Specialty pharmacy cost management strategies of private health care payers

BACKGROUND: The rate of increase in spending on specialty pharmaceuticals is outpacing by far the rate of increase in spending for other drugs. OBJECTIVE: To explore the strategies payers are using in response to challenges related to coverage, cost, clinical management, and access of specialty pharmaceuticals and to describe the potential implications for key stakeholders, including patients, physicians, and health care purchasers. METHODS: Sources of information were identified in the course of providing consulting services in the subject area of specialty pharmaceuticals to health plans, pharmacy benefit managers, employers, and pharmaceutical manufacturers. RESULTS: Specialty pharmaceuticals represent the fastest growing segment of drug spending due to new product approvals, high unit costs, and increasing use. Health care payers are faced with significant challenges related to coverage, cost, clinical management, and access. A variety of short- and long-term strategies have been employed to address these challenges. CONCLUSIONS: Current management techniques for specialty pharmaceuticals often represent a stop-gap approach for controlling rising drug costs. Optimum cost and care management methods will evolve as further research identifies the true clinical and economic value of various specialty pharmaceuticals.     

Rising Cost of Cancer Pharmaceuticals: Cost Issues and Interventions to Control Costs

The rising cost of pharmaceuticals and, in particular, cancer drugs has made headline news in recent years. Several factors contribute to increasing costs and the burden this places on the health care system and patients. Some of these factors include costly cancer pharmaceutical research and development, longer clinical trials required to achieve drug approval, manufacturing costs for complex compounds, and the economic principles surrounding oncology drug pricing. Strategies to control costs have been proposed, and some have already been implemented to mitigate cancer drug costs such as the use of clinical treatment pathways and tools to facilitate cost discussions with patients. In this article, we briefly review some of the potential factors contributing to increasing cancer pharmaceutical costs and interventions to mitigate costs, and touch on the role of health care providers in addressing this important issue.     

Reducing Branded Prescription Drug Prices: A Review of Policy Options

The high prices of specialty pharmaceuticals are causing some public programs to ration care and many private insurers, including Medicare drug plans, to place specialty drugs on high cost‐sharing tiers. As a result, access to these drugs is often restricted, and only a small portion of the population with a disease may receive treatment. This concern has generated a wide range of proposed solutions. We conducted a literature review and identified 52 solutions in the peer‐reviewed literature that we classified into five broad categories: revising the patent system, encouraging research to increase development of new drugs, altering pharmaceutical regulation, decreasing market demand, and developing innovative pricing strategies. We discuss the rationale for these five approaches and summarize the proposed solutions. We also discuss four empirical issues that are particularly important in any discussion of policy options.     

Pharmacological treatment of severe psychiatric disorders in the developing world : lessons from India

Severe psychiatric disorders (schizophrenia, bipolar disorder and major depressive disorder) cause much morbidity and disability in developing countries. Most of the evidence on the efficacy and effectiveness of drug treatments for these disorders is based on trials conducted in Western countries. Cultural, biological and health system factors may profoundly influence the applicability of such evidence in developing countries. Attitudes towards, and concepts about, psychiatric disorders vary across cultures, and these may influence the acceptability of drug treatments. Genetic and environmental factors may lead to variations in the pharmacodynamics and pharmacokinetics of psychotropic drugs across ethnic groups. This may explain why lower doses of psychotropic drugs tend to be used for non-Caucasian patients. There is a dearth of mental health professionals and care facilities in developing countries, especially in rural areas. Epidemiological studies show that, despite this lack of services, the outcome of schizophrenia is favourable in developing countries. This suggests that cultural, genetic or environmental factors may play as much of a role in influencing outcome as access to antipsychotic treatment. Regional drug policies may influence the availability and cost of psychotropic drugs. In particular, the Indian experience, where drugs are manufactured by several local pharmaceutical firms, thus bringing their cost down, may represent a unique deregulated drug industry. However, the impending impact of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, with the strict enforcement of patent laws, will almost certainly lead to a rise in drug costs in the coming years. This may influence the choice and cost effectiveness of various drugs. The implications of these cross-cultural variations for policy and practice are the need to ensure a reliable supply of affordable psychotropic drugs in developing countries, trained healthcare professionals to use these drugs rationally, a concerted advocacy campaign to exclude drugs for severe psychiatric disorders from patent protection, and the development of psychosocial programmes to improve global outcomes.     

The Decade of the Brain Initiative and Health Care Reform: Irreconcilable Differences?

While the US initiatives in health care reform continue to be the subject of debate and have yet to become law, the free market system has already enacted a major part of health cost containment. Major pharmaceutical companies including Merck, Pfizer and SmithKline Beecham have invested in managed care organisations with, in the case of Merck, dramatic changes in corporate management reflecting the new market place for pharmaceuticals. The cost effective contribution of drugs to the total expense of health care in the US continues to be ignored as the pharmaceutical industry has been singled out for special consideration by various congressional committees. The impact on the discovery of new therapeutic entities remains uncertain although many major companies have downsized and reorganised their research operations in the past year. Despite these approaches to streamlining and cost cutting, the cost and risk of advancing compounds into the clinic remains expensive and will become even more so as the disease entities being studied reflect chronic situations with benefits only being demonstrable after many years of clinical trials. Thus, the clinical trial endpoints for a new antibiotic remain relatively straightforward as compared to those involved in assessing the efficacy of a compound for the treatment of atherosclerosis, osteoporosis or Alzheimer's Disease. This is especially true in the area of CNS drug entities where knowledge related to disease aetiology and brain function is at an early stage. Thus, there continues to be an even greater need to advance compounds into the clinic to assess efficacy and test mechanism-based disease hypotheses. This is an expensive and very high risk endeavour that may not be compatible with the changing environment in health care that is impacting the risk assessment process in drug discovery and development.     

Economics of using pharmacists as advisers to physicians in risk-sharing contracts.

An educational program designed to help physicians control the overall cost of drugs and total health care is described, along with its effectiveness at one managed health care plan. Prime Therapeutics, Inc., developed and manages an ongoing physician education program designed to help primary care physicians control drug and total health care costs. Physician education initiatives in the program are developed by using peer-reviewed literature; selections of preferred drugs are based on evidence of their safety, efficacy, uniqueness, and cost-effectiveness. For a typical educational initiative, a pharmacist meets with the physicians identified as being among the top 20% of prescribers of high-cost drugs addressed by the initiative and delivers a 20-minute presentation. One-on-one meetings with the physicians are then held quarterly to review their prescribing. Each physician is shown comparisons with the prescribing patterns of other physicians in the organization. The clinic chooses to present the clinicwide data as either blinded or nonblinded data. The program was evaluated by comparing per member per month (PMPM) total health care and drug costs for 1996 and 1997 at 12 general medicine clinics in a managed health care plan. Five clinics received no interventions, three clinics allowed the initial presentation and the quarterly face-to-face meetings, and four clinics allowed only the presentation and barred ongoing meetings. In general, the clinics with more interaction between pharmacists and physicians had lower PMPM costs for total health care and drugs than the clinics with less interaction. Pharmacists acting as advisers to primary care physicians in general medicine clinics helped lower PMPM costs for drugs and total health care.     

The status and future of pharmacoepidemiology (part 1)

The study of the effects and use of pharmaceuticals in populations, or pharmacoepidemiology, is in its formative years. The field is growing due to many factors, including access to large data resources. Current research is applied, emanating from the pharmaceutical industry and drug regulatory agencies, with limited presence in academia. Accomplishments include a growing use of many large population databases and an increased understanding and acceptance of drug risk, e.g. for agranulocytosis, which may explain the presence of certain drugs with defined risk remaining on the market. In the next decade, international consensus will be needed on acceptable methods and data standards, development of new data resources, and efforts made to assure database maintenance and quality. Further, the field must develop bases for a clear identity and scientific credibility to enable development of academic status. In the future, pharmacoepidemiology has considerable potential for applications in drug regulatory reform, drug development, risk management, pharmaceutical benefit and cost assessment, and drug utilization review, as well as for understanding drug-associated disease.     

Historical overview of generic medication policy

OBJECTIVE: To provide a historical perspective on controversies surrounding the use of generic drugs. DATA SOURCES: Articles were indexed initially using terms such as generic medications, generic drugs, multisource medications, and multisource drugs. These terms were used to search indexing services such as MEDLINE, International Pharmaceutical Abstracts, CINAHL (a database of nursing and allied health literature), Science Citation Index, Psychological Abstracts, and Wilson Indexes to Journal Articles. STUDY SELECTION: Performed by the authors, with preference given to events from 1951 to the present. DATA EXTRACTION: Not applicable. DATA SYNTHESIS: The history of generic drug use is a history of conflict from a variety of perspectives. The primary conflict is economic, in which manufacturers of brandname pharmaceuticals aggressively seek to protect their patents from a variety of groups (e.g., the federal government, managed care organizations, consumer groups) that want access to less expensive medications. Another conflict is professional, especially for the members of the pharmacy profession who view drug product selection as an important opportunity for pharmacists to use their professional judgment. The most confusing conflict is the scientific discussion of bioequivalence and product quality. The brand manufacturers suggest that not all products are bioequivalent and of the same quality. This position has been opposed by the pharmacy profession, generic drug manufacturers, health care institutions, and the Food and Drug Administration. CONCLUSION: Generic drug use has increased dramatically during the past 50 years and is an accepted part of health care. However, the economic consequences of generic drug use are sufficiently high for this activity to continue as a source of controversy in the future.     

National drug formularies: lessons from Latin America

Although pharmaceuticals comprise up to 40% of the health care budget in developing countries, the majority of the population does not have access to many of the essential drugs needed to treat prevalent diseases. This situation demands the development of a national formulary of essential drugs for the public sector. The approach used in developing countries is to select drugs of choice for the treatment of prevalent morbidities and avoid therapeutic duplication, unacceptably dangerous drugs, or drugs of unproven efficacy. Drugs are selected based on a review of the prevalent morbidities, health care worker training, patient characteristics, and efficacy/risk information resulting from scientifically sound studies. An added component to the formulary is the inclusion of concise, unbiased prescribing information for each drug selected. A number of product selection guidelines were proven to be effective in establishing and maintaining an essential drug formulary for developing countries. These guidelines include: 1. Selection of drugs with proven efficacy and acceptable risk; 2. Selection of minimum number of drugs needed to treat the prevalent diseases; 3. Inclusion of new products only if they are found to have distinct advantages over products currently in use; 4. Inclusion of combination products only when they provide true benefit over single ingredients; 5. Selection of drugs with clear "drug of choice" indications for prevalent diseases; 6. Evaluation of the administrative and cost impact of products; and 7. Selection of drugs with established high quality.     

The increasingly complex fourth hurdle for pharmaceuticals

There are three known criteria that underlie drug reimbursement decisions: therapeutic value, cost effectiveness and burden of disease. However, evidence from recent reimbursement decisions in several jurisdictions points to residual unexplained variables, one of which may be budget impact. An economic rationale for carrying out budget impact analyses is opportunity cost, measured by the economic benefits foregone by using resources in one way rather than another. Under certain assumptions, cost-effectiveness analysis accounts for opportunity cost while conveying to the decision maker the price of maximising health gains, subject to a budget constraint. However, the underlying assumptions are implausible, particularly in the context of pharmaceutical care. Although drugs that are cost effective may lead to unambiguous health gains among patient groups for whom the drugs are indicated, the opportunity costs could conceivably lead to a reduction in aggregate health gains, or failure to meet different kinds of equity considerations. The pertinent policy question is where to find the resources to fund new innovations, such as cost-effective pharmaceuticals, or drugs targeting severe diseases. It may be a matter of redeployment of resources across healthcare sectors, cancelling the funding of (older) pharmaceuticals that are less cost effective, or delisting drugs that are cost effective but target less burdensome conditions.     

Projecting future drug expenditures--2002.

Drug-cost projections for 2002 and factors likely to influence drug costs are discussed. The United States continues to face the challenge of increased growth in health expenditures, and pharmaceutical expenditures continue to increase significantly faster than the growth in total health care expenditures. These increases can be largely attributed to a combination of general inflation, an increase in the average age of the U.S. population, and the increased use of new technologies. On the basis of price inflation and nonprice inflationary factors, including increases in volume, shifts in patient and therapeutic intensity, and the expected approval of new drugs, we forecast a 15.5% increase in drug expenditures in 2002 for hospitals and clinics and an 18.5% increase for ambulatory care settings. One of the most substantial contributors to the rise in pharmaceutical expenditures over the past decade is the successful introduction and rapid diffusion of new pharmaceuticals. Data about many new drugs on the horizon are provided. One agent likely to have the highest impact on hospitals in the next year is drotrecogin alfa for the treatment of sepsis. The cost of this agent is expected to range from $3,000 to $10,000 per patient per course of therapy. Other factors influencing medication costs, including generic medications, legislative initiatives, and the recent acts of terrorism committed against the United States, are also discussed. Technological, demographic, and market-based changes, and possibly public policy changes, will have a dramatic influence on pharmaceutical expenditures in the coming year. An understanding of what is driving the changes is critical to the effective management of these resources.     

Why has the use of health economic evaluation in Japan lagged behind that in other developed countries?

The aging population and the increasing availability of new medical technologies, particularly pharmaceuticals, have led to growing pressure on governments worldwide to contain healthcare costs. Increasingly, economic evaluation is used to aid decisions on the reimbursement and formulary access of drugs, and pharmaceutical companies are often required to demonstrate the cost effectiveness of their products. Canada and the UK are examples of countries that have successfully incorporated mandatory requirements for economic evaluations into the decision-making process in healthcare. Japan faces cost-containment issues for its health and welfare system similar to those seen elsewhere in the world. Despite this, economic assessments are not currently used in the allocation of drug budgets. Reasons why economic evaluations for healthcare have not yet been used routinely in Japan include governmental approaches to healthcare cost containment, the pricing of pharmaceuticals, the organisation of the healthcare system, attitudes of the medical profession, and limited knowledge and expertise. However, small but encouraging steps are now being taken towards the introduction of economic evaluations in Japanese medicine.