June 24, 2014 
When I was at AHIP last week in Seattle, I had a chance to see Alan Lotvin from CVS Caremark present on specialty pharmacy. It was one of the best presentations that I’ve seen in a while.
It was good because I actually heard things that I’d never heard discussed around specialty pharmacy before. And, as he pointed out, specialty will represent 50% of the pharmacy spend and about $235B in total spend by 2018. This is where everyone is focused and the opportunity for differentiation exists.
- He talked about how to get to zero trend in specialty.
- He talked about the consumer experience in specialty.
- He talked about care coordination and its value in specialty.
- He talked about the need for a beyond the pill approach by the specialty pharmacy.
So, what does all this mean? Let me share some highlights:
- Specialty pricing is starting higher based on government pricing constraints. You can’t raise price. It’s easier to start high, discount, and/or come down over time.
- Pharma is beginning to price based on Quality Adjusted Life Year (QALY).
- 3.6% of patients drive 25% of costs (not a surprise)…but 43% of their total costs are not from the specialty condition but from their co-morbidities. (Why treating the patient not the condition is critical.)
- Site of care (which is the hot buzz today) can save you 17% or more.
- Developing an exclusion formulary is important to counteract copay cards and help reduce costs.
o This article says that CVS Caremark is working on a formulary with 200 brand drugs excluded.
- They are moving from 12-month contracting with pharma to 2-3 month contracts to really keep on top of market conditions.
- Coordinated care can drive lower costs in terms of readmissions and other total medical costs.
- You can use generics to replace biologics. For example, he showed switching out an HIV biologic costing almost $3,000 / month with 3 generics costing $101 per month. (I’ve never heard anyone else talk about this.)
- He also reinforced the fact that today’s specialty benefits are not coordinated across medical and pharmacy. For example, he used the RA example where there are 9 drugs with 4 of them commonly used under the medical benefit and 5 under the pharmacy benefit.
But, the most important thing was their strategy to get clients to ZERO TREND for specialty pharmacy. (It reminded me of the program I developed at Express Scripts where we actually guaranteed a 3-year zero trend…if you followed our very aggressive recommendations.) He outlined the following:
- 1.5% savings from their formulary
- 0.5% savings from an exclusive specialty network
- 1.9% savings from an aggressive generic policy
- 1.0% savings from innovative pricing
- 3.6% savings from optimizing site of care
- 2.5% savings from medical claims editing and repricing
- 6.0% savings from enhanced prior authorization
He also went on to talk about the consumer experience. I think a lot of specialty pharmacies are thinking about the same things, but there were several things he shared that were new to me. It was exciting.
As I’ve said before, as specialty pharmacies really start to think about the patient and focus on the experience over time, we will start to see more coordination with pharma about going beyond the pill and driving lower total costs.
Enabling Healthy Decisions 
Can you talk a bit more about how site of care strategy will result in 17% savings (key components)? What about the repercussions on the provider network? Thanks!
Site of care is a key topic of discussion within the PBM/pharmacy market right now. The reality is that pricing varies based on where the care occurs. For infusion drugs, the patient can receive them in a hospital, in a physician’s office, or in the patient’s home.
Here’s a few links:
– http://www.specialtypharmacytimes.com/news/Walgreens-Specialty-Pharmacy-Shows-Cost-Savings-Through-Alternate-Treatment-Sites-
– http://info.cvscaremark.com/cvs-insights/site-care-playing-role-increasing-specialty-pharmacy-costs
George, with all due respect, is this a puff piece sponsored by CVSC? I have been working with CVS Caremark’s Specialty Pharmacy as a health plan for almost 10 years and have heard a lot of this type of information before, but what they actually do for their clients is not what the pitch on “the circuit” . They are in it to make money for CVS Caremark as they are a public company with shareholders to please.
Believe me their clients are not experiencing anywhere near a 0 trend, the only way this is remotely possible is if their clients are consolidating their provides(who they have terrible contracts with) to CVS Caremark. And that would be a 1 time benefit. That could be done with any vendor you are willing to give all the business to.
Their clinical guidelines are mediocre at best, their day to day clinical management of the member/patient is not existent.
You would speak with their clients that are experiencing the 0 trend and then right the article again.
This wasn’t a sponsored piece (otherwise I would have disclosed that). I didn’t say their clients were experiencing 0% trend. What I said is that he laid out a roadmap for how to experience 0% trend. This is the same thing I did at Express Scripts. It’s not easy. You have to implement the arsenal of programs to make it happen. I would suggest that you meet with your account representative and create a plan to get here. It may only be a correction, but if you correct down and start experiencing lower trend off a lower base, that will create real savings.
George – can you provide any examples where pharma is pricing based on QALY’s?
I looked back at my notes (which I was writing quickly while he spoke). I don’t remember hearing any specific examples. He talked about it, but maybe it’s in the works. I think there have been a few contracts like this in Europe.