Authors: A. Mark Fendrick, Jason Buxbaum, Kimberly Westrich
Publication: June 2014
Download the report.
Specialty pharmaceuticals are medications that consist of complex molecules, have qualities that result in costly delivery, and/or carry high costs ($600 or more per month is a common threshold). These medications are frequently used in the treatment of rheumatoid arthritis (RA), multiple sclerosis (MS), cancer and a variety of other serious health conditions.
About one quarter of total pharmaceutical spending in the commercial market is devoted to specialty medications. If current trends hold, spending on specialty medications may comprise half of all pharmaceutical spending by 2018 for commercial health care plans. These trends have invited the scrutiny of plan sponsors. To control spending, many payers and purchasers have established requirements for high cost-sharing, requirements that may trigger cost-related non-adherence for some patients.
This report, authored by A. Mark Fendrick, MD, Co-Director of the Center for Value-Based Insurance Design at the University of Michigan, Jason Buxbaum, MHSA, and NPC Director of Health Services Research Kimberly Westrich, MA, outlines that:
- For many patients and clinical indications, high spending on specialty medications is money well spent;
- Indiscriminate, high cost-sharing for specialty medications can be harmful to patients and employers; and
- Payers and purchasers can deploy a variety of tactics to help assure that patients have access to the right medications.
Value-based insurance design (V-BID) is a key tactic payers and purchasers can use to promote access to high-value specialty medications. V-BID is a model of insurance design that provides more generous coverage for services that offer known, evidence-based value and less generous coverage for those where value is low. Or in other words, V-BID shifts the focus from “how much” to “how well” we spend health care dollars. V-BID is driven by the concept of clinical nuance, which recognizes that medical services differ in the benefit they provide, as well as the benefit each individual patient experiences from a particular service.
The concept of clinical nuance and condition-specific benefit design is especially relevant for specialty medications. Specialty medications tend to deliver both great clinical benefits and have higher costs. However, the cost, as opposed to the clinical benefit and ultimate value, of specialty medications has been the sole focus of typical approaches to insurance design. Alternatively, V-BID offers a way to account for clinical nuance and, as the report notes, the fact that “many specialty medications deliver improvements in health and health-related quality of life at prices that are lower or competitive with many commonly accepted medical interventions.”
In applying V-BID to specialty medications payers and purchasers can use a variety of techniques, including:
- Imposing no more than modest cost-sharing on high-value medications;
- Reducing cost-sharing based on patient- or disease-specific qualifications;
- Selectively reducing cost-sharing for patients who fail to respond as desired to another medication based on current access restrictions used by insurance companies; or
- Using cost-sharing to encourage patient selection of high-performing providers.
To make V-BID work effectively for specialty medications, the authors point out that it will be critical to anticipate and address some of the foreseeable challenges associated with clinically nuanced benefit designs. Specifically, it will be essential that plans and plan sponsors:
- Prepare for administrative complexity;
- Establish incentives that engage patients early;
- Communicate effectively about V-BID;
- Integrate V-BID with provider-facing initiatives; and
- Recognize that the perfect must not be the enemy of the good—or in other words, understand that comprehensive and far-reaching V-BID implementation for specialty pharmaceuticals may not be feasible immediately, but that important headway can be made by beginning with certain high-priority medications or conditions.