Three of the Biggest Opportunities Advisors Miss When Managing Specialty Drugs

Three of the Biggest Opportunities Advisors Miss When Managing Specialty Drugs

The latest employer survey shows that specialty drug costs are the top concern of employers in managing their medical benefit (Source: MBGH). This is no surprise given the high cost of specialty medications. In 2022, the average cost of a new specialty medication was more than $200,000 per year, which is more than 3 times the average worker salary in the U.S.

Benefit brokers and consultants play a critical role in advising plan sponsors on the best management practices for specialty drugs, yet many advisors find the uniqueness and complexity of specialty drugs a challenge to master and to stay ahead of on a day-to-day basis. Against this backdrop, we highlighted the top three opportunities that we often see advisors overlook when managing specialty drugs.

Clinical Management Valuation: The first commonly missed opportunity is not monitoring or valuing prior authorization and other clinical management services and savings. Virtually every advisor can tell you the rebates and discounts in a PBM deal, but these discounts and rebates simply do not matter if the drug is not clinically appropriate to begin with. Research shows that inappropriate use of specialty drugs due to off-label prescribing, etc., represents 30% or more of specialty prescriptions. Furthermore, our experience has been that effective clinical management can represent savings of 15% and more on overall specialty drug spend. Given this, understanding how to assess the clinical performance of a PBM and correspondingly, how to quantify the clinical savings, is critical to the overall economics of a deal. Perhaps the best indicator of a PBM’s clinical performance is the prior authorization approval rate. PBMs who are approving 90 percent or more of the cases are essentially rubber stamping the PA cases, often to their inherent conflicts of interests. In addition, to understand the true savings, advisors should require PBMs to guarantee their clinical savings and have a robust and validated measurement methodology, a topic that cannot fully be covered here.

Managing PBM bids for traditional drugs: The second commonly missed opportunity is the bundling of RFPs for traditional and specialty drugs. When advisors bundle the RFPs, they play into the PBMs protection of the status quo model. Breaking out the economics for traditional and specialty drugs allows plan sponsors to pick the best-in-class option; and yes, PBMs will provide their best deal on traditional drugs as a stand-alone when they believe that the plan sponsor is serious about independent bids. When considering why an employer might want to use a different vendor to manage specialty drugs, remember that specialty drugs represent only 1-2% of members but more than 50% of costs. Equally important, specialty drugs require a different clinical, distribution, and financing model for optimal management. Our experience has been that independent management of specialty drugs using an aligned and transparent specialty focused PBM can provide savings that range from 30% to more than 50% and that those savings are sustainable over time.

Medical specialty drug management: The third commonly missed opportunity for benefit brokers and consultants is not having a strategy to manage medical specialty drugs. More than 30% of the specialty drug spend sits under the medical benefit, where it mostly goes unmeasured and unmanaged. Furthermore, these drugs are typically those that represent the great risk for a stop-loss claim. Most benefit advisors and even consultants who specialize in prescription drugs spend 99% of their time focused on the pharmacy benefit due to knowledge and comfort. Management of the non-oncology drugs under medical consistently delivers a 50% overall savings and oncology management savings vary based on the current carrier programs and other factors. The savings percentage is high because the medical benefit remains the “wild, wild west” in terms of pricing and clinical management. Reducing the unnecessary variability in pricing and establishing a robust clinical management program is a much-needed service that most employers are lacking.