Site of Care: Helping Employers Control Soaring Specialty Drug Costs

With specialty drugs soaring as a part of employers’ total pharmacy expenses, a site-of-care (SOC) strategy supports medically appropriate care while bending the cost curve.

Specialty drugs are transforming medical treatment and quality-of-life possibilities for millions of people who face health conditions and diseases ranging from the common to the chronic and complex. At the same time, these drugs are dramatically increasing healthcare costs for self-insured employers and their health plan members.

A 2020 Mercer survey found that while only about 2% of consumers receive specialty drugs, these treatments now account for 51% of employers’ total annual pharmacy costs. The survey noted that while overall health benefits costs per employee have been rising in the 3% to 4% range in recent years, employers who track specialty drug costs were seeing an average increase of more than 11%.

By one estimate the average cost of a specialty drug — defined as “specialty,” in part, because it must be infused or injected — recently topped $5,000 per year. The most expensive treatments can cost hundreds of thousands of dollars annually, some more than $1 million.

With an estimated 75% of the drugs in development considered specialty in nature, both the expanding treatment possibilities, and the upward financial pressures, show no signs of slowing.

Managing the SOC to control costs

As employers and benefits consultants seek solutions to this issue, Quantum Health has developed an in-house clinical team that conducts SOC reviews on specialty drug authorization requests and treatment cases. The goal is to help employers and members identify opportunities to reduce treatment costs while still enabling access to clinically appropriate therapies.

Why does the SOC matter? A major factor driving pricing is where a specialty drug is administered. Sites can vary — hospital, outpatient infusion center, doctor’s office, even the patient’s home — with sometimes astounding cost swings. A recent study showed a nearly 90% cost difference between home and hospital (the most expensive) for administering one medication.

In most cases, patients must get their first few doses in a hospital to ensure adequate medical support should there be a life-threatening reaction to the drug. But once a drug proves well tolerated, an SOC program often can shift future treatments to a clinically appropriate, but less costly, location.

How significant can those cost savings be? Our team recently managed a case where a member received infusions every six weeks in a hospital. Annual cost: $621,000. Collaborating with the treating physician, and identifying an alternative infusion facility, we were able to shift treatment to an outpatient setting. Annual cost: $38,385.

Insights from the front line

Quantum Health’s SOC service is integrated into our healthcare navigation and care coordination solution. That means our team gets a uniquely holistic view of each member’s treatment journey. In most instances, we’ve already dedicated a nurse to provide one-on-one clinical support while also engaging with the treating physician.

Not all self-insured employers receive SOC review through one of their benefits administration partners. If it sounds like a strategy that’s needed in your benefits program, here are steps our team considers key to effective SOC review:

• Evaluate for medical appropriateness. From the moment a provider submits a specialty drug for authorization — whether for a new member joining a benefits plan, or a physician seeking approval for a new prescription — an SOC partner should initiate a rigorous evaluation. Doing so will ensure the drug is appropriate for the member’s condition, according to evidence-based guidelines. Quantum Health’s precertification nurses are experts at reviewing authorization requests and work in partnership with our chief medical officer to evaluate the appropriateness of more than 50 specialty medications.
• Verify that therapy has been escalated appropriately. So-called “step therapy” involves gradually escalating treatment from the least expensive option — such as a Tier 1 oral prescription — to the costliest Tier 4 specialty medication. Under a thorough SOC program, each prior step must be tried and shown to be unsuccessful before the specialty drug is authorized.
• Check the dosage. Clinical studies have indicated medical appropriateness for higher-than-standard doses of some specialty drugs (sometimes double or even triple the standard dose). But when a doctor seeks authorization for an unusually high dosage, the treatment could be considered “investigational,” and excluded from coverage, under an employer’s health plan. An SOC partner should flag these scenarios for further consultation with the treating physician before treatment is authorized.
• Shift to less costly sites when safe and appropriate. An effective partner will shift the care site for treatments that don’t truly require administration by a physician in a hospital setting. Certain medications (such as chemotherapy) do require a doctor in a hospital setting because of the potential need for immediate on-site medical intervention. Be aware that pairing with other strategies, such as medical lockout lists, may restrict SOC savings.
• Perform continuity review. If a member’s condition isn’t responding as intended to a treatment, alternative or less costly options might be indicated. Some of the costliest specialty drugs should receive continuity review at three- or six-month intervals to ensure they remain clinically effective. At minimum, a specialty drug authorization should be reviewed annually for clinical performance and cost-effectiveness.