Strategies to manage “buy and bill”

[participant5]

Since a “buy and bill” reimbursement payment mechanism may create incentives for overutilization, what are some strategies to manage products in this environment?

[gary.owens]

1. Traditional prior authorization for selected “buy and bill” is effective in managing off label use and overutilization. It is also effective in moving some products to voluntary specialty pharmacy. However, there are many drawbacks. This process can be cost- and labor-intensive, and can only be used in certain circumstances. It may cause delays in access (i.e. submitting the PA, and turnaround time) and does not manage unit cost issues. However, it still allows the provider to use more costly alternatives if the indication is approvable (i.e. larger margin on higher priced product.

2. Voluntary use of specialty pharmacy (especially when coupled with a prior authorization) may allow some movement to the lower priced supplier. However without financial incentives for the member or provider to use specialty pharmacy, this may be relatively ineffective.

3. Mandatory use of specialty pharmacy will eliminate the issue of buy and bill, but some problems are likely, including provider pushback. It is likely that there will be significant network reactions and network de-stabilization, especially in high-volume specialties (i.e. oncology, rheumatology). Some providers may attempt to get around this by moving patients to an outpatient (OP) facility, which may actually increase cost.

4. Reference pricing is another potential strategy. Here, plans can price the reimbursement to the provider at the same level as the specialty pharmacy pricing. There are some drawbacks here including the fact that some providers may refer the patient to OP hospitals on low margin products thus potentially increasing cost. Also, some providers can purchase pharmaceutical agents at lower costs than the specialty provider, because of class of trade issues, thus allowing them to retain the high margin patients and send the lower margin patients to alternate and more expensive sources.

5. Benefit changes may be necessary. Some that may be effective in helping managing buy and bill include introduction of co-payments or co- insurance for products given in the physician’s office. However this may create access problems if the member out-of pocket cost is too high. As an example of this benefit, there could be the introduction of differential cost sharing such as a co-insurance when a product is provided by anyone other than the “designated preferred provider” . If that designated provider is the specialty pharmacy, then the member has a strong incentive to request use of the specialty pharmacy (where one may choose to have a fixed co-payment) over any other supplier including the physician’s office or the OP department.

Ultimately there is no one solution that is best for all situations. It is up to the plan to decide on the strategy or combination of strategies that are most effective and most compatible with their other strategic goals to manage this issue. One relatively aggressive approach is to start with mandatory specialty pharmacy and let the network issues work themselves out. Some plans may find a combination of approaches implemented in an incremental fashion might work better for them. In any regard, having benefits that align member and provider incentives can move plans in the direction that is best needed for them.

[chantell.reagan]

Our May Webinar participants wanted to see if you have found any of these strategies to be particularly effective in the management of oncology products?

[gary.owens]

The most effective initial strategy would likely be reference pricing. In this setting the plan would set the reimbursement of these products at the lowest cost supplier rate, presumably the specialty pharmacy. All drugs would the be reimbursed at this rate whether to the provider or to the specialty pharmacy.. However, there is still the possibility of overutilization of more costly products by the provider if there is margin in dispensing them. One advantage is that his approach is less likely to destabilize the networks. In addition implementing differential copays or coinsurance for members is also another possible strategy. For example, members who use specialty pharmacy pay a fixed copay, while those who choose to use providers pay a coinsurance for their drug. In this instance, the member is aligning with the plan to drive utilization and lower costs. Pure utilization management techniques like prior authorization manage utilization, they don’t really control “buy and bill.”