Specialty Pharmacy:“The Inside Story”John Aforismo, B.Sc. Pharm., R.Ph

Chairman & FounderRJ Health Systems International, LLC

AGENDA

1. Current Reimbursement Trends2. Payor Models3. Managed Care Expectations

Payor Issues

What issues are Payors struggling

with?

Home Infusion

Contracts

Pharmacy Network Contracts

Manufacturer Incentives

Physician Contracts

Specialtyvs

Buy & BillSpecialty Formularies

Specialty Pharmacy Contracts

Reimbursement: Trends

AWP?

Average Wholesale

Price

AMP

AverageManufacture

Price

SWP

Suggested Wholesale

Price

AAC

Average Acquisition

Cost

MAC?

Maximum Allowable

CostPAYORSReimbursement Methodologies? WAC?

Wholesale Acquisition

Cost

ASP?

Average Sales Price

HCPCS

Drug Codevs

NDC

Reimbursement: Trends• Payors (commercial & federal government) are using

variations of the following:1. ASP (average sales price)

2. AWP (average wholesale price)

3. WAC (wholesale acquisition cost)

4. SWP (suggested wholesale price)

5. AMP (average manufacturer’s price)

6. AAC (average acquisition cost)

7. MAC (maximum allowable cost)

• Pharmacy benefit

• Medical benefit

New Reimbursement Methodologies

MAC (Maximum Allowable Cost)

• “A list of prescription medications established by a health plan (PBM or Third Party) which will be covered at a generic product level price.”

• Pharmacy Benefit:

• Medical Benefit: • HCPCS Drug Code Level

• NDC Level

Acquisition costs used as reference

New Reimbursement Methodologies

Average Acquisition Cost (AAC)• Used for Medicaid• Surveys of Pharmacy Purchases• Reflects the final drug price paid by the pharmacy after

subtracting discounts• Each state reimbursement would be different • NA DAC- National Average Drug Acquisition Cost

Potential New Benchmark from CMS

NADAC National Average Drug Acquisition Cost

• Developed in response to FDB ceasing publication of AWP in September 2011

• More precise than AWP/MAC

• For Medicaid Drug Reimbursement

Is A New National Benchmark

Needed?

Reimbursement: Observations

Reimbursement Observations

Present Payor ContractsRetail Pharmacy

• Brand name drugs: • Usually AWP discounts range from AWP−14% to AWP−16%

(plus dispensing fee) ($1.40 – $1.50)• Generic drugs:

• MAC plus dispensing fee (AWP-76 or MAC) ($1.40 – $1.50)

Mail Order Pharmacy• Brand name drugs:

• AWP discounts range from AWP−23% (plus a small or no dispensing fee)• Generic drugs:

• AWP− (plus a small or no dispensing fee)

Reimbursement Observations

Specialty Pharmacy• AWP discount can vary by drug with maximum discounts

seen of AWP–35%• Payors requiring NDC on claim when HCPCS Drug Codes

is supplied.

Specialty Pharmacy

Managed Care Expectations

Specialty Patient Workflow

Initial Prescription Received

Benefits Verification

Proactive Clinical Assessment

Care Coordination

Personalized Education

Dispensing & Shipping

Member Outreach

Clinical Reassessment

Clinical Intervention

Billing

Compliance & Persistence

Prior Authorization & Step Therapy

Payor/Management:

ICD 9

ICD 10

Reimbursement

CPT Drug Code

Drug Units

HCPCS Drug Code

NDC Drug Name

Strengths

Min

Max Dose

Admin Code

Office Supportive

Code

CMS1500/UB04Claim Form

857Electronic Transfer

CONTACT INFORMATION

RJ Health Systems International, LLC30 Cold Spring RoadRocky Hill, CT 06067

Phone: 860-563-1223 Fax: 860-563-1650

E-Mail: info@rjhealthsystems.com

Specialty Pharmacy: “The Inside Story”

Stephen Lagano, Founding Principal, Altometrixs, LLC

Today’s Objectives

• Overview Specialty Pharmacy And Market

• Identify Significant Impactful Trends

• Identify Key Stakeholders And Their Expectations

• Review The Specialty Pharmacy Business/Financial Model

• Business/Patient Impact – Reimbursement & Care Perspective

• Discussion Into The “Future”

Discussion Guide

Market TrendsStakeholders

SP Business/Financial Model

Into the “Future” Discussion

Specialty Pharmacy

Reimbursement Trends

What is Specialty?

Confusion: • “Specialty” is term used to describe products, markets, companies, programs, etc.

Clarity: • For consistency the term “Specialty” will be utilized to describe products ,certain

therapeutic areas and channels:

• Injectable and infusion therapies (can be an oral drug)

• High-cost ($5,000 and up per patient per year) therapies

• Therapies that require complex care (“high touch” services)

• Special handling

Specialty Products

• Specialty Distributors• Servicing physicians• Clinics, etc.

• Specialty Pharmacies

* - Specialty products can go through the retail channel

Specialty Channels*

Specialty PharmacySpecialty Pharmacy:

• Specialty pharmacy is a “closed door” pharmacy that is delivering high cost drugs for complex therapies that require patient case management and “high touch” services

• Specialty pharmacies provide day-to-day patient management

services to optimize the patient’s clinical outcomes, including:• Coordination of care across all providers• Patient counseling and support to assist with injection technique• medication side effects and disease complications• Recognizing and responding to suboptimal responses to therapy• Identifying insurance coverage and reimbursement support

services to assist the patient with out-of-pocket expenses that may limit the patient’s access to the drug

Specialty Markets

Specialty Markets: • The specialty markets is an aggregate of specialty of

specialty products under therapeutic categories

• Common specialty markets therapeutic areas*:• Rheumatoid Arthritis• Multiple Sclerosis• Oncology• HIV/AIDS• Human Growth Hormone• Hepatitis C • Infertility • Auto-Immune

* - Sample list not meant to be exhaustive

The Specialty Markets Are About GrowthDrug Spend - Prescriptions

2006 2011 2016

Branded Generic Specialty

% A

nn

ual S

pen

d

0%

10%

20%

30%

40%

50%

60%

70%

80%

68%

57%

27%

14%18%

33%

18%

25%

40%

Drug Spend: 2006 - $270B, 2011 - $320B, 2016 - $404B

Sources: HIRC & IMS Estimates

Multiple Influences Affecting Specialty

Health Care Reform

Rising Health Care Costs

Patient Pool Increases

Provider Pool Decreases

New & Improved Specialty Biologics

Quality of Care

Affordable Care Act

“Actual Care Act”

Innovation

Costs/drug Spend

Increase

?????

Increasing Challenges = Increasing Opportunities

Complex “Picture”

Trends Impacting Specialty

Health Care Reform

Multiple Moving Parts – “Not All in the Same Direction”

Patient Protection Act

Affordable Care Act

More Patients

ACO/Health Exchanges

Technology“Push”

Comparative Effectiveness

Research

Trends Impacting Specialty

Health Care Costs/Drug

Spend

Increasing costs/spend

Provider Employers

Cost Containment

Outcomes Demonstrated Value

Patient Plan

Utilization Management

Pharmacy/Medical Benefit Management

Decision/Payment Criteria

Trends Impacting Specialty

Drug Pipeline

Simple /Traditional Complex/Specialty

Retail/ Specialty Channels

Therapeutic Expertise

Critical Patient Needs

Limited/ Restricted Channels

Increasingly Orphan Drugs

Reimbursement Needs

REMs Requirements

Trends Impacting Specialty

Other Important

“Stuff”

Simple /Traditional Complex/Specialty

Biosimiliars TBD TBDCopay

Programs

Generics Employment Situation

Multiple Stakeholders & Multiple Interests

Specialty Pharmacy

Patient Physician

HUB/ Patient Center

Mfg

Payer

Data, SP/ patient performance

Funds

Patient, Program Support ServicesReimbursement

Data,

Data, Referrals

Data

Data, SP/Plan Performance

Data, Referrals

Patient Info, care planning & mgt

Stakeholder – SP Value PropositionsStakeholder Service(s) Value Proposition

Patient Benefits Investigation, Clinical/patient assessments, product fulfillment

Product availability, financial support on OOP expenses, increased compliance and persistency, increase overall quality of life

Physician Coordinated support for patient care, reimbursement support,

Collaborative partner to extend, execute and report on patient care

Payer Implement drug utilization requirements and report on patient and SP performance

Cost savings through appropriate drug utilization, compliance data reporting to validate performance

ManufacturerPatient delivered benefits support, compliance and disease management services, inventory management and data

Provides valuable data that provides insight into patients and business performance, deliver services that increase compliance & persistency and supply chain efficiencies through inventory management and decreased returns

HUB/Patient Support Center

Interfacing with HUB for referrals, coordinate product fulfillment, benefits verification, services and data

Coordinated care/data between SP, HUB and physician

SPECIALTY PHARMACY BUSINESS MODEL AND REIMBURSEMENT TRENDS