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Hold middlemen's feet to the fire to cauterize specialty drug spending

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CHICAGO — With no end in sight to the rise in specialty drug prices, experts urge employers to be creative in managing those costs — from building custom networks to holding pharmacy benefit managers accountable for treatment outcomes.

Drugmakers have received the brunt of public outrage for the high prices of some specialty drugs, which require special handling and are used to treat diseases such as cancer, hepatitis C and rheumatoid arthritis. Many specialty drugs are pricey: Epclusa, Gilead Sciences Inc.'s hepatitis C drug that the U.S. Food and Drug Administration approved last week, comes to market at about $75,000 for a single course of treatment.

Specialty drug spending rose 17.8% in 2015, according to PBM Express Scripts Holding Co., and spending is expected to continue increasing with several oncology drugs in the FDA pipeline.

But experts say employers should be aware of the many middlemen, from PBMs to retailers, that profit from the drug.

“When it comes to the distribution of drugs, every time that drug passes through another hand, there's a margin that's captured by whoever is handling it. Whether it's the wholesaler, retailer or a doctor, everybody's getting a piece,” said Alex Jung, Chicago-based principal of global strategy at Ernst & Young L.L.P.

PBMs, she said, happen to be “one of the biggest expenses” in marking up the cost of the drug.

But employers aren't doing enough to hold middlemen accountable for the costs they add to the prescription drug bill, and few employers have custom pharmacy networks and direct contracts with health care providers to ensure they pay the lowest costs but get the best outcomes for their employees, she said last week during the Midwest Business Group on Health's Employer Forum on Pharmacy Benefits and Specialty Drugs in Chicago.

Employers need to understand what diseases are prevalent among their employees and “construct a network that meets your needs by looking at a provider that serves those needs from a therapeutic perspective,” she said. “You can't just say I'm going to follow whatever Boeing (Co.) does or whatever United Airlines (Inc.) does, because ... they're not creating a customized specific benefit plan that meets the needs of the specific therapeutic diseases that are prevalent in your population.”

But most employers don't have the expertise to navigate the prescription drug industry or devise custom pharmacy networks. And only employers with thousands of employees have the power to form direct contracts, experts say.

Additionally, the lack of drug industry transparency makes it nearly impossible to know which middlemen are driving “unwarranted margins” along the supply chain, Michael Thompson, Washington-based president and CEO of the National Business Coalition on Health, said in an interview at the forum.

“If we have full transparency, we will easily negotiate (the margins) out. But the problem is, it's a shell game,” Mr. Thompson said.

Employer strategies

Still, there are strategies employers can use to avoid wasteful specialty drug spending.

For one, employers should have PBMs and other providers monitor patient medication adherence to ensure good treatment outcomes, Chris Compisi, general manager of national accounts for U.S. managed health care at Abbvie Inc. in North Chicago, Illinois, said during a panel discussion.

“Make that part of your (request for proposal) process, to demand that (vendors) capture the outcome of the associated adherence or the associated result of the investment that you have in a high-cost specialty medication,” he said.

Employers also can incentivize employees to take their medications as prescribed, said Sandra Morris, former senior manager of U.S. benefits design at Procter & Gamble Co. and now a consultant at her firm About Quality Benefits Design L.L.C. in Cincinnati

“I think there is going to be a lot more movement by the payers for the patients to have skin in the game,” Ms. Morris said during a panel discussion.

Utilization management, site-of-care management and narrowing pharmacy networks are other cost-cutting strategies, said Atheer Kaddis, executive vice president of sales and strategic alignment at specialty pharmacy Diplomat Pharmacy Inc. in Flint, Michigan.

Among the most effective strategies, according to Diplomat data, is managing where employees have their medications administered — a tactic that can lead to savings of up to 30% on specific drugs — and limiting prescriptions for high-cost drugs to 15-day supplies instead of 30 days, which can lead to savings of up to 20% on targeted medications, Mr. Kaddis said.