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Employers Look to Manage the Benefits of Specialty Pharmacy

December 2016 Vol 9, Special Issue: Payers’ Perspectives In Oncology: AVBCC 2016 Highlights - Employers’ Perspective

Washington, DC—Employers recognize that oncology care is expensive, and they are shifting their focus on cost management. As such, employers are seeking approaches to determine which drugs and health plan designs will help them manage pharmacy and medical costs to improve patient outcomes, said F. Randy Vogenberg, PhD, RPh, Partner, Access Market Intelligence, and National Institute of Collaborative Healthcare, Greenville, SC, at the Sixth Annual Conference of the Association for Value-Based Cancer Care.

Employers have traditionally looked at oncology and specialty pharmacy drugs and services in financial terms. Health plans want competition from oncology and specialty pharmacy and the discounts that precipitate from competition, utilization management services, drug preferencing, the use of pathways or guidelines, rebates from contractual arrangements, and price protection terms.

“Heath plans seek a specialty pharmacy partnership that results in effective trend management,” said Dr Vogenberg. But the needle has moved little in this regard, he said.

“Opportunity lies with the disruption that’s beginning to happen in the marketplace on a variety of levels,” said Dr Vogenberg.

As the entity that puts money into the healthcare system, employers are becoming increasingly engaged in health plan discussions, and, along with the patient, employers see themselves as the center of the health plan universe. Offering better health plans has become a tool for employers to retain and recruit employees.

“What’s also happened is the consumerism that the Affordable Care Act [ACA] brought, and how fast it came about, so the pace of change has picked up an awful lot as well,” he said.

Understanding Financial Risk

Just as physicians desire long-term relationships with their patients, employers are also thinking long-term with their health plans.

Commercial health plans need to understand financial risk and its importance to employers’ health plan goals. Employers must maintain a fiduciary responsibility on behalf of their health plan members. “Even though we’re in these shared-risk arrangements, it may be downstream from the employer. The employer, as a plan sponsor, still holds that responsibility,” Dr Vogenberg said.

Health insurers assume maximum financial risk when they do not pass this risk on to the providers or the employers (such as when community rating is in effect), and providers are paid on a fee-for-service basis. Health insurers can pass financial risk on to employers through self-funding arrangements. Health insurers may also pass financial risk on to providers who are reimbursed based on capitation or the shared-savings reimbursement model.

With new types of risk arrangements that shift financial risk to the employer, employers have moved into the high-deductible health plan model, which means that the employee health plan member has to pay upfront. “That begins to change the whole decision paradigm,” said Dr Vogenberg. For example, patients with end-stage cancer may forgo expensive treatment to prolong their life by 2 months and instead opt for hospice care if they have inadequate coverage in their consumer-directed health plan.

The impact of the ACA on stakeholders has translated into a shift in performance risk from third-party payers to providers, he said. In addition, hospital and medical provider networks are increasingly pressured to manage costs and to establish partnerships in order to improve patient outcomes and be eligible for payment incentives under the ACA.

“With all these shifts and this focus around outcomes…it’s going to be more important to work together, to think more in an integrated and holistic manner,” said Dr Vogenberg. “Now it’s becoming more important if you’re ever going to have some revenue success,” he added.

It remains to be seen where oncology care and specialty pharmacy are headed. Oncology care and specialty pharmacy have to focus on where the reimbursement “ball” is going, not where it is today, said Dr Vogenberg.

Value Is the Ultimate Goal

Obtaining value is the ultimate goal of healthcare, and the biggest opportunity for value is in outpatient commercial care, Dr Vogenberg said. Hospitals are aware of this opportunity, and are moving care from inpatient to outpatient settings. This transformative trend for hospitals is the reason why retail clinics are being established. More than 1900 retail clinics are located across the country, with more than 20 million patient visits.

“If the system doesn’t respond and provide some solutions, employers will do it themselves, and they have. We’ve seen a large growth in employer on site clinics, which includes infusion care,” he said.

The site of care is evolving to community-based care as part of a population health strategy. Oncology care as part of population health is a message that will likely dominate through the end of the decade, he said.

Knowledge of Specialty Drugs Must Improve

To better manage specialty pharmacy, employers must improve their knowledge of specialty drugs, because large gaps persist in this area. Although employer surveys show that employers understand the increasing costs of specialty drugs, they struggle to understand the difference in cost trends between drug coverage through pharmacy versus medical benefits, in addition to the criteria for coverage of specialty drugs through pharmacy versus medical benefits (Figure).


Employers are also concerned about the oncology pipeline and not being able to plan for the uncertain cost of newly approved drugs. The majority of this concern centers around aspects that employers cannot control, said Dr Vogenberg. Employers strongly agree that new and innovative solutions are needed to manage these drug costs.

When employers consider effective patient outcome strategies, “the first thing they think about is how they finance their risk, or alternative risk financing, and actuarial design. Again, it requires an ability to look forward as opposed to looking backwards in designing your insurance benefit,” he said.

Other options that employers consider as effective patient outcome strategies include restricting access to care, such as through restricted coverage under the medical benefit; the use of exclusive or limited networks by the setting of care; and defined contracting terms. However, these options serve little purpose in advancing employers’ goals of improving health plan performance, Dr Vogenberg said.

Last modified: August 30, 2021