It’s time for employers and their brokers and consultants to be thinking about the years ahead. I recommend starting by taking a look at your specialty pharmacy drug program. While prescription costs overall are expected to rise nearly 10% in 2024, the specialty drug trend is closer to 15% according to one projection. And even though weight loss medications like GLP-1s may not be considered traditional “specialty,” their growing popularity for weight loss, and necessity for diabetes, means employers must plan now for how to cover and manage these complex medications.
What’s more, a recent pharmacy benefit manager customer satisfaction survey by PSG found that just 51% of respondents are satisfied with management of specialty medications in the medical benefit. What may be more telling: 26% of respondents said they “didn’t know,” a possible indication that specialty remains a mystery for many employers.
I’ve worked in specialty for 18 years, which is most of my career. It can be a confusing space, but understanding a few basic principles of specialty can help employers and their brokers and consultants navigate it. Here are three things to know about specialty going into 2024:
Is it a medical or pharmacy benefit?
Specialty drugs may be covered by a medical benefit (what patient-members likely think of as “their insurance”) or pharmacy benefits. There’s often a gray area for where specialty falls, but it can relate to whether the drug is being administered in a clinical setting, like a doctor’s office, outpatient clinic, or infusion center.
Reimbursement for these drugs can also vary between average wholesale price (AWP) for pharmacy reimbursement and average sales price (ASP) for the medical benefit. It’s complex to compare, and both ASP and AWP are used in the health care industry, but they’re different. ASP is a government-regulated tool that uses manufacturer sales information including discounts, such as rebates. AWP is the average price that wholesalers sell drugs to pharmacies, prescribers, and others. A government report found the median percentage difference between ASP and AWP to be 49%.
The reimbursement between these two models can differ drastically across the two benefits, and it’s sometimes hard to understand the savings and appropriate use mechanisms in place between the two benefits. Many PBMs tout being able to manage both, but I have yet to see someone accomplish this in the best way for the member.
And it’s important to remember that the specialty plan may be intricately linked to the pharmacy benefit and even the medical plan, depending on the employer’s choice of companies. In 2021, of the top five specialty pharmacies by revenue, four were PBMs. As the verticalization of the PBM industry continues, employers and their brokers should watch for any steering of patient-members to specialty pharmacies that are owned by the same entities who cover medical insurance.
There are nuances that exist around coverage and deductibles, but one scenario to watch for: the stipulation that the member must try a prescription benefit drug before a medical benefit drug. Another cause for concern? The PBM or health plan being subsidized by the profits of the specialty pharmacy – because dispensing more specialty medication would make more money for the PBM.
How to ensure clinical management to keep costs under control?
After the baseline assessment of whether specialty drugs fall under medical or pharmacy benefits, it’s important to ask about clinical tools that assess whether specialty users are appropriate. There should be logic behind the PBM’s assessment on how to approve patients to be on a specialty drug – and none of that assessment should have to do with how good the revenue is for the PBM. For example, imagine a therapeutic class of drugs where one drug requires no prior authorization (PA), but the remaining do. This would be a situation to ask more questions, like “how is the clinical criteria in a clinical policy verified or checked?”
As a byproduct of the vertical integration of the Big 3 PBMs with the three medical insurance carriers – Aetna (CVS Health), Cigna (Express Scripts) and UnitedHealth Group (Optum Rx) – we could see more expensive medication therapies being prescribed without the appropriate and clinically sound transparent controls in place. These issues and more have prompted companies like Blue Shield of California to “unbundle” from CVS Caremark and look for other avenues to deliver services, and that trend could continue in 2024 and beyond. Unbundling could be good for specialty, but I’ll say it again: The systems of the disparate companies have to talk to each other to ensure a good member experience.
“Specialty-light”: The weight-loss category
While specialty drugs account for 55% of medication spend by one estimate, it may be worth expanding what “specialty” means as the prescription weight-loss category continues to explode to a projected $22 billion market by 2030. Many employers say they are interested in covering weight-loss drugs like Wegovy and Zepbound, and a recent survey found that that interest could drive GLP-1 coverage to nearly double in 2024. Some researchers say that weight-loss drugs could add 50% to overall health care spending. And with social media and influencer attention focusing on the drugs, member interest could spike, driving even higher costs for employers, who have already seen a 90% increase in the utilization of the drug class since 2020.
With weight-loss, there are many considerations: Is it bariatric surgery coverage or is it medication coverage? Beyond prescriptions or surgeries, how do you manage behavior to impact results, though value-added clinical services and other solutions that build support around the medication? How do you identify the right employee-member who might benefit from these solutions? What’s the potential return on investment for covering weight-loss benefits? It’s all on the table as the weight-loss category expands.
So, even though these weight-loss drugs may not technically be “specialty,” it’s worth doubling down on considering how these drugs are being managed for weight loss, and the appropriate use of the drugs for diabetes patients. How will the medical benefit and pharmacy benefit work together to manage the best care for the patient? What clinical management steps will the health plan administrator take? How will the plan cost-share with employee-members to help cover the drugs? If an employee-member uses a compounding pharmacy to receive the drug and save money, how will the plan manage safety concerns? These are all questions that brokers/consultants and PBMs can help answer.