Specialty Pharmacy

Home Infusion Therapy and SRx: What's a Payer to Do?

Reprinted from the June 2005 issue of SPECIALTY PHARMACY NEWS, a monthly newsletter designed to help health plans, PBMs, providers and employers manage costs more aggressively and deliver biotechs and injectables more effectively.

By Bill Sullivan

In the late 1990s, payers began to express growing alarm over the spike in utilization of hospital outpatient infusion services and home infusion therapy. Biotherapies such as Remicade suddenly presented significant cost management challenges — a double whammy of high-cost therapy and expensive administration billings. For once, oncology was not a primary cost driver since oncologists have always preferred to office-infuse and thereby achieve attractive margins.

Home infusion therapy (HIT) has long been a service that health plans have viewed critically. Years of questionable utilization and specious billing practices led to a major overhaul of these contracts by payers nationally. Stringent authorizations for services have become commonplace, and HIT vendors have had to work hard to improve their image. A positive working relationship between HIT companies and payers will clearly be of mutual value in the new environment.

Improvements in the contractual and working relationships between payers and HIT providers cannot come any too soon. In the very near term the expected product mix within the HIT market will put upward pressure on costs due to the introduction of the new high-cost infused biotherapies. According to the September 2004 issue of Biotechnology Today, out of the 125+ biotech therapies identified in the near-term FDA approval pipeline, approximately 80 are infused.

Mike Sicilian, executive vice president, home infusion and alternative site for Managed Healthcare Associates, confirms that MHA has already initiated formal discussions with various biotech manufacturers to contract for these products. (MHA is one of the fastest-growing national home infusion group purchasing organizations in the country.)

Sicilian states, "Our infusion therapy members see home care as taking on a significant role in the clinical management and distribution of these therapies. With the recent number of specialty pharmacy acquisitions of traditional home infusion providers, it is becoming clearer that the local, regional and national infusion therapy providers are increasingly capable of providing these services as an extension of their current high-touch clinical services. It is important to remember that before specialty pharmacy these home infusion providers were compounding, distributing and clinically managing chemotherapy and intravenous nutrition patients in the home care setting. MHA's members see this as a natural expansion of their services, and a number of them have been contacted by payers within their respective markets to provide clinical expertise and manage these highly complex and life-sustaining therapies. Many infusion providers today see this as a strategy to increase new patient referrals and realize better net gross margin dollars."

And, he adds, "payers are becoming more sophisticated from a systems perspective in how they reimburse the home infusion providers, and the medical-vs.-pharmacy-benefit issue is becoming less of an obstacle. The term 'specialty infusion' is really beginning to stick across the segment."

Just months after the much-anticipated launch of Tysabri, Biogen Idec pulled the multiple sclerosis drug from the market due to safety concerns. That story diverted attention from a broader issue of escalating concern to the health care delivery system, and payers in particular. Few neurologists prescribing Tysabri possessed in-office IV capabilities and, while some considered building out these services, thousands of patients were referred to hospital outpatient clinics or home infusion companies. This event underscores the fact that infused medications coming to market in the next two years will commonly be prescribed by specialists with no or insufficient in-office IV capacity to accommodate a burgeoning demand.

Payers are generally unprepared to prospectively manage the impending onslaught of new IV therapies. Since they have little understanding of their current providers' capacity, they cannot adequately determine whether they need additional resources. The efficacy of yet-to-be-available products — along with the impact of direct-to-consumer advertising — is impossible to project, and health plans will need to scramble to "guesstimate" rates of utilization, associated professional (per-diem) expenses and, ultimately, how much to factor into premiums to cover these costs. Since most health plans set rates as early as 9 to 12 months in advance, the ability to forecast these significant costs becomes worrisome.

Payers are now asking their providers to offer better-integrated solutions that can contain therapy costs and manage the utilization of nursing services. A vexing question facing payers is exactly whom should they be talking to as HIT providers forward integrate into specialty pharmacy territory and specialty pharmacy providers backward integrate into HIT.

Jeffrey Casberg, director of pharmacy for ConnectiCare (Farmington, CT), saw a natural merging of pharmacy and HIT as early as 2003. Coordination of therapies across the delivery spectrum clearly was expanding — including self-injectables, office-administered and, increasingly, home-administered products. Alarmingly, outpatient infusion utilization was also spiking. "We needed to get a handle on the situation. By working with our home care providers, we detailed our prescribing network physicians and identified needs and gaps, especially in-office infusion capacity. In response, we arranged for our HIT provider to administer infusions in physician offices where no infusion chairs were available. These patients are routinely transitioned to home care as soon as they are stabilized on the infused therapy. It is a win-win situation — quality care, better coordination, convenience for the patient, and appropriate cost containment for ConnectiCare," Casberg says.

Health plans have learned that having a game plan in place as soon as soon as a new biotherapy is released is highly beneficial, especially if managing higher-cost outpatient utilization is a key objective. Casberg continues, "Our contracted specialty pharmacies and lead HIT provider have provided invaluable assistance in our ability to develop [utilization management] strategies before new therapies hit the market."

"We have also seen measurable improvements in controlling established therapies like Remicade and IVIG with many former outpatient clinic referrals being redirected to our lower-cost HIT provider," says Casberg. "We now actively negotiate terms for pharmacy services directly with our HIT provider in coordination with our network contracting department. This is new territory for pharmacy, but the effort is really paying off."

And What About Pharma?

Manufacturers are also struggling to deal with the blurring of HIT/specialty pharmacy lines. Class-of-trade pricing has traditionally separated retail pharmacy from specialty, specialty from HIT, and so on. As HIT and specialty pharmacy providers begin to blend their products and delivery models, manufacturers' pricing strategies are further complicated.

Much lobbying is being done by each interest group to influence these changes since a movement of only one-to-two percentage points in either direction translates into millions of dollars — a huge difference to these companies' bottom lines — and a direct hit to what providers will be charging for these medications. Payers would be well-advised to keep a close eye on how this process shakes out.

Bill Sullivan is an Orlando, FL-based consultant working exclusively in the specialty pharmacy and disease management segments.

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