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Report: U.S. Will Waste $9 Billion on Non-Pharmacy Specialty Medications in 2015

Cost-control tools of pharmacy benefit should be applied to medical benefit, experts say

Next year, U.S. health plan sponsors are projected to spend $9.07 billion on specialty medication services that provide no additional value, according to a new analysis released by Express Scripts. This excess spending could be avoided if payers applied cost-saving techniques from the pharmacy benefit on medications that are administered through the medical benefit, the group says.

Specialty medications treat complex, chronic conditions, and many of these medications are administered in a hospital or outpatient setting. Nearly half of all specialty medications are currently billed through the medical benefit, which lacks the visibility and cost control tools of the pharmacy benefit. The new report finds that inefficient U.S. spending on specialty medications in the medical benefit led to $4.87 billion of waste in 2011, and this excess spending is expected to reach $9.07 billion in 2015.

Researchers studied two large national databases of paid medical claims to establish the industry’s first comprehensive analysis of spending on specialty drugs outside the pharmacy benefit.

“As the cost of specialty drugs continues to rise, payers will need to take action today to prevent unsustainable spending in the future,” said Warren Davis, vice president of product management for Accredo Health Group. “Applying the cost-control techniques available to payers in the pharmacy benefit to the medical benefit has been clearly shown to reduce or eliminate this waste.”

The data showed that plans that implement medical benefit management services have, on average, saved 10% to 15% on their specialty spending.

According to the report, an effective medical benefit management program consists of three key components:

  • Utilization Management: Specialty drugs billed in the medical benefit lack clinical policies applied to drugs dispensed in the pharmacy benefit, the report says. Between 15% and 20% of drug requests billed through the medical benefit do not meet evidence-based treatment guidelines. Closing this gap can help save $1.3 billion annually and ensure that patients are receiving clinically appropriate therapy.
  • Site-of-Care Management: Costs for specialty medications billed under the medical benefit vary by site of care, the report notes. For instance, drugs administered in a hospital or an outpatient setting are often significantly more expensive than at-home care. Site-of-care programs redirect patients and medications to the most clinically appropriate and lowest-cost channel and could save up to $1.7 billion a year.
  • Reimbursement Management: According to the report, having robust reimbursement management ensures that claims are paid accurately at the contracted rate and improves rebate opportunities. Claims management tools could save payers $1.9 billion annually. These programs can also greatly improve the data available for health plan analysis.

“The tools and techniques that are part of a comprehensive medical benefit management program have proven effective in keeping traditional drug costs at or below the rate of consumer inflation,” Davis said. “These techniques have not yet been widely applied to the medical benefit, and this analysis shows the price tag of failing to do so in the future.”

Source: Express Scripts; August 5, 2014.

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