For self-insured plan sponsors, specialty drugs represent 33-50% of total pharmacy spend but only account for 1% of total prescription claims. These medications usually require special handling, administration, inventory management, patient monitoring, and support and typically come with a higher cost than traditional drugs.
Specialty drugs are covered by either the medical or pharmacy channel of a benefit plan, which causes clinical and cost containment challenges for plan sponsors.
In 2020, reports showed that 45% of specialty drugs were covered under the medical benefit, while the remaining 55% were covered under the pharmacy benefit.
In 2019, 60% of the 54 new specialty drugs approved by the FDA were covered by the medical channel, including seven biosimilars.
Medical benefit drugs are typically injectable or infusion medications administered by a healthcare provider in an in-patient setting, outpatient clinic, or infusion center. Because these drugs typically require additional supplies or services, coverage on the medical plan allows the drugs, supplies, and services to be billed together.
Pharmacy benefit drugs are self-administered medications, including orals, self-injectables, and other drugs administered at home by the patient. These drugs are distributed via retail or specialty pharmacy.
When drugs are covered under the medical benefit, reporting is done via J-code. This code is used during claims processing and billing to indicate the chemical name of the drug. However, J-codes do not identify the manufacturer, strength, or quantity of the drug.
Conversely, when drugs are covered under the pharmacy benefit, reporting is done via National Drug Code (NDC) which identifies the manufacturer, strength, dosage, and package size and type.
The lack of drug-specific information provided by J-codes limits how quickly plan sponsors can process claims and how effectively they can manage medications from clinical and cost perspectives.
Drug rebates also vary depending on which coverage channel. Rebates found in the medical channel are pennies on the dollar compared to rebates offered via the pharmacy channel. While the benefit of drug rebates is debatable, the significant difference between rebate amounts in the channels impacts plan spend.
When considering coverage decisions for specialty medications, plan sponsors have little clarity into the cost of drugs covered via the medical channel.
However, data analytics, frequently applied to pharmacy management, can provide the visibility necessary for plan sponsors to gain a deeper understanding of total drug spend.
Aggregating medical drug data alongside pharmacy data allows stakeholders to see plan trends, more aggressively manage utilization, identify better rebate opportunities, and develop a more comprehensive pharmacy benefit.
Drug-level detail on specialty medication covered by medical and pharmacy benefits provides plan sponsors with new opportunities to develop benefit strategies that meet budgetary requirements, allow for deeper clinical management, and provide more comprehensive member care.
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Crafting a benefits strategy with cost and clinical transparency for specialty drugs across channels is complex. That is why Prescription Care Management (PCM) has done the work for you. In addition to a comprehensive pharmacy platform, PCM offers a medical platform that provides visibility into specialty medications covered by the medical channel. To see how PCM is helping payors get a holistic plan view, click here.
Updated: Aug 31, 2021