The ways patients access specialty medications have increased dramatically, making distribution channel management a priority. Ensuring that patients use the optimal channel is critical to manage cost and return on investment in high-dollar specialty therapies.
Drug administration requirements, benefit design, provider service availability, and restricted manufacturer distribution can influence channel selection. Dispensing channels for infusible drugs are limited by the need for administration by physicians or other qualified medical professionals. Infusible drugs can be administered at infusion centers, which offer lower treatment costs than physician offices, but aren’t available in all markets. Plan design dictates whether oral and injectable medications are dispensed through retail, mail-order and/or specialty pharmacies. Some plans require use of only one specialty pharmacy.
Payers should be knowledgeable about distribution channels when deciding whether to cover drugs under the pharmacy or the medical benefit. The physician “buy and bill” reimbursement process is not cost-effective for payers. Consequently, many payers are moving self-administered oral and injectable drugs under the pharmacy benefit where they cost less and are easily tracked. Drug plan designs may encourage or require patients to obtain medications through specialty pharmacies qualified to provide special handling and services. Not all retail pharmacies are equipped to handle refrigeration, compounding, and patient counseling often required by specialty products.
Contracts with Specialty Providers
Payers are beginning to contract with preferred specialty pharmacy providers (SPPs) to facilitate distribution through multiple channels. In addition to dispensing onsite, SPPs can deliver medications to patient homes, physician offices and infusion centers. They can manage billing and reimbursement under pharmacy and medical benefits.
The optimal mix of distribution channels may vary from one organization to another. It is important for benefits managers to analyze options in light of their own organization’s specialty drug utilization, medical and pharmacy networks, and vendor relationships.
The University of Michigan and the Carolinas HealthCare System are two examples of plan sponsors aggressively managing specialty pharmacy distribution.
The University of Michigan (UM) pharmacy benefit covers self-administered oral and injectable products as tier two preferred drugs with a $15 copayment. The benefit design includes a separate specialty drug formulary and limits dispensing to a 34-day supply from either UM health system pharmacies or a designated SPP.
When UM physicians prescribe for drug plan members, the medications must be dispensed through the health system’s three hospital pharmacies. The hospitals qualify for the U.S. government’s 340b Drug Pricing Program, enabling them to purchase outpatient drugs at deep discounts. The hospitals pass the savings to the drug plan.
More than half of UM’s 35,000 employees and their dependents use UM physicians and medical facilities. “By dispensing specialty products through our hospital pharmacies, we saved $890,000 in 2008,” says Keith Bruhnsen, assistant director of the UM benefits office and manager of the prescription drug program.
Specialty drugs prescribed for plan members by physicians outside the UM system must be dispensed through Wellpartner, UM’s SPP. “A key reason we chose Wellpartner was our ability to obtain specialty drugs at acquisition cost plus a dispensing fee,” says Bruhnsen. “We began channeling distribution through specialty pharmacy three weeks ago and the savings we’ve seen already puts us on target to meet our goals. We plan to reduce spending by $1M this year through specialty pharmacy management initiatives.”
Leveraging Internal Resources
The Carolinas HealthCare System (CHS) also covers self-administered oral and injectable drugs under its employee pharmacy benefit. A fourth tier was added to the drug benefit design with a 20% coinsurance and $100 out-of-pocket maximum for each specialty prescription. Specialty drug formularies specify which products are covered under the pharmacy benefit and the medical benefit.
All prescriptions for self-administered specialty drugs must be dispensed initially through the health system’s six retail pharmacies, each equipped to handle specialty products and counseling. After three refills, specialty drug prescriptions must be dispensed through the health system’s own mail-order pharmacy. There are exceptions when drugs are available only at select pharmacies designated by the manufacturer.
“Our goal is to dispense through cost-effective, in-house channels as much as possible,” says Bob Carta, assistant vice president, division of pharmacy services for the 40,000-employee hospital system. “Our pharmacies purchase these drugs at excellent volume discounts as well as being involved with the 340b drug purchasing program. Because we are a self-insured health plan, we bill our plan for the drug costs plus a slight processing fee. We have in-house resources to provide the necessary care management.”
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