Managing Specialty Drugs from a Contract & Clinical Perspective

Managing specialty drugs, many of which are some of the most expensive prescription medications on the market today, requires a combined contract and clinical approach. This is the best way to ensure that specialty pricing and rebate terms align with utilization so that plan spend is managed effectively for self-funded plan sponsors.

First, let’s talk contract strategies. From a contract perspective, the best practices for managing specialty medications on self-funded plans fall into three main buckets: defining specialty and limited distribution medications, securing pricing discount guarantees, and aligning drug rebates.

What is a Specialty Medication?

Make sure you always understand the definition of a specialty medication and get a specialty drug list from the pharmacy benefits provider for that particular contract you are reviewing. Knowing the specialty drug list is absolutely imperative because once you know it, you will know what the limited distribution drug (LDD) list is.

What is a Limited Distribution Drug?

A limited distribution drug (LDD) list is medications that are created by a manufacturer that have an exclusive arrangement with one particular specialty pharmacy to be dispensed. There are a lot of limited distribution drugs, including most of the new, novel therapies. It’s really important that you know which drugs are defined as specialty and which drugs are defined as limited distribution, and then make sure your clients’ contract includes drug pricing discounts for those drugs under an overall specialty guarantee. You may see a schedule or target specialty discount guarantee, but specialty now accounts for more than 40% of pharmacy plan spending and so it’s important to make sure you have hard guarantees around that spend.

How Do I Secure the Best Pricing & Rebate Guarantees?

The pharmacy benefits contract might include different guarantees for limited distribution vs specialty medications, but you want to make sure that you have those guarantees in place and the associated rebates that apply to those specialty medications. You’ll want to check whether those rebates apply to medications filled through mail order and retail, or just retail, and whether they apply to limited distribution medications.

Now, let’s discuss the clinical best practices to manage high-cost and specialty drugs. The first step in designing any clinical strategy is to evaluate the group’s specific Rx claims data. Data-driven clinical oversight uses detailed data analytics to facilitate understanding and identify appropriate next steps for the plan. The goal is to use the client-specific data, along with the expertise of clinical pharmacy experts, to uncover what’s going right and the opportunities that exist to ensure appropriate utilization of all medications, including the high-cost brand and specialty drugs.

When the plan’s risk areas are identified, tailored strategies can be considered to ensure appropriate Rx utilization, such as optimizing the drug formulary with formulary management solutions, implementing clinical reviews of costly medications to validate that utilization, or monitoring for common drug pricing and prescribing practices, like dose creep, parity pricing, or low clinical value medications, that routinely contribute to wasteful pharmacy spending. All too often costly, unnecessary low clinical value medications are added to PBM formularies and slip through established PBM review processes — at the employer’s expense. The strategies selected should focus on helping your clients improve the clinical and economic value of their pharmacy benefit plan so that they can preserve their valuable benefits dollars to cover the medications that matter.

Managing the high-costs of specialty medications in your self-funded clients’ pharmacy benefit program requires a comprehensive approach that includes in-depth contract and clinical oversight. To learn more about proven contract and clinical management strategies your clients can implement to manage specialty drugs, check out our Definitive Guide to Managing Pharmacy Benefits.


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