It’s no secret that specialty pharmacy costs have soared in recent years. By some estimates, specialty medications now account for half of all drug spending. A 2020 survey found that 42% of employers view specialty drug costs as their top healthcare expense concern.
To help employers manage these rising drug costs, their pharmacy benefit managers (PBMs) sometimes recommend a cost-control strategy known as a “lockout list.” This list is created and managed by the PBM and identifies certain specialty drugs to be obtained through the PBM’s specialty pharmacy only. Specialty drugs are used to treat complex and chronic conditions (such as Crohn’s disease or cancer) and are infused or injected by a provider.
How does a lockout list help control costs? PBMs tend to have greater buying power, which can mean lower drug costs, opportunities for rebates, and network discounts for employers and their members. On the other hand, when providers buy and bill for drugs, employers miss out on these cost-saving opportunities.
Insights from the front line
Quantum Health’s Care Coordinators engage with hundreds of members and providers daily, often around questions and authorizations related to prescription drugs. We’re in a position to see how a lockout list strategy sometimes creates unintended confusion and challenges for members and their treating physicians.
When a lockout strategy is implemented, a provider might discover that a treatment they have been buying and billing directly must be sourced from the PBM’s specialty pharmacy. The unexpected change in sourcing the medication could result in a treatment delay, which might cause worry for the member and even allow their condition to worsen.
Things can go downhill from there. A flare-up of a member’s condition can lead to greater resistance to the prescribed medication. If the case is severe enough, it may even land the member in the hospital for a costly inpatient stay. Should their health deteriorate further, the medication may be deemed a treatment failure, requiring a new, potentially more costly drug to be used.
In some cases, the list might also mean a new provider must be introduced into the member’s treatment journey, because the lockout list places certain limitations or requirements on the type of facility where a provider is permitted to administer the drug.
Preventing unintended impacts on members and providers
When implementing a lockout list strategy, employers and consultants should consider these three factors to help minimize disruption to members’ experiences and providers’ treatment plans:
- Ensure timely provider authorizations. Providers contact the PBM for authorizations of specialty medications. Employers or their independent navigation partner should confirm the PBM is processing authorizations quickly to support timely and accurate billing. This vigilance can prevent member and employer frustration and confusion associated with receiving inaccurate charges.
- Define exceptions clearly in advance. Exception processes set guardrails for how to handle unforeseen specialty medication scenarios and are written into the summary plan description by the employer, third-party administrator (TPA) and PBM. For example, if a provider fails to seek authorization before administering a member’s medication, exceptions might allow a TPA approval to pay the first claim, but then any future treatments must be obtained through the specialty pharmacy. Defining exceptions early and clearly will help prevent members (and in some cases, employers) from receiving unexpected and costly bills for medications. In some cases, a hospital is the only medically appropriate location to administer a medication. For example, some therapies must be administered intravenously by a licensed physician. When these sorts of exceptions are identified in advance, it will prevent scenarios where members and their doctors face concerns about timely access to medications.
- Pursue issue resolution proactively. To limit potential confusion or disruption caused by a lockout strategy, ensuring clear communication and proactive issue resolution among members, providers and the PBM is critical. This due diligence can create additional workload for HR teams and requires specialized knowledge around medications and billing processes. It’s one reason employers value the role healthcare navigation can play, allowing them to implement a lockout strategy while working proactively to prevent any potential negative impact on member satisfaction and health outcomes.
As specialty medication costs continue to rise, medical lockout lists and other cost-control strategies are likely to become more common. With some advance planning, and the right partners working to ensure successful implementation, employers have the best chance to control costs and safeguard member satisfaction.