As Specialty Drug Usage and Costs Increase, New Approaches Needed for Recoveries

Specialty drugs include a wide range of products, including chemotherapies, pulmonary arterial hypertension and hemophilia drugs, high-cost oral medications like anticoagulants, oncology treatments, and HIV drugs and more. In recent years, payment recoveries for specialty drugs have become a higher priority issue for payers.

A number of factors have contributed to this trend:

  • Rising costs for specialty drugs. Market data suggests that the average cost per specialty claim increased from $4,879 in 2018 to $5,029 in 2019.
  • More widespread usage of specialty drugs. In 2019, 4.0% of the population used at least one specialty drug, compared to 3.4% in 2017. In addition, between 2009 and 2020, specialty drug spending rose $255 per person, while spending on traditional medications decreased by more than $210 per person.
  • A relatively small percentage of members accounts for a large share of specialty drug spending. Magellan RX Management recently analyzed specialty drug costs across different types of payers. In 2018, it found that 40% of Medicaid members accounted for 96% of specialty drug spending. Among commercial payers, 31% of members accounted for 96% of specialty drug spending. In the Medicare segment, nearly half of members (47%) accounted for 98% of specialty drug spending.

There’s little question that specialty drugs costs constitute a significant concern. From the pharmacy perspective, billing for these treatments is also complex. Unlike other medications, specialty drugs may be covered under an individual’s medical benefit, pharmacy benefit or both.

As the National Council for Prescription Drug Programs (NCPDP) noted in a September 2020 white paper, industry standards don’t exist to determine which type of benefit covers a particular specialty drug. Additional sources of benefit coverage confusion include whether the specialty drug is bundled with a service and where the drug is administered.

Recovery denials are problematic for payers. In the commercial insurance direct bill process, third-party liability recoveries can be challenging due to new plans and pre-pay requirements which result in a lack of medical documentation and/or patient history. Related post-pay recovery denials represent millions in “lost dollars” that could be recycled back to the Medicaid resource pool.

Medicaid and Managed Care Plans Are Turning to Pharmacy Disallowance for Help

HMS’ Pharmacy Disallowance product helps clients achieve higher recovery rates on high-cost specialty medications by leveraging patient history information, the direct relationships that pharmacies have with prescribing physicians, and the relevant and specific expertise of pharmacists.

Pharmacies receive all relevant coverage information for each disallowed claim and they are asked to bill the appropriate plan. HMS’ Provider Relations team is available to assist pharmacies in determining appropriate billing and strategies for denial management, where needed. To streamline communication and eliminate paper correspondence, pharmacies can leverage HMS’ online Provider Portal.

Many clients already use HMS’ Disallowance to engage providers and recover payments for medical services that were paid erroneously when a third-party plan was liable. Expanding this process to pharmaceutical expenditures for costly specialty drugs is a logical path forward to continuously improve recoveries.

The result is more money in the Medicaid pool for necessary member procedures and prescriptions, more lives that can be covered within the Medicaid program and a lower likelihood of potential Medicaid program budget shortfalls.

To learn more about how Pharmacy Disallowance can help your organization, contact us.

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