Managing Drug Spend Without ‘Squeezing the Balloon’: The Case for Integrating Pharmacy and Medical Benefits

August 20, 2020

Eliminating barriers between a PBM and its health plan helps put the focus on the big picture—what's best for the overall plan and members

By Eric Culley and Bob DiRenzo

Not long ago, Evolent Health Service's pharmacy benefit management (PBM) team and our partner, a Medicaid plan, identified an opportunity to save millions of dollars on medications for opioid dependency. By moving the brand-name drug to non-preferred status, the plan could encourage members to use the equally effective generic equivalent.

At first glance, this would have been a win in its own right for our partner and its members. But this change could have had ripple effects beyond the pharmacy plan. Would encouraging members toward the generic product lead to more emergency department (ED) visits or alter the severity of medical conditions they bring to the ED? Would the plan lose more on the medical benefit than it would save for pharmacy?

Answering such questions should be straightforward, and in this case it was. Because Evolent supports the entire health plan, we could pull certain limited data (in a fully secure and compliant fashion) from across our administrative platform and appropriately coordinate with colleagues overseeing the medical benefit. Several months into this formulary change, the data showed that the switch was justified. There was no increase in ED visits or the severity of medical conditions involved, and just 1% of members switched back to the brand-name drug after moving to generic. There was only a slight cost increase due to more lab testing for the presence of opioids. But this was a positive sign that these members were now being appropriately monitored through the drug change. Despite the higher lab spend, net savings was nearly $42 per utilizing member, per month.

Understanding the broader impact of a pharmacy change on members and health plan financials might sound like routine procedure, but that's not always the case. Those health plans that carve out their PBM are not equipped to offer this level of analysis because their medical and pharmacy data—like their pharmacy and medical teams—are siloed. Standalone PBMs may dabble in medical claims integration, but they will typically focus on programs tailored to their interests. On the other hand, health plans may have access to pharmacy data from an outsourced PBM; however, they have to battle for resources from stretched-thin analytics teams to complete these types of deep dives. 

This is just one scenario that illustrates the advantages of integrating pharmacy and medical benefits, and one backed up by a growing body of evidence that integration is superior—fewer ED visits, fewer hospitalizations, lower medical costs and greater engagement in care management. These plans are simply better positioned to do things that plans with a carved-out solution are structurally unable to accomplish.

Here are some of the reasons that integration helps:

Consistent and coordinated utilization management policies 

When pharmacy and medical benefits work independently of one another, there's risk that their utilization management (UM) policies won't align. Tight integration helps avoid situations where members get stuck in the middle, with mixed signals about whether a given drug is covered. For plans where Evolent manages both benefits, our physician leaders have visibility to both formularies and ensure that the UM policies and the criteria for coverage are the same under each. Teams from the medical and pharmacy sides have regular touchpoints to ensure they are in lockstep. Additionally, the pharmacy team performs UM for drugs on the medical benefit. That's something you don't expect with a carved-out PBM.

Incentives aligned to the entire plan

Sometimes, a money-saving decision on the pharmacy side simply "squeezes the balloon," sending more claims to the medical benefit. Let's say there's a new, but expensive, migraine management drug proven to decrease the number and severity of headaches. While it would likely increase pharmacy PMPM, those costs might be justified by lower rates of ED visits, less frequent primary care visits, and greater productivity at work for those members. In an integrated solution, there's greater alignment around what's best for the member and for the overall plan.

Better data, faster

In an integrated solution you have all the data on one platform—medical claims, pharmacy claims, lab results and more. This single repository vastly improves your ability to gauge the ramifications of larger pharmacy policies on medical utilization and spending, and vice versa. Having a unified data platform also simplifies decisions at the member level. When authorization is needed for a new medication, you can quickly pull up the patient medical record and find the relevant diagnosis, lab results and other data to decide whether it meets the criteria. This makes for fewer touchpoints and a more seamless experience for the member—less hassle and fewer back-and-forth phone calls to the provider's office, without sacrificing data privacy and security.

More complete data to support members in care management

When our pharmacists reach out to a care management member who is covered by Evolent's PBM, they know our formulary and our UM criteria, and when working up the case, they can make suggestions to the member to help to drive to more cost-effective therapies without sacrificing efficacy. Additionally, when they have efficient but appropriate access to medical and pharmacy data, our clinical pharmacists can more easily identify cases in which a member's prescriptions don't match the type or severity of their disease. For example, there are several different types of heart failure, with different drugs more appropriate for each. Occasionally, our pharmacists find that the member's type of heart failure, based on diagnosis codes in the medical data, does not match the medication they are taking. In these cases, the pharmacist contacts the member's physician and care management team to discuss a potential prescription change. We run across similar scenarios when a member's disease, such as asthma or renal impairment, progresses to the point that a new medication would be more appropriate than what they are taking.

More coordinated management of specialty drugs across your plan

While specialty medications make up a much larger portion of your pharmacy budget, roughly 50% of all spending on these drugs occurs on the medical benefit. One major barrier to more effectively managing these drugs is their increasingly blurry lines of distribution. They might be covered under the medical benefit, under the pharmacy benefit, or under both. Autoimmune medications, for example, have at least a dozen specialty drugs across both benefits that can be used for various conditions. Plans can benefit from an integrated management strategy to prevent duplication of therapy, eliminate waste due to duplicate billing, and monitor the pipeline of new medications entering the market. If your medical and pharmacy UM criteria are not aligned, managing specialty medications becomes even harder because achieving high quality and managing cost is a challenge when not done holistically.

Certainly, health plans can still succeed with a standalone PBM. Many do, and we've helped them achieve their goals. But there's no question that there are often certain built-in advantages for plans that integrate their pharmacy and medical benefits, from improving the experience at the individual member level to enhancing plan-wide performance.

Interested in discussing how integrating pharmacy and medical benefits can enhance your health plan's performance? Contact us. 



About the Authors

Eric Culley

As vice president of pharmacy services, Eric is responsible for leading the Evolent pharmacy enterprise, consisting of teams who work with clients on all aspects of their pharmacy benefit and improving overall plan financial performance of prescription drug benefits for employee, commercial, Exchange, Medicare and Medicaid lines of business. This includes establishing quality programs, oversight of utilization management, strategic planning, managing specialty pharmacy for both the drug and medical benefits, and maintaining profit and loss responsibility for the department.

Bob DiRenzo

As managing director of pharmacy strategy and analytics, Bob is responsible for leading teams who work with Evolent’s partners to develop pharmacy strategies, evaluate clinical pharmacy programs and improve overall plan performance. Prior to joining Evolent, he served in executive management and consulting roles at Pharmaceutical Strategies Group, Pharmacy Data Management, and Medco. He has managed all aspects of prescription drug benefits covering all lines of business.

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