Managed Care Innovator: Jane Lutz - Part 1

The Pharmacy Benefit Management Institute (PBMI) is an independent research and education organization that focuses on the complexities in the pharmacy benefit management (PBM) landscape. Its research uncovers key marketplace trends that facilitate actionable decision-making. We recently sat down with Jane Lutz, PBMI’s executive director, to address the group’s most recent findings, and get her take on what they mean for managed care stakeholders. Ms Lutz—a 24-year veteran in the pharmacy benefit management space—told us about PBM customer satisfaction, attitudes towards financial transparency and goal alignment, where PBMs can step up and assume a leadership role, and more. 

Let’s start out addressing the importance of customer service. What does PBMI’s most recent customer satisfaction report reveal about PBMs?  

Our 2017 report shows that while satisfaction is gradually increasing, it’s still not exceeding expectations.  

What did you specifically find in this regard?  

On a scale of 1 to 10, with 10 being the highest level of satisfaction, overall satisfaction in 2017 was 7.9. In 2013 it was 7.6. Smaller PBMs tend to get a higher overall rating. Those with 20 million members or fewer received a score of 8.6 in 2017, whereas their larger counterparts were rated at a 7.6 last year. We also saw differences by plan type. Union plans were most satisfied with their PBMs, rating them 9.0. This was followed by employer plans at 7.9, and health plans, third-party administrators, and insurance companies at 7.6. 

There has been a very slow uptick in satisfaction, but there is still a huge opportunity to improve it even more.

What is the best way to get there?   

It’s important to recognize that many core PBM functions are basically commodities—things such as offering a retail network and a claims processing platform.  Most PBMs score very well in these areas, with satisfaction numbers well north of 8.0.  

So, I see the best opportunity for PBMs to claim leadership in the nonstandard services areas. And the biggest of those opportunities is managing specialty pharmacy. 

What do the satisfaction numbers indicate with regards to specialty pharmacy?    

The numbers are lower, and generally not improving. When you look at the specialty management functions, only two areas are up year over year: delivery of promised savings and financial reporting in the pharmacy benefit. All other areas—including patient customer service, formulary management, rebates, and utilization management—show no improvement. Some of the scores for certain management functions for specific PBMs are at 7 or lower.  Yet, this is where the market is heading. The pipeline is filled with new specialty drugs. We are all waiting for a PBM to be the leader in this space.

What else is your research uncovering about the specialty drug market? 

It is one of the greatest areas of concern for plan sponsors and employers, which is not surprising. Not only are specialty drugs expensive, but they’re becoming a much greater share of total drug spend and total health care spend. The good news is that these drugs work and sometimes even cure people.  But it’s coming at a very high cost. These medications are complex to manage. Patients typically have multiple issues, so it involves more than just taking a pill once a day. It requires a much higher touch—a comprehensive approach.

Can you put the cost issue into perspective in a real-world sense? 

Sure. Let’s step away from the specialty drug area for a moment to look at employee wages and health care costs in general. The median household income in 2016 was just under $57,000, and the average cost of health care for a family of four was nearly $27,000. The family’s share of that expense was about $11,600. While that is a substantial amount, at least the math is doable. 

With specialty drugs, the numbers get scary. The average annual cost of a treatment with a single specialty drug was more than $52,000 in 2015. That number is higher than the median wage of just under $49,000. As you can see, the math doesn’t work, and that is the scary part.  

So, what’s the answer? 

First, I think it’s important to point out that this is not just a PBM issue. Specialty drugs are unique in that costs are incurred on both the medical and pharmacy sides of the benefit. So, it’s a matter of forcing the industry to think differently, and not just in their silos of care delivery.  

A greater share of specialty drug costs now falls under the medical benefit—55%. The average share of coinsurance under the medical benefit is 32% compared with 29% under the pharmacy benefit. I am not trying to minimize the drug component—which is still critical. But it’s important for employers and for plan sponsors to think about the entire health care continuum—to look at all of the different delivery channels where specialty medications are being dispensed and make sure that they are managed appropriately.

In that context, what can PBMs do to help manage specialty drug costs? 

PBMs have several tools and levers at their disposal. It starts with something as simple as network management. PBMs can and should be steering people to designated pharmacies, when clinically appropriate or specialty pharmacies with staff trained to get the medication dispensed. 

There’s also cost sharing. We see a number of organizations that are considering specialty drugs in a higher tier or cost share tier, whether it’s coinsurance or a flat dollar benefit design. 

There’s also clinical and utilization management programs. For example, prior authorization or step therapies ensures that people are taking the right medication. There might be an oral product or something that costs less that should be tried first before going directly to the high-cost injectable drugs, where clinically appropriate.

What about on the medical benefit side? 

The big opportunity here is administering medications in the most cost-effective setting. Unlike drugs covered under the pharmacy benefit—which are typically self-administered at home—a large portion covered under the medical benefit are administered by health care providers in a variety of settings—the physician’s office, in the hospital outpatient or inpatient departments, or home. But we haven’t seen the aggressive utilization management and clinical programs implemented here.  We see some, but there is greater opportunity to improve it. Our research indicates that more than one-fourth of benefit stakeholders representing employers are not sure of the lowest cost site of care for medication administration. That presents a significant opportunity for education.

For part 2, click here.

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