Spotlight on Medical Pharmacy Trends

The Magellan Rx Management Medical Pharmacy Trend ReportTM is an annually published resource highlighting medical drug trend and analytics. The Trend Report includes primary and secondary analyses of provider-administered drugs, which are infused or injected and paid under the medical benefit.

The data comprise the results from Magellan Rx’s 2018 survey, including responses from 45 commercial and Medicare Advantage payers representing more than 105 million lives across the country. Results also include health plan paid-claims data analyses across commercial and Medicare Advantage payers, as well as the Medicaid line of business, which is new to the 2018 Report.

The Report also includes medical benefit utilization and trend data for 1,065 Healthcare Common Procedure Coding System (HCPCS) codes across outpatient sites of service, including the physician office, home, and hospital outpatient facility. This represented an increase of 140 HCPCS codes from the previous Report, demonstrating the rapid growth in classified drugs managed on the medicalbenefit. Of note, 2017 is the most recent calendar year analyzed due to the lag associated with medicalbenefit claims data in terms of allowing adequate time for claims run-out, and thus ensure that finalized claims are included in the analysis and publication. New to the Trend Report in 2018 are forecasting results for seven high-impact disease categories that were determined to show potential growth within the category over the next five years.

2018 Key Trends

Medical Benefit Billion-Dollar Drugs, 2017–2022

The number of drugs with projected annual sales of more than a billion dollars, or billion-dollar drugs, is projected to grow 26% from 34 in 2017 to 43 by 2022 (Figure 1). All 43 of these projected billion-dollar drugs are currently available on the market today, and increased utilization and growth in expenditures on these products is anticipated. This projection highlights the need for proper utilization management, targeted dosing optimization, and other management tactics for these high-cost medical specialty drugs, which will help promote quality of care and prudent savings of healthcare dollars.

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Oncology CAR-T Therapy

Trend Report forecasting projected growth of chimeric antigen re­ceptor T-cell (CAR-T) therapies of 530% from 2017 to 2022 (Fig­ure 1). This represents an increase from $0.10 per member per month (PMPM) in 2017 to $0.63 PMPM by 2022. Just more than 75% of that growth is due to agents available on the market to­day. We project these currently available CAR-T therapies to gain spend and utilization, making it especially important to manage them appropriately given these are typically administered within the hospital inpatient setting.

Medical Benefit Drug Trend Highlights

PMPM by Line of Business

The Trend Report explores medical pharmacy PMPM spend and trend for the past five years for commercial, Medicare, and Medicaid lines of business. The total PMPM spend for the com­mercial line of business in 2017 was $29.97, with the annual trend at 18% and the average annual trend for the past five years at 14%. The overall five-year trend for commercial business is 68%, representing tremendous growth. Medicare PMPM spend is higher than commercial, at $52.19, likely due to the older popu­lation it serves, with a slightly lower annual trend, at 12%, and a significantly lower five-year trend, at 22%. The Medicaid line of business displayed a similar five-year trend to Medicare, at 17%, but a much lower PMPM spend, at $8.29, likely due to the Medicaid population skewing younger and greater utilization of lower-cost products such as infused antibiotics, injectable ste­roids, and contraceptives.

The differences in PMPM spend and trends between the lines of business is largely attributed to differences in unit costs and site-of-service combinations based on differences in reimburse­ment methodologies, such as hospital outpatient reimbursement based on percent of billed charges versus other standard percent markup strategies in physician office and home infusion.

Percentage of Drug Spend

Medical pharmacy continues to be driven by low-volume, high-cost specialty medications, with almost all of medical pharmacy spend attributed to specialty drug costs across lines of business. The Trend Report highlights that 15% of patients drove 94% of the PMPM spend in commercial; 21% drove 95% in Medicare; and 14% drove 91% in Medicaid. All lines of business played out a similar story of a small percentage of patients driving the majority of spend for drugs on the medical benefit. Spend in medical pharmacy is also very concentrated in a few products, with the top 50 medical pharmacy drugs making up 75% of spend in the commercial segment; up to 80% in Medicaid; and 84% in Medicare.

Category Profile Highlights: Oncology

The Trend Report details seven categories with forecasting models to show their potential growth, taking into consideration the drugs in the current pipeline. Full profiles for all categories can be found in the full Trend Report.

The Trend Report presents oncology as the category with the highest spend. Oncology agents make up 34% of the total medical pharmacy spend for commercial, 46% for Medicare, and 35% for Medicaid (Figure 2). The Trend Report outlines the variation in members utilizing oncology agents: 1.7 per 1,000 in commercial, 8 per 1,000 in Medicare, and 0.6 per 1,000 in Medicaid. The disparities illustrate the variation in utilization among the lines of business and the resulting differences in PMPM. Oncology PMPM spend was $10.12 in commercial, $24.25 in Medicare, and $2.87 in Medicaid. Forecasting for the oncology category shows a projected growth rate of 44% by 2022, with increased utilization and expanded indications for new products along with the pipeline of new agents. Figure 2 shows highlights of the oncology category, illustrating a small sample of the type of profile that can be found in the full Trend Report.

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Medical Benefit Drug Management Survey Highlights

The Trend Report highlights results from a payer survey con­ducted annually during summer. It features insights from 45 U.S. payers representing more than 105 million medical pharmacy lives; 33 of these payers managed Medicare Advantage as well as commercial populations. The respondent sample was split with 53% representing smaller plans (covering fewer than 1 mil­lion lives) and 47% representing larger plans (covering more than 1 million lives). Survey participants represented all major lines of business: commercial, Medicare Advantage, managed Medicaid, and health insurance exchanges.

Survey Responses: Site-of-Service Programs

Site-of-service (SOS) programs are intended to direct members to the lowest-cost site of drug administration. In most circum­stances, this is the physician’s office, since hospital outpa­tient centers may be two to four times the cost in comparison, depending on the drug and regimen. Commercial payers find high levels of success with SOS programs; more than 67% of commercial payers with these programs report an average sav­ings of 61%. Payers have been slower to adopt SOS programs for Medicare members; little more than a third have an SOS strategy, and 25% of those have experienced average savings of only 5%. Medicare may be a difficult population in which to implement this type of program due to the unique rules the program has around offering patient choices, as well as the strict turnaround times for coverage determinations and the Centers for Medicare & Medicaid Services’ well-known dis­couragement of edits in Medicare Advantage.

Payers most often executed their SOS program through criteria em­bedded in their clinical policy. A quarter of commercial payers and 17% of Medicare payers include the SOS program in their mem­ber-benefit design. A small group of commercial payers encourage use of their SOS program through favorable reimbursement rates, available when medical-benefit drugs are administered through the lowest cost of SOS.

Figure 3 illustrates some of the detailed breakdown of medi­cal-benefit drug-management survey responses relating to SOS programs. Much more detail and additional approaches to medical benefit drug management can be found in the full Magellan Rx Medical Pharmacy Trend Report.

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Article used with permission from “Spotlight: 2018 Magellan Rx Management Medical Pharmacy Trend Report.” Author: Kristen Reimers, RPh Senior Vice President, Specialty Clinical Solutions, Magellan Rx Management. The full article can be found in the Summer 2019 issue of the Magellan Rx Report.  

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