Specialty Pharmacy

United Healthcare Narrows Network of Specialty Pharmacy Providers

Reprinted from the January 2007 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.

When the UnitedHealthcare (UHC) unit of UnitedHealth Group wanted to narrow its network of specialty pharmacy providers in early 2005, it began looking into the issue by performing a rigorous assessment of their capabilities. What it found, says Randy Falkenrath, vice president of specialty pharmacy at UHC, was that there is "no profound, compelling evidence of the clinical influence pharmacies have on pharmacy spend and clinical outcomes. They need to do drug utilization management."

The plan worked to come up with a "good set of metrics that were defensible in the market," says Falkenrath, so it could "create a benchmarking capability for a set of providers, a strong data set to show how does Provider A fare vs. Provider B. Is there any difference in costs? In outcomes?"

The plan went through three different steps to get the information it needed:

(1) Exploratory discussions with companies: Providers would come to UHC and talk about their companies and backgrounds.

(2) A "pretty intensive RFP [request-for-proposal] process": In order to narrow down the choices, companies gave examples of their management approaches, partnerships and similar programs.

(3) Reviewing, questioning and challenging the RFP: "We wanted to have some data, something to back up" what the companies were saying. Among UHC's questions: What metrics do they use to define success? What programs are their robust ones? How do they integrate with payers and provide care coordination and disease management?

After it went through those steps, UHC narrowed down a network that previously had dozens of providers to one that had two providers for each of six therapeutic categories: rheumatoid arthritis, multiple sclerosis, anemia and neutropenia, growth hormone, infertility and hepatitis C. Cirrhosis and thrombocytopenia are included as well because they are "conjunctive with the other categories," adds Falkenrath. UHC chose these categories because most were in its top-10 spend in the pharmacy benefit.

Falkenrath declines to identify the vendors, but he says there are a total of six providers for those categories. They comprise a mix of "large, multi-class companies and a couple of niche providers" that are "not necessarily independent but specialize in one or two categories." The pharmacies also offer a mix of mail and retail pharmaceutical availability.

Besides offering obvious value to UHC, the vendors have a financial advantage, he says - the fewer the providers, the more business for those participating.

According to Falkenrath, 75% of the covered lives in its new network started up in the program in June 2006. For self-funded lives, 15% have implemented this program.

In total, he says, what the company has seen in the first wave of the process is a 5% reduction in pharmacy costs in those categories. Falkenrath does not offer any further cost specifics, but he asserts, "We knew we could reduce acquisition costs." The vendors, he says, are aware of UHC's evidence-based medicine approach and its product tiering.

UHC created a benchmark based on historical data that it uses to evaluate the companies' performance per product mix vs. the "ideal" mix. "The numbers have been exactly as we thought they would be," Falkenrath says, adding that the plan thought it "would see differentiation between providers. Some are much more effective in influencing providers and members."

UHC to Evaluate Lengthy Data Set

Over the next three quarters, the company will review the data. The providers are on 18- to 24-month contract timelines, says Falkenrath, so UHC can evaluate a 12-to-16-month data set. By June 2007, the company "will be into the review process" to determine whether it wants to recontract for the conditions or to continue with the vendors it already has in place.

One of the points UHC has learned so far is how to treat members with multiple conditions. Do you send those members to multiple providers? UHC decided to go with a single provider with a broader capability.

"It has been a very positive experience," says Falkenrath. He adds that "specialty pharmacies are very assertive and anxious to be involved."

Does he anticipate changes to the group of vendors? "It is inevitable that it will change," he responds. "The question is, in what respect?"

"This is a little different philosophy for United than before," Falkenrath says. "We are now responsible for creating and managing our pharmacy benefit services," which had been managed by Medco Health Solutions, Inc. "We've created our own narrow network that we manage directly, and we'll build competency around it."

"The payback has been well worth it," according to Falkenrath. "By having that approach, having an active and proactive engagement with providers, collecting information, reporting, reviewing and transitioning members, we have found new ways to look at areas of importance."

UHC is in the process of rolling out the second wave of the initiative, which includes HIV, oral oncology and transplant drugs. The plan is working through the RFPs now, and Falkenrath says he "anticipate[s] we will launch the program at the end of the second quarter or early in the third quarter of 2007."

With this wave, he says, "clinical engagement and integration are more significant." United Resource Networks (URN) is a unit within UnitedHealth Group that manages infertility and transplant drugs for the plan, as well as carves out those services for other payers. Falkenrath says that there will be "more tight coordination with URN and the pharmacies" and that the plan will be "building out more capabilities." External network providers will be connected with UHC internal programs, such as its behavioral health program, under which depression testing occurs.

So far, though, UHC has found that it "has been able to leverage lower-tier therapeutic alternatives," says Falkenrath. "The clinical piece will come over time. We have a quarter's worth of data," and a few more quarters of data are needed before UHC will know about the impact on its total health care spend.

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