Blog // HealthSmart Blog // November 2019

On the Bubble: Lowering the Costs of High Cost Specialty Drugs and Other High Cost Brand Medications

11/1/2019 1:27:40 PM

On the Bubble: Lowering the Costs of High Cost Specialty Drugs and Other High Cost Brand Medications

by Martino Luu, RPh, Executive Vice President & General Manager of HealthSmartRx Solutions

In February, the current administration caused quite a stir in the healthcare industry – and to our clients – when The U.S. Department of Health and Human Services (HHS) released a proposed rule which aims to eliminate rebates from pharmaceutical companies to pharmacy benefit managers (PBMs) in Medicare Part D and in Medicaid managed care organizations. The proposal was intended to address the growing concern of the “gross-to-net bubble.” Dr. Adam J. Feins, author and CEO of Drug Channels Institute, defines the gross-to-net bubble as the difference in the list price of drugs compared to the actual net price of brand name drugs after the manufacturer pays a rebate to the plan through their PBM.

The gross-to-net bubble has been attracting mainstream media attention because individual patients are negatively impacted. Individual members’ copays or coinsurance are based on the much higher list price of the medication instead of the net price after rebates. In theory, plan sponsors will utilize the rebate payments to offset members’ premiums, but the reality is not always as nice and clean. Adding to this issue has been the rise of very high cost specialty drugs, where approximately 1.5 percent of the member population are contributing to approximately 45 percent of total pharmacy cost and the uptrend in coinsurance for specialty drugs. Many of these members are faced with thousands of dollars in copays every month.

As expressed by the administration, “the intent of this rule is to eliminate rebates from manufacturers to PBMs and replace them with discounts provided to beneficiaries at the point of sale.” The goals of the proposal sounded great – lower out-of-pocket payments for high-cost beneficiaries, lower list prices and a more efficient alignment of incentives. There were, however, some concerns on how all the supply chain stakeholders would react. Will manufacturers unilaterally lower the list prices? What’s the impact on premiums?

After many months dominating the healthcare news, the HHS unexpectedly withdrew the proposal on July 11, citing several factors including the likelihood that the proposal will increase premiums for most beneficiaries.

So, what does all this mean for HealthSmartRx clients? The answer is two-fold.

  • First, it’s business as usual and HealthSmart will continue to pay our clients their rebate guarantees. If the proposal came to fruition, rebates would stop being paid to the plan sponsors and instead translate to a point of sale discount to the members/patients (HSRx does have a point of sale option for interested clients)
  • Second, we still have the gross-to-net bubble impacting members on a high cost specialty drug and other high cost brand medications. We encourage our clients and members to utilize our variable copay program, in which we leverage manufacturers’ funding for copay assistance to decrease members’ out of pocket costs and potentially save plan sponsors additional dollars.

Rebates have been used by PBMs like HSRx, health plans and plan sponsors to partially offset the cost of prescription drugs, but HSRx isn’t like other PBMs. We get creative and develop programs to further offset the rising costs of prescription medications, like the variable copay program I mentioned. This is just one way we’re helping members and plan sponsors save money on medications.

Martino Luu, RPh is Executive Vice President & General Manager of HealthSmartRx Solutions. He is an expert in clinical and pharmacy operations, with experience working with leading specialty pharmacies and PBMs. Martino graduated from pharmacy school at Rutgers University and completed his MBA in entrepreneurship at the Silberman School of Business at Fairleigh Dickinson University. He is a licensed pharmacist in Texas, Florida, Tenness and New Jersey.