Midwest Business Group on Health. Managing the Rising Costs of Specialty Pharmacy

Midwest Business Group on Health Managing the Rising Costs of Specialty Pharmacy January 29, 2014

Midwest Business Group on Health Celebrating 34 Years of Advancing Value in Health Benefits Management Founded in 1980 as a 501(c) (3) not-for-profit employer coalition by a group of large Midwest employers Members consist of over 120 large self-insured public and private employers Boeing, Ford, Kraft, OfficeMax, Procter & Gamble, State of Illinois Members are represented by senior human resources/health benefits professionals Members annually spend more than $4 billion on health care for over 4 million lives Founding member of the National Business Coalition on Health 2

Midwest Business Group on Health Project Background

National Employer Initiative on Specialty Pharmacy 2009 to 2013 MBGH Board cites specialty drug costs as #1 priority 2009 Collaborate with F. Randy Vogenberg, PhD, RPh, Principal, Institute for Integrated Healthcare 2011 to 2013 Partner with 16 NBCH sister coalitions to conduct national employer survey 2012 launch online employer toolkit ongoing development 2014 Partner with 6 sister-coalitions on employer demonstration pilots 4

National Employer Initiative on Specialty Pharmacy Employer Specialty Pharmacy Toolkit www.specialtyrxtoolkit.com

Employer Specialty Pharmacy Toolkit www.specialtyrxtoolkit.com Developed with input from employer advisor committee, leading industry experts and multi-stakeholder meetings Toolkit includes: Section I: Understand the specialty pharmacy landscape, emerging issues and related stakeholders Section II: Address key challenges and identify innovative approaches to benefit plan design and vendor contracting Section III: Support at-risk population through communications and resources 6

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Midwest Business Group on Health Specialty Pharmacy 101

Advances in Biotechnology Biologic/Specialty Drugs Medications called specialty drugs including biologics are made from variety of natural sources including human, animal or micro-organisms Derived from a biotechnology process that can change the course of a disease instead of just treating the symptoms Development of these drugs is a long, complex and costly endeavor Average of 10-15 years to bring a medicine to patients Average R&D investment today for each drug is $1.2 B Source: PRDMA.org 2013 Report 13

Advances in Biotechnology Biologic/Specialty Drugs Used to treat more than 100 life-threatening diseases and complex chronic conditions that previously had no therapeutic options Very effective in decreasing debilitating effects of a disease As of 2013, there are 907 biologic drugs in development 338 2013 In development by therapeutic category 14 Source: PRDMA.org 2013 Report

Shift from Small Molecules to Biologics 15

Advances in Biotechnology How Specialty Drugs Work The Human Genome A person s gene tells their body to produce all the enzymes, hormones, antibodies and other proteins needed to make the body function Missing or defective genes impact the body s proteins which are needed to function property Today s technology helps scientists determine which genes or proteins are defective Greater understanding of how a disease works at the genetic and molecular level allows researches to better predict how certain drugs will affect specific subpopulations 16 Source: PRDMA.org 2013 Report

Definitions Bioinformatics Biological databases that include DNA sequences to decipher the molecular pathways of disease to find patterns in how genes respond to drugs Biomarkers Every disease leaves a signature of molecular biomarkers in our body Measuring these biomarkers can tell the state of our health and how we might respond to treatment Biomarkers are the first step in developing personalized medicine Molecular Targeting Designing drugs that specifically attack the molecular pathways that cause disease, without disrupting the normal functions in our cells and tissues 17 Source: PRDMA.org 2013 Report

Definitions Personalized Medicine Sequencing of the human genome producing a map of the human genes in DNA Allows for targeted therapies for people with specific gene sequences Helps physicians choose the best treatments based on individual genetic, lifestyle and environmental factors Researchers are currently developing genetic tests that can tell if we are susceptible to certain diseases 18 Source: PRDMA.org 2013 Report

Manufacturing Complexities Because most biologics are very complex molecules and can t be fully characterized by existing science they are characterized by their manufacturing process Considered very complex and sensitive, even slight changes in temperatures or other factors impact the final product and affect how these drugs work in patients Changes in the manufacturing process or the facility where the drug is developed may even require clinical studies to demonstrate safety, purity and potency Source: PRDMA.org 2013 Report 19

Biologic Drug Classes Generics With few exceptions, generic specialty drugs do not exist today Biosimilars Copy of a biologic drug, but due to the complex nature of biologics are not identical very few exist In order to reach market, the manufacturer must demonstrate to the FDA that it is highly similar to an existing FDA-licensed biologic product Although biosimilars may enhance competition only a few will be available in the near future with cost savings expected to be no more than 20% ACA is offering an abbreviated approval pathway 20

Biologic Drug Classes Biogenerics Follows the existing FDA drug regulatory approval pathway for an identical drug Usually accomplished through clinical trials or sophisticated computer modeling of the drug chemical structure compared to the branded original product Biobetters Instead of being a structural imitation of an existing biologic product they are improvements to the original product Also called branded generics may offer easier route of administration or less frequent dosing 21

Key Stakeholders Purchaser Provides their share of payment to the Prescription Claims Administrator for the cost of the drug may be.. Patient (e.g. co-pay or co-insurance) Public or private employer Government (e.g. Medicare, Medicaid, Veteran's Administration, Dept. of Defense) 22

Key Stakeholders Manufacturer Pharmaceutical companies conduct research to develop and manufacture specialty products Sell the product for distribution to wholesalers or distributors as well as physician, hospital and pharmacy dispensers May contract directly with other stakeholders Distributor Wholesaler or medical distributor who sells and distributes drugs that require special handling e.g. temperature, storage, transport Support, tracking, reporting, reimbursement and other services that traditional drugs normally do not require May include support such as billing, nursing support, collection and account management Provides broad-based distribution and accountability for specialty drugs in the health care delivery system 23

Key Stakeholders Provider Clinicians or clinical settings such as physician/ prescriber, hospital out-patient, infusion center or home health care that offer: Intensive patient supervision, education and follow-up Diagnostic testing to monitor dosage, effectiveness of drug May offer special handling and storage of drugs for administration to patients Prescription Claims Administrator Receives prescription expense claims from Dispenser and reimburses them for cost of drug may be PBM or Health Plan Accountable Care Organization/Patient-centered Medical Home Physician 24

Key Stakeholders Dispenser Fills prescriptions, files claims for reimbursement with health plan, handles reporting requirements, distribution of drugs to patients, followup, nursing support and assistance with benefits investigation includes: Pharmacy Benefits Manager (PBM) that has its own specialty pharmacy Independent specialty pharmacy focused solely on providing and supporting the use of specialty drugs Health plan with an internal specialty pharmacy Retail pharmacy that provides specialty drugs 25

No Single Definition It s not uncommon for different stakeholders to have different definitions for biologic drugs: Centers for Medicare & Medicaid Services define specialty drugs as those that cost more than $600 Food & Drug Administration, employers, and other health care stakeholders define it differently When asked to define specialty drugs, PBMs and specialty pharmacy executives provided a number of responses

Distribution, Dispensing and Site of Care Distributors are held accountable for patient safety through a Risk Evaluation and Mitigation Strategy (REMS) REMS is a distribution and care management restriction tool required by the FDA for manufacturers to implement to ensure that the benefits of taking a drug outweigh the risks Most REMS require that manufacturers offer providers and patients with educational materials so they understand the risks and safe use of a drug REMS also impacts the clinician, pharmacy or pharmacist by limiting availability of certain drugs to an even smaller number of pharmacies or physician offices, resulting in very few points of access to some higher risk drugs 27

Distribution, Dispensing and Site of Care Specialty pharmacies provide broad-based distribution of specialty drugs in the health care delivery system They are accountable for patient safety and typically provide intensive one-to-one patient education and follow-up support by a pharmacist and/or nurse There are a limited number of specialty pharmacies in the U.S. compared to the large number of retail pharmacies A specialty pharmacy typically provides more extensive care management, counseling, case management and coordination of care with other stakeholders involved in a patient s treatment 28

Distribution, Dispensing and Site of Care Specialty drugs are administered in a variety of ways, including injection or intravenous infusion by a clinician who can monitor the patient to ensure their safety Site of Care options can have a direct impact on costs: Physician s office ($$$) Hospital outpatient dept. ($$$$) Freestanding infusion center/clinic ($$ - $$$) Worksite medical center ($ - $$) Home mobile infusion therapy provider ($ - $$) This typically takes place in a traditional medical Retail Clinic ($ - $$) setting but can also occur in a non-traditional Some drugs, including oral tablets, setting all are injectables and inhalants can be self-administered by the patient considered site-of-care 29

Midwest Business Group on Health Current Landscape

Market Trends Mergers and acquisitions among manufacturers and smaller research organizations have led to rapidly accelerating drug research Venture capitalists have shown an increased interest in investing in this growing sector Manufacturers are directing their research and development investments away from traditional drugs towards more profitable specialty drugs Innovations in science has enhanced the medical profession s understanding of the disturbances of body functions caused by disease and subsequent mechanisms to reduce or prevent it 31

Cost Drivers Aging population and related increase in chronic diseases means larger number of covered populations are eligible for treatment Direct to-consumer marketing encourages patients to bypass more conservative treatments in order to receive the perceived newest and best Rapidly growing research/development pipeline means number of FDA-approved specialty drugs will continue to increase Bringing drug to market is more complex and expensive than traditional drugs making for a higher cost per unit Current lack of generic substitutions means limited competition Specialty drugs target conditions that affect smaller patient populations so costs are spread out over less individuals 32

Top 10 Highest Revenue Producing Drugs 33

Midwest Business Group on Health Employer Impacts

Most Large Employers Are Paying Attention Employer Understanding of SP MBGH Survey 2011 2012 36

Employer Top Concerns 37 Source: PBMI 2013 Survey

Economic Impacts to Employers High cost per unit $6,000 to $100K per year or more Hemophelia can be $ 1M Fast growing with over 800 drugs in pipeline 25% of drugs in the R&D pipeline are considered specialty Nearly 50% of drugs in late-stage development are specialty In 2013 ESI forecasted: U.S. spending on specialty drugs is projected to increase 67% by the end of 2015 3 of the 4 costliest prescription therapy classes will be for specialty conditions 38

Economic Impacts to Employers Specialty drugs account for more than 20% of the average employer s overall pharmacy costs Increase in number of diagnostic and genetic tests, lab diagnostics and biomarkers required Site of care cost issues Three account for more than half of all spend: Cancer Arthritis Multiple Sclerosis Approximately 50%-60% of specialty drugs are represented by the oncology category

Economic Impacts to Employers 40 Source: PRDMA.org 2013 Report

Challenges of Reimbursing Through Medical vs. Pharmacy Benefit With over 50% of spend occurring in the medical benefit it is difficult for employers to track and manage costs PBMs may not have access to data reports on what costs are running through the medical plan making analysis of costs and utilization a challenge Variations in drug classes and condition categories and route of administration determines whether medical or pharmacy benefit covers the drug: Pharmacy Typically covers self-administered oral, injectable and inhaled Medical Typically covers injected or infused by doctor s office, hospital out patient center, free-standing infusion center or mobile infusion at home 41

Preliminary Results 3 rd Annual National Employer Survey on Specialty Pharmacy Developed by employers for employers

Employer level of understanding of specialty pharmacy benefits 2012 2013 45

Employer level of involvement in working with specialty pharmacy benefits 46

Amount of time health benefits professionals spend on. 47

Priority of company s business goals in managing specialty pharmacy 1. Reducing inappropriate utilization 2. Reducing drug acquisition costs 3. Improving adherence/compliance 4. Reducing variability between the pharmacy and medical plan design 5. Improving productivity 48

Percentage of biologics/specialty pharmacy costs paid through Pharmacy plan 49

Percentage of biologics/specialty pharmacy costs paid through Medical plan 50

Increase of specialty pharmacy benefit costs over the past 3 years 51

Claims incurred through medical/pharmacy plan by disease state Medical Pharmacy Don t know HIV/AIDS 49% 57% 41% Growth hormone deficiency 42% 56% 44% Cancer (oncology and hematology) 83% 85% 12% Multiple Sclerosis 69% 87% 13% Arthritis 65% 85% 15% Vaccines 61% 55% 24% Transplant related medications 50% 61% 37% Rare genetic diseases 20% 29% 71% Immune disorders 44% 58% 42% Infertility 51% 63% 37% 52

Use of key components in plan design 53

Effectiveness of cost management strategies 54

Effectiveness of cost management strategies 55

Use of cost sharing strategies by benefit Medical Pharmacy Medical & Pharm Don t use Don t know Traditional pharm design w/ 2-3 tiers and copays Traditional pharm design with 2-3 tiers and coinsurance Additional specialty tiers w/ copay Additional specialty tiers w/ coinsurance 17% 63% 20% 17% 0% 11% 50% 13% 37% 3% 5% 35% 13% 60% 0% 3% 22% 3% 72% 3% Coinsurance w/ min copay 3% 34% 9% 60% 0% Coinsurance w/ max copay 3% 39% 8% 56% 0% Coinsurance w/ max annual out of pocket No tiers, no copays, no coinsurance 16% 32% 14% 51% 0% 6% 0% 0% 91% 3% 56

Effectiveness of strategies to improve specialty drug use Very Effective Effective Somewhat Effective Not Effective Have not done Drug cost comparison 5% 20% 36% 8% 31% Cost share incentive 2% 21% 27% 13% 37% Pharmacy networks 8% 36% 38% 3% 15% Protocols used for prior approval Day s supply/limitations messaging 5% 54% 24% 7% 10% 5% 37% 34% 7% 17% Formulary explanation 0% 30% 33% 20% 17% Utilization management 2% 41% 46% 2% 9% Benefits coverage options 2% 24% 37% 2% 35% Mailing/phone messages 0% 10% 37% 20% 33% 57

Prioritization of key tactics used for managing specialty pharmacy benefits 1. Case management 2. Benefit coverage coordination for Pharmacy & Medical 3. Drug utilization 4. Step therapy 5. Prior authorization for pharmacy benefit 6. Cost sharing 7. Quantity approaches 8. Site of care options 9. Prior authorization for the medical benefit 10. Combining medical & pharmacy data 11. Practice guidelines 58

Specialty pharmacy coverage based on Site of Care 59

Maximum out-of-pocket per specialty Rx fill 60

Actions required for patient to receive incentive 61

Required use of an in-network specialty pharmacy for covered population 62

Number of fills at retail pharmacy before required to used specialty pharmacy 63

Types of specialty pharmacy claims reports received 64

Top priorities when contracting with a specialty pharmacy provider 1. Care management support 2. Overall performance 3. Cost of vendor services 4. Account management 5. Cost transparency model 6. Medication adherence support 7. Trend management 8. Prior authorization for claims approval 9. Step therapy edits for claims approval 65

Type of performance guarantees included in specialty pharmacy contracts 66

Effectiveness of case management on outcomes Very Effective Effective Somewhat Effective Not Effective Don t know Management of related chronic conditions 11% 29% 34% 3% 23% Medication adherence 18% 24% 27% 5% 26% Treatment compliance 11% 29% 29% 3% 28% Increase in productivity 5% 8% 29% 3% 55% Reduction in absenteeism Increase in quality of life 5% 8% 21% 5% 61% 11% 19% 27% 0% 43% 67

Midwest Business Group on Health Benefit Plan Design

Key Benefit Plan Design Elements Identify those with high-cost chronic conditions who have poor drug adherence and PBM/vendor programs to improve compliance Include clinical coverage rules, such as prior authorization and step therapy to ensure appropriate utilization (e.g. to conditions such as MS and RA) Ensure case/care management is coordinated or integrated Establish coverage requirements that eliminate redundancy and conflicts across medical and pharmacy benefits e.g. high out-of-pocket costs for oral medication in the pharmacy plan can motivate the patient to seek treatment in the medical plan, thus increasing total plan sponsor cost 69

Key Benefit Plan Design Elements Conduct aggressive negotiation of financial and non-financial contract terms with the PBM to capitalize on today s buyer s market Include proactive clinical management programs to ensure optimal pricing, appropriate use and avoidance of high-cost hospitalizations Integrate drug channel management strategies that ensures specialty drugs are dispensed through the most cost-effective and efficient pharmacy delivery channel retail, mail order or specialty pharmacy Offer employee benefit communication materials delivered in coordination with specific date from company as plan sponsor 70

Other Considerations Determine where data falls under the pharmacy benefit and/or the medical benefit 71

Other Considerations Assess a drug tiering strategy for the medical benefit With some specialty drugs falling under the medical benefit, employers should assess the value of a tiering strategy to help manage costs Determine options and utilization for sites of care When trying to evaluate or assess plan design outcomes, it is important to qualify drug use by site of care to determine if other factors are impacting plan design performance 72

Other Considerations Implement a comprehensive utilization control strategy Site of care prior authorization Dose and quantity edits Prior authorization Step therapy Manage Provider Reimbursement Hospital-owned practices have increased over the past year so it is important to link physician practices with their parent organization to effectively evaluate plan design outcomes and determine more consistent reimbursement practices 73

Cost Sharing : Medical vs. Pharmacy Parity 74 Source: PBMI 2013 Survey

Midwest Business Group on Health Employer Strategies & Working with Your Pharmacy Vendor/PBM

Top Employer and Health Plan Goals for Managing Specialty Pharmacy 76 Source: PBMI 2013 Survey

Working with your Vendor MBGH 2013 Survey Vendors that support employers in their management of specialty pharmacy 77

Best Practices in Vendor Programs Full transparency in contract Partial first fill for specialty drugs, like oncology Proactive clinical care management from specialty pharmacy vendors Integrated case management from PBMs/health plans Collaborative care pathways and data exchange across vendors and their networks 78

Identifying and Comparing Vendors Considerations Distribution Networks Retail pharmacy chains, health plans, pharmaceutical wholesalers, physician practices, pharmacy benefit managers and independent specialty pharmacies Must hold active professional licenses from state to ensure medication safety and full compliance with drug regs at state/federal level Medication Adherence and Support Services In addition to the drug dispensing, additional support is needed by patients and should include oversight, counseling and communication services 79

Identifying and Comparing Vendors Considerations Medical and Pharmacy Benefit Related financial implications of the benefit design should be spelled out to include at least the following minimum elements: Cost of the drug by the unit/dose size and by the source of dispensing (e.g. retail versus mail order) Drug reimbursement to the pharmacy related to the cost of the drug itself, plus the cost of dispensing to the patient in accordance with state or federal requirements Approach to patient cost sharing that will offset the final employer cost of care required to treat the patient s medical condition Address uneven out-of-pocket costs to the patient which creates barriers to successful treatment and increases the total cost of care paid by the employer through the medical and pharmacy benefit 80

Identifying and Comparing Vendors Considerations Determine Needs and Roles for each Type of Vendor To ensure effective care coordination or collaboration to achieve desired program outcomes Case/Care Management Roles for each should include: Health Plans Case management services with the patient and coordination with other key stakeholders such as the treating physician, any specialists, local pharmacist, home care nurse, family members PBM Care management services with the patient to assure coordination of benefits with the health plan as well as communicating with other key stakeholders Specialty Pharmacy Patient and provider management or services to assure optimal patient care outcomes with their prescription drug treatment plan under the medical and/or pharmacy benefit 81

Identifying and Comparing Vendors Considerations Claims Adjudication For retail and mail order drug distribution channels as well as compliance with contracted pricing and drug utilization management or patient safety oversight. Examples: Access and distribution channels Contract pricing compliance Provider and patient management DUR and REMS (FDA Risk Evaluation Management System) Formulary and rebate management 82

Identifying and Comparing Vendors Considerations Provider Compliance Across Various Clinical Settings Integration of medical and pharmacy data, where specialty drugs are being used as well as prescribed. Since many specialty drugs can be covered under medical benefits, don t assume pharmacy benefits is the sole source for assuring patient compliance with drug therapies Physician profiling and network management where specialty drugs are being used or dispensed to assure patients are receiving their drugs to achieve optimal outcomes of care Performance tracking and outcomes to assure pharmacy benefit plan performance to include: Patient outcomes of care, including use of specialty drugs Medical and pharmacy benefit providers who use specialty drugs vs or bill for them 83

Identifying and Comparing Vendors Considerations Patient Compliance to Include Care and case management coordination across both medical and pharmacy benefits Sharing of information is critical to patient in both the medical and pharmacy benefit coverage settings Program evidence of success or failure for the specialty vendor through identification of key metrics that can assure success at the macro or micro level of review as well as during an audit Quality improvement/continuous quality improvement (CQI) measures in the dispensing operations Quality improvement/cqi measures in the patient or clinical services operations Certification(s) or Recognition of Excellence in dispensing, clinical services or IT functions that support delivery of optimal patient care outcomes 84

Selecting Vendors RFP Criteria Review formulary development and management Specify which drugs PBM will supply directly and those that must be obtained from another source due to manufacturer/fda requirements emphasis on orphan drugs and alternatives to high cost drugs Document that specifically lists which drug classes will be covered under the pharmacy plan and the medical plan Benefit design and utilization features including tiers, cost sharing, copay/co-insurance approaches How the employer's benefits will be managed Network contracting, including oversight of prescribers and pharmacists 85

Selecting Vendors RFP Criteria List of account services offered Description of how claims and payments are processed How drugs are distributed Drug utilization review, step therapy, quantity limits, prior authorization and other edits and controls Availability of medication adherence programs Type and frequency of employer reports Patient support, education and communications with plan members 86

Contracting with PBMs Carve in Some plan designs provide a one-stop and integrated coverage option to include all drugs for covered members In this model, availability of drug data is generally good but fully integrated data may still be limited depending on the vendor Carve out A separate benefit that offers separate or carved out pharmacy benefits coverage for plan members Beware of related barriers, administrative or care disruption issues for those who require the use of a specialty drug Data on drug claims remains readily available and robust compared to the many medical data sources Carving out remains a value proposition for drug benefit vendors, offering the ability to crosswalk medical claims to enhance medical data reporting on drug use in specialty categories 87

Contracting with Specialty Pharmacies The top services provided by specialty pharmacies include comprehensive patient management along with full-service facilities 2012 Survey says the most sought-after services include: Direct distribution of drugs to patients or physician Coordination of reimbursement and eligibility All day access to a health care professional Ensuring appropriate drug use Source: Pharmacy Strategies Group (PSG) Report on Understanding Specialty Pharmacy Management and Cost Control 88

Midwest Business Group on Health Employer Case Studies

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com There is a tsunami in the distance called the specialty drug pipeline and those who do not prepare now will suffer great losses Employer Experience: A visit to a drug store for an antibiotic for bronchitis Meet a co-worker there to get an Rx for HRT to ease hot flashes Both of them paid the same. Antibiotic is intended to restore normal functioning of a body system that is essential to life HRT is used to ease the symptoms of a normal body process that does not threaten life or the functioning of a body system essential to life 90

Designing Prescription Benefits With Common Sense Excerpt from www.specialtypharmacytoolkit.com Today, employers must focus on preserving life or functioning of major body systems essential to life: Medications that cure infections, reduce pain, lower cholesterol, BP and maintain blood glucose provide great value to our company Mediations that cure acne, toe nail fungus, impotence and hot flashes may provide some value to consumers, but not to employers Why should full coverage be provided for prescription medications with multiple over-the-counter equivalents? Can we develop a benefit design based on shared value that achieves intent and is accepted by employees with little or no noise? 91

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com These are the tough questions we must ask ourselves, our leadership and our employees. They called on those best trained to understand the pharmaceutical maze the PBM s account manager and lead clinical pharmacist We must ask them to take off their PBM hats and walk with us down a visionary path where the words we can t get replaced with we could, if. This can be accomplished for both self insured and fully insured healthcare plans. They convinced their PBMs to work with them to develop a benefit design that achieves the goals of their consumers and the company and can be successfully marketed to their other customers (We want to work with) PBM s who will recognize and appreciate these efforts 92

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com First, we must work with our PBM s clinical pharmacist to identify the classes of medications not primarily used to preserve life or major body system functioning and thus of little or no value to the employer as well as those that may achieve outcomes of some value to the employer, but the same outcomes can also be achieved through alternative means. 93

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com The decision was made to decrease member cost share for specific chronic care medications at the same time as increasing cost share for convenience medications they divided medications into four groupings: Lifestyle Enhancing: Medications used primarily to enhance one s ability to perform/achieve a lifestyle related activity/goal. These are medications such as Viagra, Chantix, and Retin-A. All or the greatest amount of cost for these medications would be assumed by the consumer. Convenience: Medications that produce outcomes not directly associated with the preservation of life or the normal functioning of body systems essential to life; or medications with one or more less costly treatment alternative that results in similar clinical outcomes. Examples include Nexium, Clarinex, Provera, Testosterone, Penlac, and Ambien. The consumer and the employer at least share equally in the total costs of these medications. 94

Designing Prescription Benefits With Common Sense www.specialtypharmacytool.com Life Preserving: Medications directly associated with the preservation of life or functioning of body systems essential to life. This is the largest of the groupings and includes medications for treatment of conditions such as infections, pain, seizures, depression, and cancer. Typically the employer would assume the greatest amount of cost for these medications. Business Preserving: Medications used to treat controllable chronic health conditions resulting in the highest levels of lost work time and long-term disability. This is typically the second largest grouping and includes medications for treatment of conditions such as hypertension, high cholesterol, diabetes, and asthma. These medications would have the lowest level of consumer cost share or no consumer cost. 95

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com Back to the Tsunami It only takes a few incidences of diseases such as Cystic Fibrosis treated with medications such as ~$830 per day Kalydeco for a cost trend explosion. Over 50% of the medications currently in the pipeline are Specialty Medications and over half of these are indicated for the treatment of cancers. With cancer being one of the most feared diagnoses, consumers are not going to easily tolerate traditional pharmaceutical protocols such as step therapy. There will be demand to be immediately treated with the best-inclass medications and employee relations issues and litigations will be abundant if they face barriers. Is the consumer at fault; absolutely not! 96

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com These medicines work very well and help avoid costly hospitalization when the right medications are prescribed for the right patients, at the right dosage and times the key word is right Common Sense approaches include: Know current utilization of specialty drugs in the pharmacy and medical benefits especially those drugs not self-administered, that often require intravenous administration with medical monitoring Make sure the medical benefits administrator is doing the job they were paid to do this, especially since there can be excessive mark-ups on the costs of the specialty drugs obtained through the medical benefit Site of care matters best pricing is achieved when the purchase and administration of the drug is part of a facility contract 97

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com Ensuring self-administered drugs come from a specialty pharmacy; avoiding use of ongoing fills at regular retail pharmacies they offer Highly trained pharmacists and nurses who provide individualized case management specific to the type of medication being used Frequent contact with patient and treating physician to address barriers Prevent waste by monitoring the patient s medication inventory so that refills are only sent when needed Employees have indicated changing from a retail pharmacy to a specialty pharmacy in terms of quality of care is like night and day 98

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com Allow one fill at the retail pharmacy; with a process in place to educate the consumer of requirements helps to avoid frustrating delays in treatment Drugs that are only effective in specific dosages for patients with specific genetic markets that require pharmacogenomic testing should be completed prior to treatment PBM should make sure this happens Plan design should be updated to provide coverage Costs of these tests are far less that the cost of one-time treatment with a drug that will never be effective for the patient 99

Designing Prescription Benefits With Common Sense www.specialtypharmacytoolkit.com Most important common sense. Informing the consumer the real cost of their medications, how much of the costs are being paid by the employer and how their employer s costs directly impact their personal costs Even when this information is available to the consumer (PBM web site), they don t typically look it up PBM should send at least bi-annual statements informing them of their itemized costs as well as the employer or plan s itemized costs Consumer s should be taught the relationship between increases in the employer s/plan s costs to increases in their overall health care costs that will be seen in future premiums, co-pays, deductibles and co-insurance 100

National Employer Initiative on Specialty Pharmacy Employer Demonstration Pilots

Employer Pilot Areas 1. Ensuring High-Quality Case/Care Management and Coordination with Medical and Pharmacy Plan Vendors 2. Improving Treatment Adherence 3. Using Value-Based Benefit Design: Higher Value Medications At Lower Cost Share (e.g. lowest cost for best outcome) 4. Incentivizing Patients to Use Specialty Pharmacy 5. Using Limited Fill Supply Plan Design Options (e.g. 7-10 day first fill on new prescription) 6. Using Step-Therapy Strategy to Improve Clinical Outcomes and Medication Compliance Consumer Communications Initiative will be included with each pilot 102

Employer Pilots Employer Pilots 2014 Share outcomes and accomplishments Identify employer best practices Share employer innovation Understand PBM/HP role and opportunities Employer Opportunities 2014/15 Turn-key employer resources available to all employers based on pilot initiative Available late 2014 to early 2015 Research and pilot updates provided via employer online toolkit 103

Future Economic Trends and Impacts to Employers Specialty drugs for treating conditions such as rheumatoid arthritis, multiple sclerosis and cancers will continue to make up approximately two-thirds of drug spend within the pharmacy benefit over the several years Approximately one-third of drugs in the future pipeline will be delivered in an oral tablet form May actually cost more than traditional specialty drugs because they are considered new technology. Other new drugs will be used in combination with microtechnology delivery systems (e.g. similar to insulin pens and transdermal patches used today) 104

Future Economic Trends and Impacts to Employers New specialty drugs will likely be developed using high technology formulation and delivery systems such as nanotechnology manipulation of matter on an atomic and molecular scale and working with materials such as drugs and devices Nanoparticles or implantable devices may be used to treat specific types of cancer There will be an increase in the number of diagnostic and genetic tests, laboratory diagnostics and biomarkers 105

Future Impact on Employers Next 2 to 5 Years Specialty drugs will become the main driver of overall health care benefit cost trends Mergers and acquisitions of specialty pharmacies and PBMs will continue to occur There will be greater interoperability of systems to improve communications across transitions of care Biologic products will begin to go off patent Biogenerics, biosimilars and biobetters will continue to emerge and grow into the market Benefit designs will continue to drive mandatory specialty pharmacy utilization. Intensive case management will be critical to successful and cost-effective patient outcomes 106

Future Impact on Employers Next 2 to 5 Years Increases in drug use will be seen as oral dose forms replace injectables in some therapeutic classes Market will continue to expand to include treatments of more health conditions among an aging population with costs continuing to escalate Employers and employer coalitions will continue to influence this marketplace Employers will require PBMs and health plans to go at financial risk for not meeting goals for improved outcomes, clinical utility and quality of life measures An increase in state level regulatory mandates will be seen for specialty benefit designs that are at parity with non-specialty benefits 107

Future Impact on Employers Next 2 to 5 Years Specialty pharmacy market changes will continue into 2015 while technology growth escalates over the next 2-5 years Doing nothing is no longer an option 108

Thank you! Cheryl Larson Vice President Midwest Business Group on Health clarson@mbgh.org www.mbgh.org F. Randy Vogenberg, PhD Principal Institute for Integrated Healthcare randy@iih-online.com MBGH s Employer Communications Toolkit on Benefits Literacy and Consumerism www.mbgh.org/ctk 109