteria apply to all similar drugs, and the same reviewers handle all requests for approval. We signed new specialty pharmacy contracts with improved discounts in 2004. We implemented a new benefit category of "specialty pharmaceuticals" that permits benefits to be configured for higher cost sharing and to require members to purchase all such drugs from a contracted specialty pharmacy if an employer purchases that option. Fee schedules for reimbursement of office-administered drugs were lowered, following decreases in Medicare reimbursement. Improving claims and reimbursement processes for office drugs requires claims system changes. We hope to acquire the system capability to process drug claims based on the U.S. National Drug Code (NDC) number, a much more detailed and accurate basis for claims pricing than Healthcare Common Procedure Coding System (HCPCS) codes. This will probably never be accepted by all providers without federal regulation, but once our claims system can handle this field properly, we can offer incentives to medical groups that adopt NDC-based billing procedures. Our consultant predicted that we could save $3 million annually by cleaning up this process. Employer response. The timing of our initiative fits well with employers’ growing concern about pharmacy cost increases. Retail drug cost represented 11 percent of all U.S. health care spending in 2004, and the 8.2 percent growth rate in that year was the first single-digit increase in a decade.13 This growth rate is likely to rise again, and purchasers want to know how Premera will manage it. Managing a disease or drug class. The first class we addressed under the new system was the anti–tumor necrosis factor (TNF)–alpha agents for rheumatoid arthritis (RA). Of these, Enbrel and Humira are covered under pharmacy, but Remicade is medical. The clinical value of anti-TNF-alpha therapy in RA is established by well-designed trials. Response rates conforming to the American College of Rheumatology (ACR) (percentage of patients with at least 50 percent symptom improvement, known as ACR-50) of almost 50 percent are common in most studies. We computed cost-effectiveness ratios for these agents; for example, the cost of Enbrel required to treat enough patients that one patient would achieve an ACR-50 response was $44,000. The additional indirect benefit to employers could be substantial. Without biologics, half of patients diagnosed with RA reach total disability in ten years. Prolonging useful employment of this population by even two years could be valuable, considering that RA mostly occurs in middle-age workers in their peak productive years. Evidence suggests that most RA patients benefit from anti-TNF-alpha therapy but that some can begin with less costly drugs such as methotrexate and hydroxychloroquine. Studies also show that methotrexate plus an anti-TNF-alpha agent is more cost-effective than anti-TNF-alpha monotherapy, so our criteria require previous trial or concurrent treatment with a nonbiologic. Use is managed through prior authorization. A step-therapy algorithm requires trial of Enbrel or Humira (preferred) before approval for Remicade (less cost-effective) is granted. Our coordinated system makes this possible, even though Remicade is medical and the others are pharmacy claims. Use of specialty pharmacy would improve our discount on Enbrel and provide more specialized clinical monitoring by the pharmacy’s trained staff, who coordinate with our case manager if the patient is being followed by Premera’s Case Management team. This example shows how a coordinated program promotes high-quality, cost-effective treatment and how, once the decision to treat is made, we can facilitate the best possible outcome. Program performance metrics. Savings methodologies were developed and peer reviewed by actuaries using medical and pharmacy claims, plus an internal approvals and denials database. Prior to our initiative, Premera had medical necessity criteria in place for botulinum toxin, growth hormones, Herceptin, immune globulins, Remicade, Rituxan, and the Synvisc class. New criteria were implemented for seven biotech drugs in late 2005: Amevive, Avastin, Enbrel, Humira, Iressa, Kepivance, Raptiva, Remicade (expanded criteria), and Tarceva. Actual savings for these programs are not yet available.
Executive support is critical to any large corporate initiative. Such projects require considerable internal resources and funding to hire consultants. Biotechnology should be addressed at the corporate strategic planning level, and the project team must ensure that it remains a focus of senior executives’ attention. Input from all levels of the company is very important. Our approach combines the breadth of executives’ strategic vision with the detailed systems knowledge and "grassroots" experience of working-level associates. Skilled project management resources are required. We benefited from coaching by an internal strategic planning consultant. Advice from consultants complemented the expertise of the project team. External technology assessment resources might also be needed. Premera has developed a rigorous evidence-based formulary process that incorporates cost-effectiveness analysis. Because of biologics’ cost and targeted specificity, improved identification of patients for whom they are cost-effective can pay large dividends. Genomics will introduce complex ethical issues. Therefore, the initiative team should include legal counsel, and prudent health technology managers should think proactively. Ongoing consultation with ethicists will be invaluable.
John Watkins (john.watkins{at}premera.com) is pharmacy manager, Formulary Development, at Premera Blue Cross in Mountlake Terrace, Washington, and a clinical associate professor of pharmacy at the University of Washington in Seattle. Sanchita Roy Choudhury is a senior internal consultant, Pharmacy Services, at Premera Blue Cross. Ed Wong is pharmacy director at Premera Blue Cross and a clinical professor of pharmacy at the University of Washington. Sean Sullivan is a professor of pharmacy and public health and director of the Pharmaceutical Outcomes Research and Policy Program at the University of Washington. Premera Blue Cross is an independent licensee of the Blue Cross Blue Shield Association.
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