Pharmacy Benefit Management: Strategies and Approaches for Managing Prescription Drug Costs

Transcription

1 Pharmacy Benefit Management: Strategies and Approaches for Managing Prescription Drug Costs Adrian Washington PharmD., MBA Vice President of Client Management UnitedHealthcare / OptumRx

2 Agenda 1. Discuss why pharmacy is a significant cost driver in both health benefit and workers compensation programs 2. Discuss the impact of specialty drugs across all other expenses 3. Learn about strategies and innovate approaches available to deploy in your programs as new drugs come into the market 2 Proprietary Information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

3 Aging Population Americans age 65+ fill an average of 28 prescriptions a year Compared to 11.9 prescriptions for adults age 19 to 64 1 Nearly 92% of older adults have at least one chronic condition, and 77% have at least two 2 Prescription drug trend for retirees age 65 and older is expected to rise 7.5 percent more than twice the rate of retiree medical cost trends 3 1. The National Council on Aging; 2. Milwaukee Journal Sentinal Stock benefits from aging population ; Segal Health Plan Cost Trend Survey 3 Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

4 Dynamics of Trend Drug Price Inflation Specialty Medications Patient Expirations Direct to Consumer (DTC) The leading contributor to trend is price inflation, which manufacturers have kept in double-digits for specialty and nonspecialty brands over the past 4 years. Although competitive dynamics differ between traditional and specialty drugs, price increases drive trend in both categories. Specialty medications continue to be one of the most significant factors of trend, driven by inflation, increased utilization, and new drugs to the market. Today, specialty spend accounts for about 35% of all Rx spend and projected to increase to 50% in just 2 years will bring generics for blockbusters in the cardiovascular category, as well as four major HIV drugs. $90-$100B in patent expirations over the next 2 years, 2 but mostly tied to complex specialty medications Pharma advertising spend increased 30% in the past 2 years 3 and reached $5.2B in , with the highest expenditure being TV commercials which average 80 per hour, 24 hours per day. 5 28% of the population report asking their doctor about a drug they saw advertised and 12% say their doctor prescribed it American Journal of Managed Care, The Growing Costs of Specialty Pharmacy Is This Sustainable?, Feb 8, FiercePharma Special Report: Top 10 Drug Patent Losses in Fierce Pharma, Pharma's ad spend vaults to $4.5B, with big spender Pfizer leading the way, March 25, NPR.org, Selling Sickness: How Drug Ads Changed Health Care. 6. Kaiser Family Foundation, Prescription Drug Costs Remain Atop the Public s National Health Care Agenda, Well Ahead of Affordable Care Act Revisions and Repeal, October 28,

5 Key Industry Trends: Patent Expirations What the FDA Says: All generic drugs approved by FDA have the same high quality, strength, purity and stability as brand-name drugs. And, the generic manufacturing, packaging, and testing sites must pass the same quality standards as those of brand name drugs. 1 What the Manufacturer Says: In fact, not all medications work the same for all patients, including the generic equivalents. When your doctor prescribes a medication, it is because he/she has decided it is the right one for you. 2 Between 2010 and 2012, an estimated $73 billion in excess of generic cost was spent on brand drugs within the same class. - Journal of the American Medical Association

6 Brand and Generic Market Dynamics Impact on cost Brand accelerated price increases 1 New 3 Our rebated brand price 2 Launch of brand extensions High-price generics during exclusivity period Patent expires Months from patent expiration 6 Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

7 A Look Back on Drug History There are thousands of drugs on the market today and more launching. THEN Limited Treatment Options few classes and medications available, unique drugs that focused on common diseases Innovative Brands new treatment options create value NOW Generics Booming patent expirations create new generic wave Re- invented Brands old brands reformulated and repackaged to create new patent life, adding cost to the system without adding clinical value Focus on Specialty and Orphan Drugs increased treatment options for unique lifesaving/extending drugs Over time, the traditional drug pipeline has dwindled, and the focus has shifted to specialty medications and orphan drugs. Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group. 7

8 Top Spend Classes under Pharmacy Benefit More than 46 million people in the U.S. have inflammatory conditions $1.2 million average lifetime treatment cost multiple sclerosis hepatitis C sales topped $2.6B in Q1 of 2014 HIV infects 50,000 people in the U.S. each year By 2022, 18M Americans will be living with 75% of total pharmacy drug spend represented by 5 classes cancer 8 Cancer: The American Association for Cancer Research (AACR) / Inflammatory Conditions: National Institute of Arthritis and Musculoskeletal and Skin Diseases / Multiple Sclerosis: Scope, Stanford Medicine / Hep C: Merrill Lynch data / HIV: CDC

9 Dynamics Impacting Specialty Trends Specialty drug costs are predicted to represent 50% of overall drug costs by Cost Implications Drug Pipeline Biotech Innovations Specialty pharmacy spend is growing by more than 15% annually. 2 Price inflation is expected to account for half of annual spending increases. 60% of drugs in the pipeline are specialty drugs. 3 Over 20 biologics will lose patent protection by In the US, an estimated 30 million people have rare conditions, creating fierce competition to be first-to-market with new treatments. 1. American Journal of Managed Care, The Growing Costs of Specialty Pharmacy Is This Sustainable?, Feb 8, Specialty Pharmacy Times, 10 Top Trends in Specialty Pharmacy, Oct 14, PHRMA 2014 Report Biopharmaceuticals in Perspective. Spring Specialty Pharmacy Times, Implications of Biosimilar Use: A Market Perspective, March 13, 2013.

10 Biosimilars Overview Biosimilars will provide less expensive versions of branded biologic drugs in the same way generic drugs do for small-molecule chemical drugs. First biosimilar, Zarxio TM (filgrastim-sndz), approved by FDA in March biosimilar clinical trials underway in the U.S companies & research labs developing biosimilars worldwide 2 Differences between biologic drugs and traditional drugs create barriers against biosimilar growth: Complexity Cost Prescriber adoption 700 medications moving through various pipelines 2 1. Specialty Pharmacy News. Biosimilar Development Ramps Up, With Many Products in Pipeline. August 2014,Vol 11, Issue FierceBiotech. Biosimilars Set to Revolutionize Global Drug Development Industry with More Than 700 Therapies in Pipelines. Sept. 29, 2014.

11 Orphan Drugs The focus on large disease populations as the biggest potential revenue streams is shifting to rare conditions where are orphan drugs are used Orphan Drug Act Manufacturer incentives to develop orphan drugs Faster approval process Longer market exclusivity 260 drug applications in in /3 of all drugs approved in Less competition +5% growth rate over non-orphan drugs 2 42% of specialty pipeline 1 Orphan drug market expected to hit $127B by 2018 accounting for 16% of total prescription drug sales. 3 Source: Regulators adopt more orphan drugs. NATURE. April The Economic Power of Orphan Drugs. Thomson Reuter Orphan Drug Report. EvaluatePharma. 11 Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

12 Pipeline Forecast: Blockbuster Drugs New Drug Approvals and Applications Brand Name Generic Name Drug Class Indication/Use Route Hepatitis C Hepatitis C PO Nucala mepolizumab IL-5 inhibitor Severe asthma SC Cinqair reslizumab IL-5 inhibitor Severe asthma IV Ocrevus ocrelizumab anti-cd20 monoclonal antibody Multiple sclerosis IV Taltz ixekizumab IL-17 inhibitor Plaque psoriasis SC TBD brodalumab IL-17 inhibitor Plaque psoriasis SC Ocaliva obeticholic acid FXR agonist PBC and NASH*** PO TBD ivacaftor / VX-661 CFTR corrector Cystic fibrosis PO Translarna ataluren Gene transcription modulator DMD, cystic fibrosis PO TBD sarilumab Il-6 antagonist Rheumatoid arthritis SC TBD baricitinib JAK1/JAK2 inhibitor Rheumatoid arthritis PO ) *** Ocaliva is FDA-approved for PBC; it has not been approved for NASH Note: Estimated approval dates are subject to change. Budget impact analyses are based on assumptions and estimates with available information at the time of pipeline drug evaluations. PMPM calculations are not plan specific and various factors may alter these analyses (e.g., contracting strategy, benefit design, etc.). Actual pricing and budget impacts may vary. OptumRx is not responsible for any decision or outcome that may result from use of this report. 12 Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

13 We manage new drug pipeline trend before it happens New Drug Approvals and Pipeline (non-specialty) Medication Name Therapeutic Use Estimated Approval Date Acute/ Chronic Xiidra (lifitegrast) Dry eyes 7/12/2016 Chronic Xultophy (insulin degludec/liraglutide) Type 2 diabetes 7/25/2016 Chronic Lyxumia (lixisenatide) Type 2 diabetes 7/29/2016 Chronic iglarlixi (lixisenatide/basal insulin) Type 2 diabetes 8/22/2016 Chronic Xeglyze (abametapir) Head lice 9/14/2016 Acute Invokamet XR (canagliflozin/ metformin ER) Type 2 diabetes 9/20/2016 Chronic FIAsp (insulin aspart [ultra fast acting]) Diabetes 10/9/2016 Chronic Note: Estimated approval dates are subject to change 13 Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

14 Leading Trend Management Case Study: UnitedHealth Group Managing trend through continual innovation and focus. 1.1% Six year average trend (PMPM) Make smart medication choices Advantage PDL Exclusion Strategies (semi-annual) Exclude at Launch Eliminations of Specialty Coupons Full Clinical Suite (Supply Limits, Step Therapy, Medical Necessity, etc.) Price Protection Pharmacy Trend (PMPM) Choose the right pharmacy Select Designated Pharmacy Mail Service Member Select Annual Network re-contracting $33.96 $30.75 $31.63 $34.81 $36.63 $36.11 Help manage overall health Specialty Pharmacy Program Clinical Synchronization Adherence & Gap in Care Programs Biometric Screenings Incentive for Premium Reduction Experience and benefit design ONE Call & Web Support Medication Text Reminders Consumer Driven Health Plan Preventative Drug List with Copays Annual Increases in Combined Med/Rx Deductible 14 Proprietary information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group.

15 15