Impossible Task

Managing the costs of specialty pharmaceuticals is a perpetual task for specialty pharmacists, as the cost of those drugs continue to rise and insurers cover fewer medications. Plus, retroactive direct and indirect remuneration (DIR) fees are cutting into pharmacies’ profitability.

In 2015, specialty drug spending reached $121 billion, according to the IMS Institute for Healthcare Informatics. In addition, specialty drugs are projected to represent 44 percent of the total U.S. drug spend by 2020.

Spending on specialty medicines has nearly doubled in the past five years, contributing more than two-thirds of overall medicine spending growth between 2010 and 2015. “Increased specialty spending was driven primarily by treatments for hepatitis, autoimmune diseases and oncology, which accounted for $19.3 billion in incremental spending,” according to the IMS Institute.

The soaring costs of certain medications, such as Mylan Pharmaceutical’s EpiPen and Turing Pharmaceuticals’ Daraprim, which realized a 5,000 percent increase, have caught the attention of both lawmakers and the media. Democratic presidential candidate Hillary Rodham Clinton has laid out a plan to lower the costs of pharmaceuticals, and legislators held drug pricing reform hearings last year.

Burt Zweigenhaft, NASP“Every day, there is headline about some kind of bad actor on the pharma side, such as a drug price increasing $500 overnight. It’s bad for the whole industry. We all get smeared by the same storyline,” said Burt Zweigenhaft, president of the National Association of Specialty Pharmacy (NASP). However, drug distribution in specialty pharmacy is complex and “pharmacies don’t set pricing in the marketplace”, Zweigenhaft said.

Meanwhile, pharmacy benefit managers (PBMs) are covering fewer specialty drugs. “Five years ago, I would service seven out of every 10 scripts received from doctors, because we would be in network. Today, it is fewer than five,” said Mike Agostino, vice president of pharmacy innovation at West Des Moines, Iowa-based Hy-Vee, which operates 240 stores. “What has changed is an incredible amount of consolidation and the rampant expansion of vertically-integrated healthcare delivery systems that have taken away any type of consumerism in healthcare. Patient choice is limited.”

In addition, PBMs such as Express Scripts and CVS Health are determined to shave costs and are excluding high-cost specialty drugs from their 2017 formularies.

CVS Health said it is removing 10 medications with “hyperinflationary” costs and 35 drugs overall from its

, and set forth a plan to control the costs of hepatitis C drugs and other medications.

“We anticipate significant savings for many clients and members, as the removal of higher cost products will enable near-term value, with additional future opportunities for savings resulting from market competition as more new products are launched,” CVS Health said.

Among the hyperinflationary drugs that will be removed by CVS in 2017 are the hepatitis C medications Daklinza, Olysio, Technivie and Zepatier.

Biosimilar and follow-on biologics will be included as a key component of CVS Health’s 2017 standard formulary strategy, replacing higher cost drugs within the categories. To that end, the biosimilar Zarxio will replace Neupogen to treat infections after cancer treatments and Basaglar, approved as a biosimilar in Europe, will replace the insulin Lantus for diabetes.

Meanwhile, Express Scripts is excluding 85 drugs from its 2017 formulary, including Sovaldi and Zepatier for hepatitis C and the hematology medications Aranesp, Epogen and Mircera. While hepatitis C medications Harvoni and Epclusa (Gilead Sciences) are on Express Scripts’ 2016 excluded medications list, that may change in 2017, according to the PBM.

The current healthcare system and rising drug costs makes managing specialty pharmaceuticals’ expense “mostly an impossible task in traditional independent pharmacy operations,” said Jim Smeeding, RPh, founder of Dallas, Texas-based healthcare consulting firm Edjudicate. “However, integrated delivery systems and hospital-based specialty [pharmacies] may have an advantage through either the use of 340B opportunities or more careful management due to the proximity of the physicians and the pharmacy’s ability to work closely together.”

Increasing pharmacies’ purchasing power for the largest players, such as direct purchase without wholesaler mark up, is an effective way to squeeze more value out of the system, Smeeding said. “Certainly, PBMs are doing this with rebates, performance incentives, etc.”

While the push for value-based contracts and pricing can help manage costs, “in most cases, unless the government is willing to allow competitive contracting and/or change the patent opportunities, it will be up to the private sector to continue to try to ratchet down and restrict utilization,” Smeeding said. “Specialty pharmacy is the critical hub for information collection and sharing between the manufacturer, the payer and the medical provider, so specialty pharmacy truly is the best advocate for patients and positive outcomes.  It is a great opportunity and responsibility to be key in this process,” he said.

DIR fees top specialty pharmacy challenge

However, in addition to skyrocketing specialty drug costs, specialty pharmacies’ profitability is being impacted by direct and indirect remuneration (DIR) fees that insurers are retroactively charging pharmacies after Medicare Part D prescriptions are filled.

As a result, NASP and specialty pharmacies such as Diplomat, Accredo, CVS Pharmacy and others are spending much more time educating officials with the Centers for Medicare & Medicaid Services (CMS) and legislators on specialty pharmacies’ role in the healthcare system as well as the often inadequate reimbursement for specialty pharmacies ‘services in relation to their training in specific disease states and medications.

“We need to be recognized for the specialty pharmacy training that is required to keep someone on their specialty meds,” Zweigenhaft said. “This includes connectivity with physicians and other providers, as well as the inordinate amount of knowledge on some specialty drugs. We need to know more about genomics, disease states and the emerging pipeline of drugs.”

According to Zweigenhaft, specialty pharmacists “struggle with a reimbursement system today that doesn’t recognize specialty pharmacits’ training and onboarding of these patients.” “There are some specialty tiers, but they don’t have specialty pharmacy reimbursement,” he said.

“We are at a critical phase in our industry. Specialty pharmacies are ready and performing every single day,” Agostino agreed. However, specialty pharmacies’ “performance does not make up a siginficant portion of how we obtain our profits.”

Specialty pharmacies typically receive a single-digit percentage reimbursement of the script, which is “what we are sustaining ourselves with,” Agostino said. “If you are dispensing a $30,000 hepatitis C product and 5 percent is being taken back, you lose your profit.”

Until this year, most specialty pharmacies have simply absorbed reimbursement clawback fees. “Now we are trying to get in front of MedPAC and CMS and help them understand the impact,” Zweigenhaft said.

Specialty pharmacists can help battle DIR fees – and promote other issues important to the industry – during NASP’s visits to legislators, Agostino said. “If you’re passionate about our industry and passionate about taking care of patients who are very sick, invest your time in staying engaged.”