Specialty tier falls out of favor because of access issues

January 1, 2012

Spending growth for specialty drugs rose 19.6% between 2009 and 2010, while growth of traditional drugs decreased by 1.4%, according to Express Scripts' 2010 Drug Specialty Report. Payers are struggling to appropriately manage high-cost drugs while ensuring their members get the care they need. One strategy is introducing a specialty drug tier to the formulary, which raises a red flag on access issues.

Spending growth for specialty drugs rose 19.6% between 2009 and 2010, while growth of traditional drugs decreased by 1.4%, according to Express Scripts' 2010 Drug Specialty Report. Payers are struggling to appropriately manage high-cost drugs while ensuring their members get the care they need. One strategy is introducing a specialty drug tier to the formulary, which raises a red flag on access issues.

In 2010, New York became the first state to pass legislation prohibiting insurers from creating specialty drug tiers. A number of other states have either proposed legislation or are planning to do so to protect patients on specialty drugs.

"The majority of the payers we work with do not have a fourth or specialty tier," says Julie Kulawiec, senior director of specialty pharmacy for Express Scripts, a pharmacy benefits manager (PBM) based in St. Louis.

"Health plans must find ways to balance serving the needs of the 2% of Americans who use specialty drugs-these medications are expected to eat up 40% of total drug spend by 2014-while still preserving their ability to provide a pharmacy benefit for all members in the future and not risking the end of specialty coverage," Kulawiec says.

Bill Martin, group vice president of business development for Accredo Health Group, a specialty pharmacy based in Memphis, considers the specialty pharmacy tier to also be a tool-1 for managing the total cost of care and in turn, ensuring broader coverage at affordable prices to all members.

He says responsibility for establishing a fourth tier falls into the laps of payers who must perform a delicate balancing act between what the member pays and ensuring that everyone's needs are met.

"There are ways to responsibly manage the high cost of specialty drugs by not denying care, but rather by encouraging the use of less costly alternatives," Martin says.

It comes down to providing the right drugs to the right patients, he says, referring to drugs that might be costly but perform effectively for certain patients. Savings also are accrued by avoiding future expensive complications.

Payers typically offer manufacturers a secure position on formulary in exchange for rebates.

"Our members are focused on how to sustain coverage and ensure that specialty drugs are safe, affordable, and accessible," says Susan Pisano, vice president of communications for America's Health Insurance Plans in Washington, D.C. "This is a daunting problem because of the underlying pressures due to very high costs for these drugs and unsustainable increases year to year. We hear from both employers and individual consumers that they just can't handle any more in premiums."

If the amounts being charged by manufacturers continue to rise, it will increase premiums and could increase the ranks of the uninsured, she says.

MEDICARE SPECIALTY TIER

In Medicare, 100% of Part D enrollees in Medicare Advantage-Prescription Drug Plans (MA-PDPs) and 94% in Medicare stand-alone Prescription Drug Plans (PDPs) are in plans with a specialty tier, reports the Kaiser Family Foundation (KFF). The median coinsurance for specialty drugs under PDPs-those medications that cost at least $600 per month-increased from 25% in 2006 to 30%, while MA-PDPs showed a change of 25% to 33%. About half of PDPs charge a 33% coinsurance, while more than three-fourths of MA-PDPs do.

This data contrast significantly with the commercial marketplace, in which only 14% of covered workers are enrolled in plans with 4 or more tiers. Thirty-six percent of employees face a copayment for fourth tier drugs-averaging $91-while 24% are required to pay coinsurance, which averages 29%, according to KFF's Employer Health Benefits 2011 Annual Survey.

Elizabeth Hargrave, a senior research scientist for NORC, a non-profit research organization at the University of Chicago, follows trends in Medicare.

"Part D enrollees want more predictability in the cost of drugs. With or without a specialty tier, we see more differentiation between non-preferred and preferred copays in the Part D market than in employer-sponsored insurance," she says. "Plans need to choose how much of a burden they want individual members to carry for high-cost drugs compared to stretching costs across an entire insurance pool."

As 1 solution, she recommends more competition among expensive drugs to bring down costs.

Dan Mendelson, CEO and founder of Avalere Health, a strategic consulting firm based in Washington, D.C., says that specialty tiering has become a standard in Medicare Part D.

"The fact is, plans are compelled from a business perspective to include a specialty tier because it's the standard," Mendelson says. "Diverging from this practice would result in extreme adverse selection."

He outlines 3 fundamental problems with specialty tiering:

"To eliminate specialty tiers, CMS could start by requiring plans to identify beneficiaries who don't adhere to their medications on the fourth tier," Mendelson says, "find out why there is non-adherence and provide counseling on options."

Gary Puckrein, president and CEO of the National Minority Quality Forum, believes that specialty tiers are untenable and compromise access to quality care.

"Insurers fail to consider varying financial barriers in accessing drugs, the nature and severity of the condition, and dosing requirements that could influence the cost of treatment," he says.

He is an advocate of community rating, spreading the risk over an entire population, rather than facing more costs at the point-of-care. Specialty tiers cut into the risk-pooling effects of insurance by shifting most of the cost of expensive medical treatments to members, he says.

"Policymakers and insurers should be incentivizing investment in new, more efficient treatments, not simply seeking ways to balance their books in the short term by putting the health and economic security of American workers at risk," Puckrein says.

Perry Cohen, CEO of The Pharmacy Group, a healthcare consulting company, believes specialty tiers aren't the ideal solution in today's evolving market.

"We're taking old solutions to apply to new problems as we move to utilization management and concerns over managing more than just traditional drugs," he says. "It's no longer only about prescription drugs vs. over-the-counter medications and brands battling it out with generics."

He believes plans have stretched the pharmacy benefit too far and encourages payers to develop coverage policies for specialty drugs, and determine how these drugs will be distributed, administered, at what site and by whom.