News & Insights

Challenges with Ineffective PBM Clinical Management for Specialty Drugs

February 2021

Challenges and Opportunities in Building a Sustainable Specialty Drug Benefit:
Ineffective Clinical Management

Nearly every employer is aware that skyrocketing specialty drug costs, if left unchecked, will threaten the financial viability of the entire health care benefit.1,2 However, most do not know that pharmacy benefit managers (PBMs), the organizations traditionally trusted by employers to make drug benefit decisions on their behalf,3 can be a major part of the problem of rising drug costs.4 In this paper, we summarize one of the three key deficiencies of the traditional employer-PBM business model. We explain why it has become dysfunctional, especially for specialty drug management, and why public attention to the problem has not translated into better service for employers. For this deficiency, we present alternative ideals—best practices to help employers achieve a drug benefit that is sensible, sustainable, and provides specialty drugs for patients who need them.

Traditional Business Model Deficiency: Ineffective Clinical Management
Ideal Business Model: Value-Based Coverage and Oversight

Although the term “value-based” is sometimes overused, it is best understood as a question of clinical benefit received for the money spent. Our evaluations of paid claims commonly reveal wasted expenditures on billing errors, duplication, or uses that were clinically inappropriate or even potentially harmful to the patient. These clinically inappropriate uses, which have been extensively documented in published research,27-29 stem from three main sources.

Misaligned or Misinformed Coverage

Coverage policies may be misaligned, as noted previously, to reflect rebate arrangements rather than cost-effectiveness. With few exceptions,30 PBMs have been generally slow to adopt biosimilar drugs, or they include both the biosimilar and the more costly reference (original) drug on their formularies.31-36 Similarly, at least one large PBM that has had a multimillion dollar rebate arrangement37 for Duexis, a combination of ibuprofen and famotidine costing about $2,600 per prescription, covers the branded combination although its individual ingredients would cost less than $20 if purchased as generics.38-40 So, even if 100% of rebates on high-cost drugs are passed through to the employer, the rebates may not make up for the added costs of a poor product choice.

Formulary management is also often compromised by over-reliance on U.S. Food and Drug Administration (FDA) approval as sufficient evidence for coverage. This strategy is ineffective in the face of off-label uses and pharmaceutical manufacturer influence on the prescribing process. For example, top prescribers of Acthar gel, a pediatric antiseizure drug costing more than $49,000 per claim, received a total of more than $2.2 million in payments from the drug’s manufacturer in 2015.41 Expenditures on adult uses increased to $636 million in 2016,42 despite little evidence of effectiveness in this age group.43 Cancer drugs, which are among the highest-cost specialty drugs, may be granted approval with limited evidence of effectiveness under the FDA’s “accelerated approval” process. In one study of accelerated-approval cancer drugs, only 14% were later found to improve survival.44

Finally, most formularies do not take drug cost-effectiveness into account. QALY, or “quality-adjusted life year,” is a standard measure that accounts for improvements in length and quality of life that result from a treatment. A drug is generally considered high-value if the cost per QALY is <$50,000,45 and a reasonable value-based range of $100,000-$150,000 is often given. Many specialty drugs have cost-effectiveness ratios that lie far outside of these thresholds.  For example, at current wholesale U.S. prices, drugs commonly used to treat cystic fibrosis have a cost per QALY ranging from $1.2 million to $1.5 million, and price discounts of 72%-78% would be required to achieve a $150,000 cost per QALY.46 Despite the lack of cost-effectiveness, PBMs routinely cover these medications without modifications to the reimbursement or clinical review of these drugs.

Weak Prior Authorization

All these opportunities for specialty drug use that is clinically inappropriate or unnecessarily expensive have created a growing need for rigorous prior authorization (PA). Unfortunately, though, most PA processes in the PBM industry today are ineffective, and published evaluations of these programs are rare:

  • Often, PBMs rely on physician office attestations that a patient meets clinical criteria, rather than taking the extra necessary steps of reviewing the medical record and following up with the provider to obtain information necessary for in-depth clinical review. Without that necessary step, physician offices may use the PA form as a “decoder ring” that tells them how to “pass the PA test.”
  • With few exceptions, PBMs generally do not conduct PA on a regular schedule tied to the clinical features of the drug. For example, if a drug should improve a patient’s ability to walk, the PBM should require periodic testing of walking ability, with medical record documentation of the results.47
  • Most employer-PBM contracts fail to hold the PBM accountable for PA failures.

Not surprisingly, PBM PA approval rates average about 90%, perhaps partly because PBM-owned specialty pharmacies make just as much money from filling inappropriate prescriptions as they do from filling appropriate ones. Our reviews of claims paid after undergoing PA review reveal numerous instances of uses that should not have been covered, such as Acthar Gel prescribed off-label for an adult who had not tried an FDA-approved drug first ($72,472 per dose) and Nutropin growth hormone prescribed for three brothers who were of normal height ($27,000 per month). Yet, these clinically inappropriate uses were covered by the PBM—and the employer paid for them.

Failure to Manage the Highest-Cost Cases

Traditional PBM programs, which were developed in the 1980s to provide efficient claims processing and price discounts,48 are ill-equipped to manage the complex requirements of patients treated with specialty drugs. Effective management requires in-depth knowledge of weight-based dosing regimens and “loading” doses, genetic testing, appropriate alternative sites of care and drugs, ongoing use of advanced decision support technology to identify cost-savings opportunities, and a willingness to intervene with patients and their providers when utilization is inappropriate. Getting a deep price discount on a medically unnecessary drug is not an effective management strategy.

Summary: What Does This Problem Mean for Employers?

  • “Value-based” benefits deliver good clinical value for the money spent. Use of a drug that is clinically inappropriate, potentially harmful, ineffective, or unnecessarily costly is never value-based—even if the PBM obtains a deep price discount on it.
  • In an era of high costs, overprescribing, and safety concerns, PA should be robust, but commonly, it is lax. Adding to the problem, PBM contracts typically do not give employers the audit rights they need to determine if clinical decision rules are being followed. The result is a great deal of wasted expense, as well as potential safety problems for patients.
  • Effective high-cost case management includes regular use of advanced decision support technology to identify savings opportunities, in-depth clinical review, collaboration with care providers, and ongoing monitoring of the patient’s response to therapy. Without these processes, waste and coverage of clinically inappropriate uses are inevitable.

Action: What Should the Ideal PBM Arrangement Include?

  1. Look for evidence that the PBM relies on lowest net cost or cost-effectiveness, not “rebate chasing,” in choosing formulary placements. Want a quick check? If the PBM covers Duexis, Pennsaid, or Vimovo—all very high-cost branded combinations of low-cost generics—you should consider a different PBM.
  2. The PBM should provide regular, drug-level reporting of the outcomes of PA, especially whether PA was given and whether the patient’s medical record indicated the decision was warranted.
  3. The contract should give the employer the right to conduct periodic audits to ensure clinical policies were followed, and it should provide for refunds to the employer for errors made in the PA process.

The Bottom Line

Contrary to the assertions of some large PBMs, successful management of the prescription drug benefit today demands a lot more than just being big enough to negotiate high-volume price discounts. “Value-based” benefits—which deliver clinical value for the money spent—are achievable with a PBM that has the financial interest, technological and clinical capability, and willingness to engage with patients and providers to ensure appropriate drug use.



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