Managing Drug Costs the Analytical Way
By Yvonne Tso, PharmD, MBA
The revised annual percentage increase for Part D reported by the Centers for Medicare & Medicaid Services shows a reversal in 2015, after six consecutive years of decline between 2007 and 2013 and a negative increase in 2014.  The annual percentage increase for CY 2017 is double-digit (11.75%) for the first time in a decade.  We all had sticker shock when Turing Pharmaceuticals announced the $750 cost per tablet for Daparim, a 62-year old anti-parasitic drug.  While drugs for treatment of hepatitis C made headline news when the price tag was $1,000 a pill (it actually cost more at retail but payers receive rebates on the back end), several oncology drugs cost no less considering the length of therapy.  The wholesale acquisition cost for Zytiga for late-stage/metastatic prostate cancer is about $7,540 a month compared to Xtandi for the same indication, $9,000.  The difference between hepatitis C treatment and oncology is that cancer has become a chronic condition that needs treatment for months and years to maintain remission.  Praluent, a new chemical moiety for lowering cholesterol costs $14,000 a year compared to a fraction of that for conventional statins.  While generics have held down drug costs in the past, the pharmaceutical industry has also found ways to strategically price their generics – Daparim is the poster child for the pharmaceutical industry’s pricing tactic, an old drug available from only one manufacturer or limited number of manufacturers.  Glumetza, the brand name for metformin extended release formulation, retails for more than $7,000 (#60, 1000mg) when the average cost of metformin generic costs pennies a pill.  Another drug that troubles payers is H.P. Acthar, an anti-inflammatory drug marketed for infantile spasm, multiple sclerosis, nephrotic syndrome and rheumatologic conditions that used to cost $50 is now selling for $28,000.00 for a 5 mL vial, even though there is little evidence that Acthar is more effective than alternatives for those conditions that are far cheaper.[1]
How can we combat these exorbitant drug costs?  The analytical way.

  1. Mine your drug claim data to identify the cost drivers – this would require the organization of data for ready access.
  2. Educate your providers with data. Oncologists and neurologists have expressed outcry at some of the above-mentioned prices.
  3. Formulary exclusions and benefit design: within the regulatory limits by the states and Medicare, drugs that do not have unique pharmacological properties should be tightly managed with UM edits such as prior authorization, step therapy, quantity limits and high refill thresholds (85% to 90% versus 75%) or exclusion from the formulary.
  4. Know your population by integrating results of health risk assessment (HRA) with drug claim data and performing predictive analytics. Drug claim data are available timely and in large volumes compared to other medical encounter data. They are sensitive to drug spend but not specific as to the medical conditions being treated (except for diabetes and oncology).  Apply logic to identify the disease conditions that would progress to high utilization of medical services: diabetes, chronic obstructive respiratory diseases, behavioral health, immunological conditions and oncology; and
  5. Monitor your PBM’s paid claims. Any gaps in adjudication edits could leak thousands or even millions of dollars without the payer’s knowledge. For example not all generic drugs are low cost; some NDCs cost more than others.  Work with your PBM to ensure that MAC (maximum allowable cost) pricing is applied and selection of pricing outliers in NDC by network pharmacies is strictly discouraged or denied.

At Medicare Compliance Solutions, we have the expertise to help you with all of the above.  Remember that you either pay now or you pay later.

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