**The following blog post was co-authored by Dr. Maria Lopes, chief medical officer of Magellan Rx Management, and Dr. Karen Amstutz, chief medical officer of Magellan Health.

Value is more than a buzz word among health care stakeholders, but stakeholders – payers, providers, patients and pharmaceutical manufacturers — define value differently, based on their needs, obligations and roles within the evolving healthcare and managed care paradigm. Each stakeholder, while looking out for its unique interests, must also consider how its priorities, perspectives and business model affect the others — their counterparts, and in some cases, partners. Payers are a common thread intertwined within this continuum of healthcare services, interfacing with each stakeholder in a significant, although different manner. As they navigate the changing managed healthcare marketplace, payers must proceed in a manner that protects their interests, even as they give consideration to the impact their strategies and initiatives may have internally and upon other healthcare stakeholders. One unique opportunity for payers exists within the management of prescription drug utilization, specifically in assessing and refining expectations surrounding their pharmacy benefit management (PBM) services and relationships, and how these translate into value for payers and ultimately, all healthcare stakeholders.

Historically, measures of success in the PBM industry focused on leveraging volume as a means of managing drug costs. PBMs demonstrated value by offering what are now considered standard, or core services. Typically these offerings consist of claim adjudication, utilization management, mail order, customer service, some clinical support services, and of course, financial support in the form of volume-driven rebates and discounts. Times have changed as the Affordable Care Act (ACA), increasing government regulation, rising drug prices, and growing availability and demand for specialty pharmacy drug products have profoundly impacted the use, costs, and management of prescription drug therapies within the managed healthcare marketplace.

Accordingly, expectations surrounding prescription drug benefit management among stakeholders have been, and will continue to be, profoundly impacted by the shifting healthcare environment. Specifically, as payers seek to provide patient or member support, access to care and expanded services, while maintaining profitability, they are reassessing business models and relationships. For payers, this includes taking a close look at the manner in which prescription drugs are managed, giving consideration to the clinical and financial impact of specialty drug spending, in particular. In response, payers are increasingly looking to PBMs to refine their services, with an eye toward driving outcomes. It is no longer sufficient for a PBM to provide products at a discounted price. Essentially, payers are looking for PBMs to provide “value over volume.”

Challenges Facing PBMs

This evolution in payer expectations of PBMs is highly driven by the pressures of rising prescription drug costs — particularly specialty drug spending. Make no mistake about it, volume-based savings remain a significant facet of PBM and payer relationships, but they are no longer the key financial objective of payer- PBM agreements, as they once were.

PBMs are now challenged to stretch beyond their traditional scope of offerings to provide the services payers expect — they are tasked with providing and demonstrating value. What is value and how is it defined in the PBM-payer relationship? First and foremost, PBM-payer relationships moving forward must be partnerships in order to successfully navigate these formerly uncharted waters. It’s not sufficient for a PBM to provide expanded services, such as clinical programs, in name only. Successful implementation of these initiatives will require tomorrow’s successful value based PBMs to have an innovative culture, a modular and flexible service model, and a platform utilizing leading edge technology. PBMs capable of providing adequate support to payer partners must actively integrate and apply clinical expertise into programs that support improved patient outcomes and consider patients comprehensively, while giving appropriate consideration of unique patient needs — and offering comprehensive solutions, which may include unique program components, such as integrating behavioral health support as warranted.

Clearly, the PBM of the future must have a new orientation – no longer focused exclusively on volume-based strategies. Tomorrow’s value-based PBM must provide value by looking beyond the current silos that commonly focus upon pharmacy drug benefit approaches that apply “traditional“ utilization management strategies (step therapy, prior authorization, etc.) to maximize rebates and manage prescription drug spending. Effective management of the future must bridge the management of prescription therapies, particularly specialty drugs, via either the medical or pharmacy benefit. Applying innovative strategies to optimize management of the use of and administration of prescription drugs through whichever benefit, medical or pharmacy, the therapy is processed will be an essential attribute of PBMs’ demonstrating value to payer partners. Focus upon coordination of specialty drug management through both the pharmacy and medical pharmacy benefits will only gain importance as the availability, costs, and utilization of expensive specialty therapies rises, as acceleration of specialty drug utilization is projected.

These current and anticipated shifts in the clinical and economic landscape will drive the challenges and amplify the financial importance of managing medical pharmacy spend. PBMs providing value will do so by offering comprehensive prescription drug management support for payers, across the benefit design, with particular attention to effectively managing drug utilization and spending within the medical benefit arm of the organization. As an example, Magellan Rx Management has focused on developing patient and provider engagement strategies, and employing advanced analytics and comprehensive specialty drug management programs for both the medical and pharmacy benefit.

Interpreting Data is Key

This application of advanced analytics is integral to the service and offerings of the value-based PBM of the future. It is insufficient to simply capture and possess data. Going to the next level, the ability to analyze and report data, while beneficial, falls short of having a demonstrable clinical and economic impact. Data capture and reporting alone are inadequate as a means of providing value to payers if this data is not properly evaluated, interpreted, and then integrated into effective clinical management strategies. These identified strategies must be capable of serving as a platform for significant clinical improvement and development of cutting edge programs that enhance care and manage costs, across both the medical and pharmacy components of the benefit. PBMs with an eye to the future are those capable of:

  • Providing rigorous analytical support to payer data in order to help payers identify opportunities to improve outcomes, while realizing savings
  • Collaboration to ensure providers have information needed to optimize treatment –promoting access to and use of the most efficacious and cost-effective drugs
  • Enhanced customer-facing strategies to increase member understanding and effective utilization of pharmacy and medical benefit therapies

With data management capabilities as a cornerstone, the value-based PBM is poised to assess payer data, applying predictive analytics as appropriate to conduct a robust and meaningful cross-functional analysis of costs, utilization of therapies, and outcomes. A well-constructed and executed analysis supports both the financial and clinical objectives of the payer – financially supporting cost management while simultaneously creating an opportunity to identify and address existing or emerging gaps in care. As a result of these analyses, payers will be poised to support providers, provider groups, hospitals, outpatient treatment facilities and other partners such as accountable care organizations

(ACOs) by providing feedback regarding current clinical and economic opportunities to improve outcomes and manage costs – ultimately benefiting the patient. As one dimension of these analyses, value-based PBMs can support payers in developing targeted initiatives that address identified gaps in care. For example, programs may be developed to improve member adherence with therapy and the selection of the most clinically appropriate treatment, as they simultaneously support payer objectives such as improving the identification, recognition, and understanding of opportunities for managing trend drivers and helping to identify other areas of concern or opportunities to improve care.

With the support of value-based PBM, payers have the opportunity to expand specialty drug management capabilities, developing new clinical programs for specific disease states, with the ability to target diseases that are highly significant for each organization, either due to cost, clinical relevance, prevalence, or demonstrated gaps in care. Some examples of programs with such experience that exist within Magellan Rx Management include the clinical programs to guide the treatment of age-related macular degeneration, hepatitis C, and chronic myelogenous leukemia (CML). These programs might include clinical interventions, product preferencing and targeted clinical patient and provider support programs.

A Case in Point

For a large regional health plan, representing about 1 million commercial lives, Magellan Rx Management partnered to offer medical formulary management programs in the following areas:

  • Viscosupplementation
  • Botulinum Toxins
  • Contraceptives
  • Gaucher’s Disease

Magellan Rx also worked with this payer to implement a variable reimbursement fee schedule, with a maximum allowable cost (MAC) / least cost alternative (LCA) product selection strategy. A proprietary methodology was applied to promote generic utilization and equalize margins on products within several therapeutic classes, including intravenous immunoglobulin (IVIG), taxanes, folinic acids, ophthalmic injections, viscosupplementation, and antiemetics. Savings in the antiemetic category alone have exceeded $3.5 million since the program’s inception in 2010, by removing incentives for physicians to prescribe higher-cost, branded antiemetics, rather than the low-cost preferred alternatives.

Additionally, value-based PBMs are equipped to support payers in the development and implementation of unique initiatives, such as site of care management programs. These programs create an opportunity to administer initiatives focused on oversight and management of the treatment and administration location for certain high-cost therapies, typically administered at either a provider office or an alternative administration site such as a hospital outpatient administration facility. By encouraging the use of the most clinically, therapeutically and financially cost-effective therapy, site of care management programs offer a means of assuring treatment is administered in the most clinically and financially appropriate setting. As an example of success in this area, Magellan Rx’s site of service netted over a million dollars in savings for two regional health plans in a six-month period. The program, which also received positive feedback from patients, demonstrated the possibilities such programs have to generate savings, while improving patient access to care. Characterized as a solution which places the patient first, the program was overseen by a collaborative team of healthcare professionals, including nurses, pharmacists and physicians.

Innovative strategies, such as outcomes-based contracting, are another means by which value-based PBMs further support payer objectives. Outcomes-based contracts are a unique and customized partnership opportunity that considers stakeholder interests by giving consideration to payer-specific data, supported by robust analytics to define opportunities for optimizing clinical and economic outcomes in the best interest of all stakeholders.

Additionally, value-based PBMs can assist payers in the identification of gaps, and the development and implementation of cutting edge and customized clinical programs designed to improve STAR ratings and HEDIS measures. Such programs are relevant and valuable to payers, as they support clinical initiatives, assisting payers in meeting objectives that translate into financial benefits for the organization.

In light of specialty drug trends, such as a burgeoning pharmaceutical pipeline — dominated by specialty drugs that are estimated to comprise 50 percent of overall drug spend by 2018, payers are changing their view of essential PBM support services. Forward-thinking payers are seeking the support of a value-based PBM with expertise in management of complex and costly therapies, including specialty drugs administered within the medical benefit. With a decade of experience in this arena, Magellan Rx is one example of a full-service PBM, with the distinction of having significant expertise in managing specialty drugs, including those covered under the medical benefit. The additional benefit of clinical expertise and robust analytical support are critical in the development of cutting edge clinical programs that simultaneously support the objectives of payers and consider the interests of other stakeholders in the managed care marketplace. These are critical strengths that value-based PBMs of the future must possesses in order to effectively support payers in meeting the demands of tomorrow’s health care marketplace; providing tailor-made, disease-specific services that provide value and drive healthier outcomes for members.