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What’s hiding in your specialty drug claim costs?

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The mystery is in outpatient specialty pharmacy claims in your medical plan.

Specialty pharmacy refers to distribution channels designed to handle specialty drugs — pharmaceutical therapies that are high cost, high complexity and/or high touch. High touch refers to higher degree of complexity in terms of distribution, administration, or patient management which drives up the cost of the drugs.

Specialty pharmacy has been the big buzz for over 15 years. We have witnessed rapid growth of specialty drug costs under the pharmacy benefit from 10 to 20 to 30 percent of total pharmacy plan costs. For some plan sponsors, growth has topped 50%, which will likely be the norm by 2020. Some employer groups have already exceeded that projected spend with no clear strategy in place to control those costs.

Not just pharmacy plans – medical plans too

While most have been focused on specialty drug cost and utilization trends under the pharmacy benefit, the specialty pharmacy “beast” has been growing under the medical benefit, too. Some of the most expensive drugs coming to market will be hiding and covered under the medical benefit.

We all, of course, expect new, cutting-edge medicines to continue to come to market and recognize they will have high price tags. But, imagine paying three, four or even five times more than you should for a specialty medication under your medical plan. Well, it’s happening!

Depends on where you get it

Specialty medication claims have long been paid out through the medical benefit – most notably those for cancer therapies. There are many others, e.g. Remicade, which are also covered under the medical plan. Outpatient medical benefit specialty drugs may include those with more complicated administration requirements (e.g., IV infusions) or complex treatment protocols, and not the self-administered and orally administered drugs we typically find under the pharmacy benefit. These drugs are reimbursed after a health care provider – physician office, home health provider or outpatient hospital facility – submits a claim.

Our analyses of specialty pharmacy claims under the medical plan exposed a shocking result. Like the price variability we see with tests like MRI’s, the site of service dictates what is paid. MRI’s can range from $300 to $3,000, depending on where the patient receives the service. We see significant variances in how much health care providers are reimbursed for the same quantity of the same amount of the same drug. The difference, again, is the site of service.

As you can see in the examples below, these variances can unnecessarily cost you hundreds of thousands of dollars.

Drug Care Provider A Care Provider B
Remicade 500 mg show treatment condition $4,372/dose

(outpatient hospital)

$12,567/dose

(outpatient hospital)

Lemtrada 12 mg show treatment condition $22,500/dose

(physician’s office)

$110,400/dose

(home health provider)

Sad to say, we have consistently found examples like these for many clients.

Intervention

We recommend that employers do some sleuthing to identify where there are gaps in reimbursement for medical specialty drug claims. Our experience has shown that insurance carriers are not actively mining claims to prevent these high reimbursements to providers. Instead, the cost is passed through to you, the employer.

The burden of identifying these high-cost reimbursements rests with employers, who need to undertake a cost assessment of their outpatient specialty drug claims under their medical plans to uncover these egregious claims.

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