Payer Trend Watch

Issue
No. 2

Payers Increasing Utilization Management Strategies to Control Drug Costs

Today more than ever, payers are facing more challenges resulting from the rapidly evolving dynamics of the healthcare marketplace. Federal and state healthcare reforms are continually driving overall cost concerns. Health plan consolidations and the expansion of health insurance exchanges and Managed Medicaid means more lives will be covered by fewer managed care organizations. Price increases for branded agents, higher generic drug costs, and increased use of specialty agents have necessitated payers to narrow their networks, institute greater restrictions, and employ specialty pharmacy providers to control drug costs and utilization.

According to the 2014 HMO-PPO Digest, more payers are using drug utilization review (DUR) and prior authorization (PA) to influence physician prescribing patterns. Health maintenance organizations (HMOs) still rely mainly on PAs, but DUR has been increasing and is now used by nearly 94% of plans. Among PPOs, the PA and DUR trends have risen even more dramatically, which can be explained by the fact that while HMOs continue to manage their own pharmacy benefits, PPOs are increasingly dependent on pharmacy benefit managers (PBMs) to regulate their member drug utilization and costs.

While small molecule drugs have long been managed with PA's and DUR's, utilization of an increasing number of large molecule drugs are also being reviewed in this manner. The percentage of commercial plans requiring a PA for 6 categories of provider-administered therapies—rheumatoid arthritis/psoriasis/Crohn's disease (RA/PS/CD), intravenous immunoglobulin (IVIG), respiratory syncytial virus (RSV), pulmonary arterial hypertension (PAH), multiple sclerosis (MS), and oncology—has increased considerably between 2007 and 2014 (see Figure).

Figure. Percentage of plans implementing a PA for 6 specialty pharmacy categories.

Health plans also support the use of an electronic PA (ePA) to control physician prescribing of specialty pharmacy drugs—with 36% currently implementing an ePA under their pharmacy benefit and 21% using an ePA under their medical benefit. This trend is expected to grow, creating another challenge that will require unique solutions to maintain share of voice in a growing, but competitive, market. The percentage of plans indicating they will employ an ePA over the next 12 months was 33% and 39% for specialty drugs covered under the pharmacy and medical benefits, respectively.

Overall, restrictions and utilization reviews need to be managed and considered carefully.

As plans look to control drug utilization and costs strategic insight and planning will be required in order for pharma companies to demonstrate the value of their current and future product portfolios.

Strategic Healthcare Alliance (SHA) has experience in a wide range of disease states and with products throughout their lifecycle. SHA provides a proven track record of driving collaboration between disparate groups, understanding stakeholder perspectives and serving as a conduit between parties. Our long history and deep experience across payer channels allows us to keep pace with evolving dynamics and tap into decision-maker perspectives, thereby allowing us to develop quality, informational programs that are truly value added instead of value expected.

Contact SHA today for more information and find out how we can help you drive market access and maximize reimbursement for your product.