March 21, 2018

Guest Post: The High Cost of Drug Savings

By Phil Walls, R.Ph., Chief Clinical and Compliance Officer, myMatrixx

Phil WallsHigh costs and savings do not usually go hand in hand, but when it comes to a relatively new category of drugs known as Specialty Drugs, perhaps it is time to re-think the traditional savings reports provided by pharmacy benefit managers (PBMs) in order to recognize the true savings generated by some of these drugs. Those traditional reports typically focused on three types of savings:

  • Generic Savings: realized when a generic drug is substituted for a brand name drug;
  • Fee Schedule Savings: calculated as the difference between a state’s fee schedule and the PBM’s contracted rate for prescription drugs; and
  • Clinical Savings: typically associated with savings realized when an unnecessary or inappropriate drug is discontinued as the result of an intervention by a clinical pharmacist or use of a formulary or step therapy program.

All of these examples have withstood the test of time because they are considered to be “hard” savings; in other words dollars that would have been spent if not for these programs or interventions simply were not spent. In actuality the savings are much higher: there may be savings from avoiding hospitalization when a pharmacist stops a dangerous drug interaction or the impact of a clinical intervention on a physician not only affects the prescription under review but may actually change the prescribing habits of that physician on other patients as well. These latter examples fall into the category known as “soft” savings, which does not mean they don’t represent real savings, but simply that the amount of those savings is at best an estimate.

Another roadblock to the calculation of these “soft “ savings is what has come to be known as a “silo mentality” or “silo thinking” referring to the way in which data is stored in different types of silos; i.e., the drug spend is kept in a pharmacy silo, hospitalizations are kept in a medical silo, and so on. Although the basis for segregating data into silos may have seemed logical, the unintended consequence has been that opportunities may be lost when silo thinking causes attention to be placed on one silo and not the overall picture. As a result, refusing payment for a drug will create savings in the drug silo regardless of the impact on others silos, such as increased office visits or delayed return to work. Elimination of these silos through a homogenization of a company’s data will go a long way toward promoting proper decisions, but an article published in Forbes last October indicates that silo thinking is still alive and well.

Which brings me back to my original premise: to fully appreciate the value of Specialty Drugs, one must evaluate the impact of that drug on all the different expense silos. In general, specialty drugs may be defined as expensive drugs used to treat rare conditions. Case in point: The launch of a new drug Sovaldi® in January was met with praise because it produces a 96% cure rate for Hepatitis C and with jeers because it costs $1000 per day! That means a 12 week course of therapy will cost $84,000. It also means the patient will very likely be cured if they follow their regimen very carefully. And the treatment stops. And the looming possibility of a liver transplant, which arguably costs between $240,000 and $500,000, goes away. And the patient returns to a productive life. And most of the associated expenses are gone! So at a time when the pharmaceutical industry is under fire for launching “me-too” products that lack innovation and do little to advance medical science, specialty drugs offer true innovation that may live up to the expectation we all have for medical care, which is to improve patient quality of life and decrease overall expenses. However, the latter measure may require a change in the way we view expenses.

myMatrixx is a WorkCompWire advertising partner.
This is not a paid placement.

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