National Employer Initiative on

Specialty Drugs & Biopharma

Employer Focused, Employer Driven

5 Ways to Rein in Medication Costs

By Bruce Shutan

The National Business Group on Health is leading the charge to help stem skyrocketing specialty drug costs, which it warns are on track to surpass traditional scripts in the next several years.

In a recent 31-page report, NBGH offers five public policy recommendations to create more sustainable and affordable pricing for specialty medications. It also outlines the challenges that large employers and their employees face in paying for expensive biologic medications, and examines cost-containment initiatives.

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The report, “Policy Recommendations to Promote Sustainable, Affordable Pricing for Specialty Pharmaceuticals,” focuses on two major areas. They include reexamining policies to promote robust biopharmaceutical competition, as well as reforming Medicare and Medicaid rules that inhibit better value and lower prices for medications.

Although the aim is to help federal regulators, policymakers and Congress alleviate excess growth in pricing for specialty pharmacy, these recommendations also can help manage industry expectations, educate the marketplace and encourage strategic partnerships.

Steve Wojcik, vice president of public policy at NBGH, sees more member companies “working with specialty pharmacy benefit managers and other consultants to make sure they’re doing everything they can on the plan design side to manage the use and expenditures for specialty pharmacy, and get the best value.”

Among the group’s recommendations:

  1. Remove barriers to risk-based and value-oriented contracting and implement indication-specific pricing and reference pricing in public programs;
  2. Change Medicare Part D rules around protected drug classes;
  3. Eliminate perverse payment incentives to providers under Medicare Part B;
  4. Encourage “biosimilars” that compete with branded biologic products;
  5. Reform permissive patent and exclusivity protocols. 

Taming costs

In spite of the need for regulatory action, progress is being made. Large employers are using several tactics to tame rising specialty drug costs, according to the NBGH’s annual Plan Design Survey. They include embracing more aggressive utilization management protocols (74%), distributing specialty medications through a freestanding specialty pharmacy (69%) and designing a specialty tier in the benefits plan (38%). Other efforts include adopting high-touch case management (35%) and using prior authorization for specialty medications billed under the medical benefit (35%).

With regard to this last data point, Wojcik says specialty medications that are billed under the medical benefit are “harder to track and probably more costly if it’s being billed under the medical benefits.” He also notes that specialty scripts administered in a facility connected to a hospital are usually more costly than at a physician’s office or other site.

Several substantive changes are needed to reform the system, the report concludes. “There’s too much emphasis from the manufacturers on what their own costs and assessment of the value is as opposed to seeing what the customers are saying,” Wojcik says. “That’s because we don’t have much of a market in healthcare. Especially not in pharmaceuticals, where we have a government-sanctioned monopoly through patents. [The patent process] promotes innovation. But at some point, it also restricts competition and promotes unreasonable pricing.”

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