1. Pharmacy insights Benefit management | Drug trend | Future
Scott A. Schnuckle, CLU
Senior Vice President,
Pharmacy & Business Development
HealthPartners, Inc.

2. Questions I hope to answer:
Why are pharmacy trends and pricing a hot topic?
What’s happening nationally with trends?
How do the emerging specialty medications impact trends?
What can we do to manage costs?
What does the future hold?
Is there anything we can do personally to help?
Are there any solutions emerging to address the challenge?

3. Consumer market trends

4. It’s no secret that pharmacy is in the news, the real new, and the fake news, as seen in comedy skits, and generally it’s in your face all day long.
I doubt any of you who either read a newspaper, glanced at magazine or watched some TV this morning escaped without seeing a drug advertisement.
It’s constant! And frankly annoying, but it impacts all of us, so we talk about it.
It’s also a political hot button.

5. It’s hard on many of us … 1 in 4 have difficulty with drug cost
Source: Kaiser Family Foundation Health Tracking Poll (conducted Sept 14 – 20, 2016)

6. Where does your health care dollar go?

7. Per capita retail drug spend
Source: Kaiser Family Foundation Analysis of National Health Expenditures Account

8. Pharmacy growth

9. Impact on growth

10. Impact on growth

11. Increasing cost of new drugs

12. Specialty drug cost impact

13. Key traditional drug categories
CONTRIBUTING TO GROWTH

14. Key traditional drug categories
CONTRIBUTING TO GROWTH

15. Top drug launches in 2018

16. National pharmacy spend
Source: Kaiser Family Foundation analysis of data from National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

17. Market growth

18. Three key drug cost drivers
DRUG MIX
UNIT PRICE
UTILIZATION

19. Cost drivers PRICE VS. UTILIZATION
Source: Kaiser Family Foundation analysis of Bureau of Economic Analysis data

21. Brand vs. generic drug cost

22. Larger impact of drug mix
PERCENT OF PRESCRIPTIONS
PERCENT OF COST
(Net of Rebates)
Generic
Specialty
Brand
Brand
Generic
Specialty
$ percent
$ percent
$4, percent
91.6 percent
7.8 percent
0.6 percent
HP commercial BOB Full Year 2018

23. Drugs under the medical benefit

24. Drugs covered under medical benefit
Administration
Injectable
Treatments
Cost
Administered by a health care provider in a doctor’s office, hospital, ambulatory infusion center, patient’s home
Typically injectable or intravenous drugs
Majority of spend is for specialty drugs to treat autoimmune conditions, multiple sclerosis, and cancer
High cost in aggregate and per patient cost

25. Total integrated specialty drug PMPM
58% of specialty drug spend is under the pharmacy benefit

26. Top 5 specialty conditions
Integrated specialty PMPM*
It is important to integrate data when understanding total specialty drug spend. The top three categories of specialty drug spend have both oral and intravenous drug therapy options. You would miss key agents if only pharmacy or medical spend were considered.
Integrated specialty PMPM*
*HealthPartners commercial book of business pre-rebate 2Q2018

27. Managing pharmacy spend

28. UNITED HEALTHCARE + OPTUMRX
Integration vs. siloes
Industry integration
CLINIC/PROVIDER
SPECIALTY PHARMACY
RETAIL PHARMACY
PBM
HEALTH PLAN
CIGNA
+ ESI
CVS HEALTH + AETNA
UNITED HEALTHCARE + OPTUMRX
ANTHEM
+ INGENIORX

29. Outperforming industry benchmarks
Total cost of care results
Minnesota
↓17%
Iowa
↓18%
Regional
↓12%
National
↓6%
Pharmacy results
Minnesota
↓16%
Iowa
↓10%
Regional
National
↓23%
These are the results from our most recent Optum benchmarking that we have done over the last decade, it’s not our own data.
Our total cost of care results are substantially below the market and pharmacy is a very significant part of the reason why.
Reference the state you are in …
Relative to our IA competition, we are 18% lower on Total Cost Of Care and 10% lower on pharmacy, regionally it’s 12 and 16%, respectively, and relative to the nation it’s 6% on Total Cost Of Care and 23% on pharmacy.
Sound too good to believe? Let’s look at this another way …

30. Low net cost formulary impact on PMPMs
Organizations
PMPM
HealthPartners*
$68.78
ESI1
$87.78
CVS Health2
$88.94**
Roughly 22% lower cost
Let’s look at how our pharmacy PMPMs compare to nationally published data.
HP 2018 costs are about $69, while the competitors ESI and CVS are roughly $88 or $89 dollars. That’s about 22% less costly and nearly identical to what Optum review shows in the previous slide of 23%.
This difference is worth over $100,000 for 500 member group and over $1 million for a group with 5,000 members, and that’s before we talk about our impact on medical costs.
Drug Trend Report. (2019, February). Retrieved March 25, from
2 Drug Trend Report (2018, April). Retrieved Apr. 6, 2018, from
*All data represents member plan liability (allowed cost) after rebate
**Total PMPM calculated using managed formulary with drug removals

31. Rebates Only Available for Certain Drugs Top drugs and therapeutic classes
TOP 10 THERAPEUTIC CLASSES:
IN 2017, THE TOP 5 OF 53 TOTAL THERAPEUTIC CLASSES ACCOUNT FOR 86% OF TOTAL REBATES

32. Cost of rebate focused formulary
Dexilant
Net cost difference: Increase of 673% to 3,000%
lansoprazole
omeprazole
Cost: $ per month supply
Average rebate: ~50% ($135)
Lansoprazole: $17.47 per month supply
Omeprazole: $4.32 per month supply
A 50% or $135 rebate doesn’t really matter when you are still paying $145 a month when you could be paying less than $20.

33. Utilization management
Prior authorizations
Quantity limits
Step edits
59,200 reviews
< 1% of prescriptions
$102 M savings
29% denials
$8.90 PMPM
2016 data
UM can provide double-digit cost savings (11.6% PMPM reduction)

34. 2018 top prior authorization drugs
DRUG NAME
FORMULARY
DENIAL %
PROJECTED SAVINGS
AVERAGE COST/RX
AV COST ALTERNATIVE
Adalimumab (Humira)
F-PA 9%
$9,980,485
$5938
$27
Stelara
Medical PA
14%
$3,751,109
$6850
Remicade 7%
$2,186,960
$3000
Enbrel 4%
$1,958,773
$5068
Saxenda
NF-PA
31%
$1,712,421
$1178 $0
Xolair
16%
$1,381,237
$3158
$230
Cialis
46%
$955,435
$366
$21
68:1 ROI

35. Leveraging lower cost site of care
Maximize negotiated provider contracts and offer more convenient sites of care
HOSPITAL $
HOME $
CLINIC $
If hospitals renegotiate, members remain
RESULTS: Significant reductions in total allowed and positive member experience $ $
Outpatient hospitals provide 24/7 service and generally spread overhead over all services. Drugs products are commodities so it’s troubling to pay a lot more for them at one site of care than others.
Site of care initiatives ensure that infusions billed under the medical benefit are reimbursed similarly across sites of care or members are asked to obtain infusions elsewhere.
Infused products billed under the medical benefit may have different
-Generally billed under medical benefit
-Require administration by a clinical professional (usually nurse)
Results:
14% reduction in allowed amounts
Positive member experience
Less PTO required as home infusions available on weekends
Less driving time

36. Coupon accumulator programs
These programs help ensure that all insured group members are treated fairly
STANDARD PROCESS
COPAY ACCUMULATOR PROGRAM
PLAN
PLAN
COUPON
ACTUAL MEMBER
PLAN
COUPON
ACTUAL MEMBER
TOTAL COST PAID FOR A PRESCRIPTION
MEMBER
Amount Applied to Accums
Amount Applied to Accums
Accumulators: Deductible, Annual Out of Pocket

37. What can you do?

38. Pharmacy shopping tools
HealthPartners
Include comments on RTBC and the impact ti

39. Information received through real-time pharmacy benefits

40. Drug price survey
Source: Kaiser Family Foundation Health Tracking Poll (conducted April 17-23, 2017)

41. What’s being considered on Capitol Hill?
Transparency bills
Increase pace of generic approvals
Rebate elimination or movement to point of sale
Include prices in direct-to-consumer advertising
Medicare negotiation
International benchmarking for prices
Importing drugs from foreign sources

42. Pricing advocacy positions
Bring real drug costs and profits to light
Make cost a factor in FDA approval
Unshackle government negotiating power for Medicare without cost shifting to private sector
End drug company loopholes and abuses
Eliminate or limit direct-to-consumer advertising
Cost transparency is a welcome trend in American health care, but drug companies are getting a pass … Public exposure will make it harder for drug companies to price gouge, as we see too often today …. We strongly believe that this cost information date should be public, and our lawmakers should compel it.
Regulators look at safety and effectiveness, but they ignore cost. Drug cost should be evaluated. This may require an expanded role for the FDA, or a new public/private entity but it could allow determination of needed limits – such as the maximum price a public or private payer would pay for a certain drug.
Current law prohibits Medicare from negotiating with drug companies on pricing. This give drug companies and unwarranted advantage with cost ramifications throughout the entire health care system. It’s time to lift these restrictions, and in a way that doesn’t simply shift the costs elsewhere.
We see many needed reforms to address unfair and abusive market practices by drug companies , e.g., drug manufacturers gaming the patent process to slow market entry of lower-cost drug alternatives, Namenda pediatric use, XR versions . And because high-priced medications are often supported by expensive marketing campaigns that add cost and drive excessive use, we support restrictions on costly direct-to-consumer advertising.

43. Is our current model sustainable?
Where are we headed?
Is our current model sustainable?

44. Oncology dominates drug pipeline
9404 entities are in the drug development pipeline.
6959 (74%) of medicines in the clinical pipeline are “first-in-class” medicines
Of the unique, first in class drugs (i.e., the 6959), 822 (12%) will have Orphan status – meaning they are medicines intended to treat rare diseases affecting fewer than 200,000 people. These are drugs that generally receive extremely high price tags.
Oncology dominates this pipeline.
Source: The Biopharmaceutical Pipeline: Innovative Therapies in Clinical Development. PhRMA.org. Accessed 10/6/18.

45. Oncology drug therapy ECONOMIC CHALLENGES
New cancer drug costs have increased more than twice the median monthly household income
$61,400 median household income in 2017

46. Oncology drug therapy value
Many new drugs have been approved to treat cancer but only some have provided a true benefit
Have we turned a corner with immunotherapy?
“…no conclusive evidence that these drugs either extended or improved life for most cancer indications.”
From 2009 to 2013, the European Medicines Agency approved the use of 48 cancer drugs for 68 indications. (EMA = FDA in EU)
Several investigators reviewed medical evidence to assess the “efficacy” value of these medications. …..they didn’t find a lot of evidence.
At a minimum of 3.3 years after market entry, there was still no conclusive evidence that these drugs either extended or improved life for most cancer indications. When there were survival gains over existing treatment options or placebo, they were often marginal.
A majority of the drugs approved form were “targeted drugs”. This means that they targeted a specific way that the tumor replicates. There is still a lot of research and approvals occurring with this mechanism. Sometimes they provide dramatic results….but more often than not they only hit one way the tumor replicates (for $10K/month) and tumors eventually become resistant or begin to replicate again using other mechanisms.
Immunotherapy may provide better results because the whole immune system is engaged to fight tumor growth. A tumor by definition is “out of control cell growth” and this means they will probably continue to find ways to grow (i.e., develop resistance to this therapy too).

47. Gene therapy – “Cures therapy”?
Gene augmentation therapy
1990 appropriated funding
Mapping human genes
2003 international project complete
$2.7B
40 gene therapies by 2022
Source: MIT FoCUS Research Brief, Nov 2017
We are on the cusp of technology leveraging the results of the Human Genome Project to address diseases associated with defective genes. In 2017, MIT published a research suggesting by way of a review of the FDA pipeline that we might have as many of 40 gene therapies approved by 2022.
Gene augmentation therapy is one method of changing existing defective genes to produce effective genes.

48. Gene therapy model* ANNUAL TREND IMPACT TO EMPLOYER GROUPS
Impact of one $800,000 orphan or gene drug therapy
Self-insured group
5,000 lives required to normalize trend
This model represents the impact of one $800,000 orphan or gene drug therapy on self-insured employer groups.
5,000 lives are required to spread the risk broadly enough to normalize trends
*Model assumes no stop-loss or stop loss amount per beneficiary high and not met by this claim and other 12-month claim expenses.

49. Economic challenges
The current insurance financial model isn’t working in the face of increasing United States health care system costs ?
Are we at a point where we need a national high-risk pool?
HIGHER COSTS FROM SOME INSURED  MORE COST TO SPREAD TO ALL INSURED MEMBERS

50. Is there a viable near-term solution?

51. Managing specialty pharmaceuticals
What can plan sponsors do to leverage drug value assessments in innovative benefit and formulary designs?
What can Plan Sponsors Do Now to Leverage Drug Value Assessments in Innovative Benefit and Formulary Designs

52. Institute for Clinical and Economic Review (ICER)
Independent health technology assessment group whose reviews are funded by non-profit foundation
Develop publicly available value assessment reports on medical tests, treatments, and delivery system innovations
Use cost-effectiveness analysis to determine value-based price benchmarks
Convene regional independent appraisal committees for public hearings on each report

53. 2018 sources of funding
ICER Policy Summit only

54. Value-based price benchmarks
COST ($)
Cost-effectiveness
threshold at $100K QALY
Even more effective & very high cost
More effective & higher cost
EFFECTIVENESS (QALYS)
Using the concept of incremental costs and incremental effects we define the cost-effectiveness plane.
We use this to illustrate the relative cost and effect of an intervention compared to some control.
If the intervention lies in the south-east quadrant, it is both less expensive and more effective than the control, and so will be preferred.
In the north-west quadrant, an intervention is more expensive and less effective, and so the control will be preferred.
In the other two quadrants there is a trade-off between cost and effectiveness.
The ICER is illustrated by the slope of a line through the origin and the IE/IC point for an intervention.

55. ICER’s examples VALUE-BASED PRICE BENCHMARKS DRUG CATEGORY
RECOMMENDED DISCOUNT*
PCSK9 inhibitors for high cholesterol
50%
Psoriasis 5%
Multiple sclerosis
25%
Rheumatoid arthritis
15%
Atopic dermatitis 0%
Osteoporosis
50-80%
TKIs for lung cancer
PD-1s for lung cancer
Abuse-deterrent opioids
40%
DRUG CATEGORY
RECOMMENDED DISCOUNT*
Ovarian cancer PARP drugs
50%
Tardive dyskinesia
85-90%
Gene therapy for inherited blindness
50-75%
Emicizumab for hemophilia A
Cost-saving
CAR-T for cancer 0%
Cystic fibrosis
67-75%
Chronic migraine
Elagolix for endometriosis
15%-25%
Apalutamide for prostate cancer
* For new drugs, discount from list price needed to meet common thresholds of cost-effectiveness. For drugs already in use, discount is from post-rebate price

56. ICER assessments
Policy makers: Independent evaluation of value and suggested value-based prices figure in multiple proposals
Drug makers and payers: Helps negotiation over prices in conjunction with appropriate access
Payers and provider groups: Helps guide coverage decisions and pricing negotiations

57. Value-based assessment application
BENEFIT DESIGN AND PAYMENT POLICY
Option 1: Special tier, step therapy, or exclusion for drugs whose best negotiated price remains above the value-based price benchmark
Option 2: Include drugs on formulary but only pay up to the value-based price benchmark. Any residual gap between price charged and reimbursement is the responsibility of the patient/manufacturer.

58. Questions ?