Specialty Drug Tiering, Indication Expansions, IRA Are Some Issues to Watch

· 10 min read

Spending on specialty drugs continues to be a top concern for U.S. payers, and employers are utilizing various strategies to try to get a handle on their costs. Some relief should come, at least for Medicare, with the Inflation Reduction Act (IRA), which will start to have an impact this year as CMS names its top medications for negotiations on Sept. 1. AIS Health, a division of MMIT, spoke with multiple industry experts about what they’re expecting to see in 2023.

AIS Health: What are some specialty pharmacy issues to keep an eye on in 2023, and why?

Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates: Increasing acceptance of biosimilars by prescribers and patients may give payers confidence to implement coverage mandates and benefit designs that advantage their use.

The launch during 2023 of several biosimilars to Humira [(adalimumab) from AbbVie Inc.], including one that is FDA designated as interchangeable, and, later in the year, the planned launch of biosimilar Stelara [(ustekinumab) from Johnson & Johnson unit Janssen Biotech, Inc.] — both huge products and both [covered under the] pharmacy benefit, so will roil the pharmacy benefit market.

How to pay for hugely expensive specialty pharmaceuticals, a continuing dilemma worldwide and a particular problem for self-insured employers.

Some manufacturer patient assistance participation rules have changed to disallow participation by patients subject to copay maximizer programs and programs like SaveOnSP. I expect more changes of this sort and hope that they are drafted so as not to harm patients who cannot afford their cost shares.

Andy Szczotka, Pharm.D., chief pharmacy officer at AscellaHealth: Emerging and continuing issues are being seen with specialty drugs, especially as we [enter] a new year in 2023. While specialty drugs are costly, they also can provide life-changing options to physicians and patients. One of the key specialty pharmacy issues is the continuing affordability of the specialty drug products. Balancing the cost, access and affordability will be vital to ensure optimal patient outcomes. For 2022, the median annual cost for newly approved drugs was greater than $222,000. The high cost of these agents will continue to be a significant barrier to access.

It has been reported that almost half of specialty pharmacy patients have experienced challenges in receiving specialty medications, with nearly a quarter of these patients stating high medication costs as the top challenge in gaining access. Specialty pharmacies will be at the forefront of ensuring initial and continuing appropriate patient access to these medications and ensuring that the clinical benefit is being seen and documented. This key piece of linking patient health outcomes to the specialty drug therapy will be instrumental in continuing treatment and coverage.

Another issue will be the evolving role of specialty pharmacies in the management of the specialty medications for the medical benefit. Payers have typically managed specialty medications on the pharmacy benefit and medical benefit separately, making it challenging to see the full effect of their specialty strategies and where there may be opportunities to improve the patient experience and health outcomes. Specialty pharmacies have the opportunity to manage these benefits seamlessly and assist both the patient and payer in enhancing the quality and cost of the specialty drug therapy regardless of the benefit.

Specialty pharmacies additionally have the opportunity to direct patient care and specialty drug administration sites of care. Hospitals typically charge more for specialty drugs and their administration than independent administration sites and physician offices, whether treatment occurs in a hospital or a hospital-owned physician practice. Identifying opportunities to provide an equally safe and efficacious administration setting while being more convenient in administering specialty drugs in physician offices and patients’ homes instead of hospital outpatient settings can significantly reduce costs and provide savings opportunities for both the payer and patient.

As compared to hospital treatment, home infusion therapy is cost-effective for a number of reasons, including elimination of hospital stays that ultimately saves both the payer and the patient by decreasing hospital utilization, hospital resources and subsequent cost. Additionally, there is a trend in site-of-care restrictions being implemented as a methodology to lower cost of care. These restrictions require the drug to be administered at a lower cost site of care, such as the home or free-standing infusion centers, limiting the number of infusions that are authorized in the hospital or hospital outpatient infusion center.

Biosimilars will provide some of the key headlines for 2023 with the introduction of key specialty products in 2023. The initial adalimumab biosimilar for Humira will be introduced in January 2023 to be followed by a number of additional biosimilar options for Humira and other key specialty products later in the year. Specialty pharmacies will be able to be on the forefront in assisting and directing patients to the best option for their unique medical condition and benefit coverage.

Mesfin Tegenu, CEO and chairman of RxParadigm, Inc.: One issue to keep an eye on is the rising cost associated with specialty drugs, particularly gene therapy drugs. Gene therapy can offer breakthrough treatment for rare diseases with limited treatment options, but the costs can be staggering. With new gene therapies coming out on the market and several in the pipeline, this will drive innovative solutions and strategies to better enhance patient access and affordability while managing costs.

Winston Wong, Pharm.D., president of W-Squared Group: In the IQVIA Global Use of Medicines 2023 report, they noted that medication spending will continue to be driven by innovation, offset by the losses of exclusivity and the lower cost of generics and biosimilars. Specialty medicines will continue to be driven by oncology and immunology, forecast to grow 13% to 16% and 3% to 6% respectively through 2027.

Oncology is projected to add 100 new treatments over the next five years, contributing to an increase in spending of $184 billion to a global total spend of more than $370 billion in 2027. The five-year oncology pipeline will include innovative treatments through cell therapy and RNA therapy, as well as immune and mutation-specific/tumor-agnostic treatments. We will continue to see an increased adoption of biomarker testing and next-generation sequencing, driving the development and utilization of targeted therapies.

The immunology space will become crowded with the indication expansion for current agents, new products in the gastroenterology and dermatology therapeutic areas and the long-awaited launch of the adalimumab biosimilars. 2023 can be seen as the ramp-up to a very packed pipeline for 2024 and 2025.

What this means for the health care industry is that we must continue to improve efficiency and quality, informed by evidence-based decision making while still keeping our focus on the patient. Specialty pharmacies will need to focus on balancing access, with controlling cost and utilization.

AIS Health: What kind of impact from the IRA might we see this year?

Rubinstein: IRA drug price “negotiation” is the big issue. A list of 10 products for price negotiations will be announced by CMS in September of this year. For months now, CMS has been hiring to create its team to focus on this.

Interesting implications of IRA have been discussed in the news in recent months, for example, higher launch pricing leading up to Medicare price controls and changed manufacturer R+D priorities in light of the IRA’s different targeting of biologics (compared to nonbiologics). I’ve been wondering if the government has thought through pushing down on drug prices via IRA price controls at the same time that 340B [drug discount program] is expanding at a breakneck pace. Since there is no national health system, net drug prices vary quite a bit,…so might pushing down net pricing in one sector (i.e., Medicare) lead to net price increases in another sector?

In my opinion, brand pharma manufacturers subsidizing non-disproportionate share hospital operations through 340B pricing is far from that legislation’s original intent to make drugs affordable for low-income individuals not eligible for Medicaid; was a policy not well-written in the first place because there was no obligation that those lower costs be passed to those low income patients; and because 340B hospitals were at liberty to provide 340B drugs to economically well-off individuals. In my opinion, the way that 340B has operationalized in the marketplace exposes it as poorly written policy.

Szczotka: The IRA includes several provisions that will impact prescription drug benefits...with a goal to reduce drug spending by the federal government for their sponsored programs. Key elements of the IRA will likely impact the prescription drug benefit, including specialty drugs.

The IRA requires drug manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than an indexed rate of inflation. If price increases are higher than inflation, manufacturers will be required to pay the difference in the form of a rebate to Medicare. Drug manufacturers may respond to the inflation rebates by increasing launch prices for drugs that come to market in the future. Payers may be able to negotiate rebates and/or price protection as part of providing access to these new therapies, but leverage may be limited when there are no therapeutic alternatives available or when drugs are covered under a Part D protected class. This may increase the cost of these newly approved therapies.

The IRA amends the design of the Part D benefit. For 2024, the law eliminates the 5% beneficiary coinsurance requirement above the catastrophic coverage threshold, effectively capping out-of-pocket costs at approximately $3,250 that year. Beginning in 2025, the legislation adds a hard cap on out-of-pocket spending of $2,000 and to be indexed in future years. Capping out-of-pocket drug spending under Medicare Part D will be especially helpful for patients who take high-priced therapies, such as specialty drugs. This may improve the affordability of specialty therapies for these patients in the future.

The IRA also provides the federal government the ability to directly negotiate pricing for certain drugs with the highest total spending, including specialty drugs, beginning in 2026. While there will be no immediate impact on specialty drugs, this will be a consideration as the federal government develops their pricing negotiations for these high-impact drugs, which also include specialty drug agents.

The impact of these provisions is that it will provide an additional avenue to enhance the accessibility and affordability of specialty medications to patients but likely will have minimal influence in 2023. Impact will likely be greater beginning in 2024.

Tegenu: The main impact of the Inflation Reduction Act this year will be the insulin copay cap for Medicare beneficiaries. The Inflation Reduction Act limits monthly cost sharing for covered insulin products to no more than $35 for patients enrolled in Medicare Part B or Part D plans. HHS recently issued a new report showing that if the Inflation Reduction Act’s insulin copay cap had been in place in 2020, an estimated 1.5 million people with Medicare would have saved an average of $500 on their insulin. The Inflation Reduction Act has several other provisions aimed at lowering prescription drug costs and reducing health care costs, but the most impact is expected to be seen in 2026, when the negotiated prices for drugs in the Medicare Drug Negotiation Program go into effect. CMS will announce the first 10 drugs selected for the Medicare Drug Negotiation Program in September.

Wong: The majority of the IRA reform is for CMS and Medicare. The IRA calls for capping the patient OOP to $2,000, limiting the cost of insulin to $35, limiting price increases to the inflation rate (with anything over the inflation rate being rebated back to CMS), and the largest change potentially is the ability of CMS to negotiate price. The $35 cap on insulin and the inflation cap will go into effect in 2023; however, the $2,000 OOP cap is not scheduled to go into effect until 2025. Price negotiations will start in 2026 for 10 high-cost medications and increases to 20 medications by 2029. The million dollar question is what downstream the impact will be to the industry in general. While many are touting that these reforms are limited to CMS and Medicare, they open the possibility for similar reforms for the commercial population. From my perspective, capping the OOP cost for insulin and inflation increases for Part D patients, as well as manufacturers strategizing for the 10 drugs in 2026, has to have an impact on commercial contract negotiations starting in 2023. I think the PBM industry will be impacted, and their revenues will take a hit. This then will trickle down to impacting the rebate revenue at the plan level. The rebate black box is going to get blacker and deeper. From the patient perspective, it’s anyone’s guess what the impact will be.

AIS Health: Do you think we’ll see any new trends in specialty drug benefit designs?

Rubinstein: Lower cost-share specialty tier for biosimilars.

Szczotka: Some emerging and continuing benefit design trends are being seen with specialty drugs. While specialty drugs may be costly, they also can provide life-changing options to physicians and patients. Balancing these is being reflected in some of the trends to ensure patient outcomes with continued access and affordability.

Some core specialty benefit trends continuing to expand include having more than a single benefit tier or coinsurance for specialty drugs. More benefits are including both a preferred specialty and nonpreferred specialty tier, similar to the more traditional preferred brand and nonpreferred brand tiers for nonspecialty drug products. This is creating more five- or six-tier prescription drug benefit designs for plan sponsors. This will continue to expand as more biosimilar specialty drugs become available. Additional trends include the use of different financial models, including shared risk agreements with pharmaceutical manufacturers, to help patients with specialty drug affordability and payers with the high burden of large one-time drug costs (i.e., gene therapies).

The use of traditional pharmacy benefit tools for utilization management and adherence monitoring continues to expand to specialty agents, including prior authorization, step therapy and quantity limits. These provide mechanisms to ensure that the appropriate drug therapy is being utilized for each patient.

An emerging trend is the carving out of specialty drugs from traditional medical and pharmacy benefit models into a combined specialty carve-out. This allows opportunities to integrate the different benefits to a seamless patient care model, a single point of contact; reduce costs; ensure appropriate use of specialty drugs; encourage biosimilar options; enhance the patient experience; identify alternate sites of care and specialty drug administration, including home care; and improve health outcomes.

Tegenu: No new trends necessarily in drug benefit design but managing specialty drug costs will remain a priority. Ensuring appropriate utilization will be a focus. Plans will continue to use prior authorization, step therapy [and] quantity limits as utilization management strategies to optimize patient outcomes while reducing overall costs.

Wong: We are already starting to see multiple tiers within the specialty categories, as we have seen in the small molecule arena for a number of years now. Benefit designs will continue to become more complex and confusing to the members and providers. The real question should be that since many of the new novel medications are for advanced or niche indications, do these more complex. multilevel specialty tiers have an impact on utilization, and do they help control cost, beyond that of simply identifying the appropriate patient? Lastly, with these complex specialty benefits with coinsurances that are mostly uncapped, are we potentially delaying treatment, or in fact preventing treatment, due to patient affordability? We have definitely seen this in the oncology arena.

AIS Health: Is there anything I’ve neglected to ask about that you’d like to add?

Wong: My head hurts again. My final commentary is that the federal government is fully aware of the nontransparency in the financial games within the health care pharmaceutical industry. They attempted to address it via the Inflation Reduction Act, but due to the strong lobby, actions got limited to CMS and Medicare. Medicaid essentially has the safeguard already in place. Hence, we are operating at a double standard, and everyone except the patient is benefiting. So the next time we look at ourselves in the mirror, we have to ask. “Are we fulfilling our mission and goal to provide good high quality and cost-efficient health care?” Anyone who responds “yes” will probably break their mirror.

Contact Kjesbo through Jenine Anderson at jenine.anderson@primetherapeutics.com, Rubinstein at elan.b.rubinstein@gmail.com, Szczotka through Caroline Chambers at cchambers@cpronline.com, Tegenu at Mesfin.Tegenu@rxparadigm.com and Wong at w2sqgroup@gmail.com.

By Angela Maas

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