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Impact of Pharmacy Benefit Managers on Oncology Practices and Patients

Abstract

Pharmacy benefit managers (PBMs) are thoroughly integrated into the drug supply chain as administrators of prescription drug benefits for private insurers, self-insuring business, and government health plans. As the role of PBMs has expanded, their opaque business practices and impact on drug prices have come under increasing scrutiny. PBMs are particularly influential in oncology care because prescription drugs play a major role in the treatment of most cancers and an increasing number of patients with cancer are treated with oral oncology agents managed by PBMs. There is concern that some PBM practices may threaten access to high-quality cancer care and may increase the financial and administrative burden on patients and practices. In this article, we review the role of PBMs in prescription drug coverage and reimbursement, discuss the impact of PBMs on oncology care, and present data from the 2018 ASCO Practice Survey assessing the knowledge and attitude of oncology practices toward PBMs.

Accompanying Articles

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STATE OF CANCER CARE IN AMERICA
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STATE OF CANCER CARE IN AMERICA

Introduction

Pharmaceutical benefits managers (PBMs) develop and manage prescription drug benefits for private insurers, self-insuring businesses, and other entities, such as unions and government health plans (eg, Medicare Part D). They are influential in oncology care because prescription drugs play a major role in the treatment of most cancers and an increasing number of patients with cancer are treated with oral oncology agents managed by PBMs.1 As intermediaries in the prescription drug supply chain, PBMs can affect both oncology patients and practices. For patients, PBMs can influence what drugs are covered by insurance, the size of copays and possible rebates, and where drugs can be purchased and administered. For providers, PBM policies can influence patient care delivery and practice administration demands.
Although ASCO and others have raised concerns about the effects of PBM practices on care delivery, there is limited literature about the impact of PBMs on cancer care.2,3 In this ASCO 2019 State of Cancer Care in America article, we review the role of PBMs in prescription drug coverage and reimbursement, discuss the impact of PBMs on oncology care, and present data from the 2018 ASCO Practice Survey assessing the knowledge and attitude of oncology practices toward PBMs. The 2018 survey findings, discussed in more detail later in this article, suggested that many oncologists have a limited understanding of the role that PBMs play in cancer care delivery. In this review, we provide an educational overview of the current landscape for those involved in care of patients with cancer and oncology practice administration.

Overview of PBMs

PBMs first entered the prescription drug supply chain during the 1980s when private insurance companies began separating prescription drug coverage from other medical expenditures.4,5 During this period, insurance companies turned to these third parties to process pharmacy claims and for help with administrative strategies, such as implementing drug identification cards, electronic records, drug formularies, and online processing.4,5 Over the next 30 years, prescription drug coverage became increasingly complex, and the role of PBMs expanded to include contract and price negotiation with drug manufacturers, wholesalers, payers, and pharmacies.3
PBMs have consolidated significantly in the past decade. The three largest PBM companies—Express Scripts, OptumRX, and CVS Caremark—process 85% of all prescription claims and administer drug benefits for > 266 million Americans in public and private insurance plans.6,7 As PBMs’ market share has grown, so has their influence on the drug delivery system.8
The sources of revenue for PBMs are unclear because their contracts are not transparent. PBMs generate revenue in part by negotiating prices and rebates with drug manufacturers, establishing formulary tiers, setting patient copays, setting clinical policies, creating pharmacy provider networks, and determining pharmacy reimbursements rates.9,10 Most own and operate their own mail-order and specialty pharmacies.11 PBMs also receive payments from plan sponsors (insurers) for processing prescriptions and managing formularies.10,12 Revenue also comes from pharmaceutical manufacturers whose drugs are listed on formularies set by PBMs via manufacturer rebates (often calculated as a percentage of drug list prices).7,8,10,13 Additional revenue is generated for PBMs on the margin between the amount charged to payers for a prescription drug and how much PBMs pay out to pharmacies for the same drug, also known as spread pricing.7,10,14 Table 1 provides a glossary of select PBM-related terms and practices. The flow of money, products, and services in the drug supply chain is conceptualized in Figure 1.
Table 1. Glossary of PBM-Related Terms and Practices
Fig 1. Conceptual diagram of the flow of products, services, and money in the drug supply chain. Rx, prescription. Adapted from Sood et al.13

Potential Value of PBMs

As intermediaries between payers, drug manufacturers, and pharmacies, PBMs potentially have the ability to lower prescription drug prices and promote value.7 PBMs can leverage their market power to negotiate lower prices and rebates from drug manufacturers, resulting in savings that can be passed on to payers and patients.13,15 For example, PBM advocacy organizations claim that PBM formularies lower medical costs while providing patients with access to more affordable drugs.16,17
PBMs claim to increase value by implementing formulary and utilization management strategies that promote evidence-based medicine and by encouraging the use of cost-effective medications and generic substitutions.16-21 PBM-preferred specialty pharmacy networks are framed as an optimal model for managing cost and access.22,23 Some PBM specialty pharmacies also provide clinical services designed to improve the quality of patient care, such as educational programs aimed at improving drug adherence or mitigating adverse effects.23
Although PBMs do not disclose information about the size of drug discounts and rebates,13 some studies have found that PBM negotiations with manufacturers do result in lower drug prices for payers and insurers. For example, health plans that use PBM-preferred pharmacy networks have demonstrated lower pharmacy costs,24,25 and formulary restrictions have been found to reduce the use of drugs and associated drug costs.26 The Centers for Medicare and Medicaid Services (CMS) reports that PBM-negotiated rebates from manufacturers have lowered net prices and contributed to slowing drug-spending growth in public programs like Medicare and Medicaid in recent years, although the share of prescription drug costs lowered by rebates is projected to decrease.27,28

Challenges With PBMs

As prescription drug prices continue to rise, there is increasing concern among government agencies, policy makers, and medical groups that PBMs may not be delivering lower drug prices or improving value in drug spending.27 For example, tying rebates to drug prices may incentivize PBMs to list higher-price drugs on formularies and discourage the use of lower-price or generic drugs,13 with unintended and potentially negative consequences on patient outcomes.26,29
Critics of PBMs are concerned that consolidation in the industry, particularly PBM ownership of mail-order and specialty pharmacies, represents a conflict of interest that may lead to pharmacies switching patients to higher-cost, better-reimbursed medications.10,13 Vertical consolidation is demonstrated by the fact that PBMs have affiliated insurers and specialty pharmacies. Horizontal consolidation is shown through the market share dominated by the three largest PBMs.30 Both types of consolidation have further increased market share and the leverage that PBMs have in contract negotiations with payers, manufacturers, and pharmacies,13 which the White House Council of Economic Advisors linked to rising drug prices in a 2018 report.13,31
The lack of transparency in PBM practices may have a negative impact on the cost of care. Many PBM transactions are contractually defined and opaque, making it difficult to track the true beneficiaries of cost savings. There are concerns about whether the discounts PBMs receive from drug manufacturers and pharmacies are passed on to patients.13,32 Moreover, the current framework of formulary tiers, preauthorization requirements, and copayments may be creating cost and access issues for patients, as well as financial risk and administrative burden for practices.8,33-37
There are examples of legislative action to address these issues, including a recent federal law that prohibits PBMs and insurers from using gag clauses, a practice through which pharmacies are blocked from providing drug price information to patients and employers (Table 1).38,39 Prior to the protransparency gag clause legislation, PBMs could contractually prevent pharmacies from informing patients if the out-of-pocket cash price of a medication would be less than their copay (ie, going through their health insurance drug benefit).

PBMs in Oncology

The price of prescription drugs is a major concern in oncology. Prices are increasing in both inpatient and outpatient prescription settings,40,41 and the costs of oncology drugs are growing at a faster rate than those of other prescription drug classes.41,42 This rise in price is affecting older (generic) and newer cancer drugs, with the annual cost of new medications routinely exceeding $100,000.43-45 At the same time, cancer drugs are increasingly targeted to specific molecules, making manufacturing more complex and not necessarily interchangeable or available in generic form.34 Cancer drugs may also require special procedures for handling and administration.11
PBMs have implemented policies that may shift costs to patients (eg, specialty formulary tiers) and make it more difficult for patients to access prescribed treatments (eg, utilization management practices like prior authorization and step therapy; see Table 1 for a glossary of select PBM-related terms and practices).

Cost Challenges

ASCO and other oncology groups have documented how PBM and payer policies may increase costs of oral cancer drugs to patients.8,12,46,47 As plan administrators, PBMs use a variety of cost-containment and cost-sharing strategies.5 Cancer drugs are routinely on the highest formulary tier and a subset of plans place all cancer medications on a specialty tier.34,48 Drugs on the highest or specialty tiers typically require cost sharing by patients of 30%-50% of drug costs.34,47 For example, Medicare Part D beneficiaries are liable for 25%-33% coinsurance for cancer drugs on the highest specialty tier, and these out-of-pocket expenses drive Medicare beneficiaries quickly into the donut hole, a coverage gap where they are responsible for paying a high proportion of drug costs until their out-of-pocket spending qualifies them for catastrophic coverage.49,50 Since the passage of the Affordable Care Act in 2010, the portion of the drug cost for which most Part D beneficiaries are responsible while they are in the donut hole has shrunk from 100% to 25%.51 Even so, out-of-pocket spending for cancer drugs, particularly targeted oral anticancer medications, is financially burdensome.52 One recent analysis estimated the average out-of-pocket spending for a patient with Medicare Part D who requires a 12-month prescription for their anticancer drug was $10,470 in 2019 (ranging from $7,220/y for lapatinib to $15,472/y for lenalidomide).53
Higher copays and large out-of-pocket costs have been shown to lead to drug noncompliance and drug abandonment and associated negative health outcomes.26,35,49 Therapy noncompliance is price sensitive and patients enrolled in high-deductible plans are more affected than those with low deductibles.5 In an analysis of a nationally representative pharmacy claims database, patients with cost sharing > $500 were four times as likely to abandon oral oncolytics compared with those with cost sharing of $100 or less.54 The high costs of care, including prescription drug expenditures, are also a major cause of personal bankruptcy and financial and psychological distress in patients with cancer.5,46

Access Challenges

PBM practices can impede patients’ access to cancer drugs. PBM utilization management approaches, for example, can include administrative rules that limit or restrict patient access to certain cancer treatments.47 A 2019 survey of cancer patients by the American Cancer Society Cancer Action Network reported that 34% of patients had to wait for insurance approval of a treatment, and that utilization management policies result in treatment delays and increased stress for patients.55 Treatment delays caused by utilization management policies can lead to patients discontinuing prescribed treatments and to poorer outcomes.47,55,56 Delays in cancer care have previously been associated with worse outcomes,57-59 and the adverse impact of cancer care delay caused directly by utilization management strategies (eg, prior authorization and step therapy) on outcomes deserves more investigation. Prior authorization is of particular concern to oncologists47 and to the broader physician community: in a 2017 survey by the American Medical Association, 92% of physicians reported prior authorization can have a negative impact on clinical outcomes.56
Access may be affected by restrictive formularies that limit the number of drugs included in a class of drugs and by step therapy (sometimes called “fail first”) policies that require use of the payer’s preferred drug before coverage of the initial drug selected by the prescribing oncologist.47 Restrictive formularies and step-therapy approaches are particularly problematic in cancer where drugs within a class may not be interchangeable and the exclusion of certain drugs from coverage could negatively affect outcomes.47 In the era of precision therapy, it is plausible that a targeted agent’s effectiveness could be compromised by first starting with step therapy–dictated, less-preferred medication. “Nonmedical switching,” whereby a patient is required to change from a previously prescribed therapy to a different, less expensive therapy for no medically advantageous reason, is another utilization management practice that could impede patient access to optimal cancer care.60,61 Currently, there are limited oncology- or PBM-specific data about the prevalence or impact of nonmedical switching.
PBM pharmacy requirements that shift drug dispensing away from oncologists can also introduce patient care and cost issues. Practices with in-office dispensing are sometimes excluded from eligible pharmacy networks when they do not meet standards assigned by the PBM. Furthermore, PBMs may incentivize or require that patients fill prescriptions at PBM-owned or -affiliated pharmacies.8 These practices diminish potential patient benefits of in-office dispensing, such as quicker access to medications and direct physician-patient communication about dosing and adverse effects, both of which can improve adherence.62 Expensive waste of unused medication attributed to mail-order pharmacies, which are often incentivized or required by PBMs, is also a concern.62

ASCO Practice Survey Data

Measuring how oncologists view the role of PBMs in cancer care and how PBM policies influence patient care and practice management have been a major focus of ASCO. ASCO has used informal polling to document its members’ impressions of the role of PBMs in care delivery and has been surveying oncology practices about overarching practice trends and pressures for nearly a decade through its annual practice survey. Practice survey methods were detailed previously in this Journal of Oncology Practice article series.37 In 2017, oncology practices identified payers as their top pressure source, with prior authorization and coverage denials cited as specific payer strains.46 In 2018, the ASCO practice survey included a series of PBM-related questions. The resulting data, described in detail in the following paragraphs, suggest many oncology practices perceive high levels of administrative burden resulting from PBM requirements, yet they have limited understanding of PBM activities and how PBM policies are affecting their patients.
ASCO received responses from 291 US clinical oncology practices to its 2018 survey, with 270 (92.8%) providing information on their experiences with PBMs. The survey respondents came from diverse geographies and settings and together represented > 8,400 oncologists (45%) who care for adult patients with cancer in the United States.63 Half of the responding practices reported interacting with one (n = 11) or more (n = 123) PBMs, and another third (n = 86) were unsure of the number. Notably, the remaining 50 respondents (19%) were screened out of subsequent questioning because they reported interacting with no PBMs—an improbable finding given PBMs’ high penetration of the prescription drug market. This section provides an overview of oncology practices’ reported understanding of PBM practices, as well as the impact of PBM policies on drug accessibility, the provision of care, and practice administration.

Understanding of PBM Practices

Respondents to the 2018 practice survey were asked to assess their understanding of “PBM operations and negotiating tactics, including formulary development and management, different rebates and discounts PBMs receive, coupons, clawback amounts/Direct Indirect Remuneration (DIR) fees” (Table 1). A majority of respondents (55%; n = 109) had no to very little understanding of PBM operations and negotiating tactics. Understanding was particularly limited among hospital-owned practices (68.9% hospital-owned v 39.8% physician-owned practices reported no or very little understanding) and among practices without in-office dispensing of cancer treatments (66.3% without dispensing v 45.0% with dispensing), the latter of whom may stand to benefit from some PBM services. Survey respondents with patient care roles were more likely to report limited understanding than those with administrative roles (61.5% of clinical respondents v 51.1% of administrative respondents).
Despite limited understanding of PBM operations, responding oncology practices were largely familiar with PBM impacts on their administrative and patient care duties. Ten percent of practices (n = 20) reported benefits to working with PBMs, with written comments noting improvements to patient access (n = 8), reduced patient costs (n = 2), and reduced financial burden (n = 2), among other benefits. Overall, a low acknowledgment of benefits corresponded with high levels of perceived interruptions to practice administration and patient care activities .

PBM Policies and Drug Accessibility

In the 2018 practice survey, three-quarters of practices reported that PBMs interfered with patient care and/or made it difficult to get their work done (Fig 2). In addition, 186 of 200 respondents (93%) encountered PBM utilization management policies, with prior authorization delays, step therapy/fail-first requirements, noncoverage of drugs recommended/required for treatment, and placement of cancer drugs on highest formulary tiers cited as common experiences (Fig 3). Physician-owned practices reported that these policies had a greater negative impact than health system–owned practices. It is clear that for any policies aimed at addressing the PBM-related issues described in this review, the differential impact on physician-owned practices versus health system–owned practices should be considered.
Fig 2. Impacts of pharmacy benefit manager policies on oncology practices.8
Fig 3. Consequences of pharmacy benefit manager utilization management and formulary policies.8

PBMs and Issues With Providing Care

PBMs may directly contact some patients to initiate and manage their prescriptions. ASCO’s data reveal that this has introduced disruptions, waste, and errors into the drug prescription process for oncologic treatments (Fig 4). More than 60% of responding practices reported that PBMs had contacted their patients without notifying their providers (62%; n = 123). Mail-order shipments were a major concern for these oncology practices, with nearly half reporting drug waste resulting from unwanted drug refills (42%) and 24% noting the shipment of premixed medications to patients without appropriate safeguards. Errors in the form of incorrect medications or dosages and unprompted mid-regimen changes were also reported.
Fig 4. Results of pharmacy benefit manager interactions with patients with cancer.8

PBMs and Practice Administration

In addition to influencing patient care, PBM policies can result in uncompensated costs and administrative work for practices. A majority of practices responding to ASCO’s survey reported that PBMs interfered with their practice administration (n = 114; 56%; Fig 2). To handle PBM-related work, practices reported hiring staff (n = 50; 25%), shifting responsibilities among existing staff (n = 47; 24%), or both (n = 15; 8%). A majority of practices allocated staff time to handle PBM paperwork (n = 108; 54%), with time spent on activities including prior authorizations (n = 96; 89%), seeking copay assistance on behalf of patients (n = 86; 80%), and addressing PBM-related medication errors and patient complaints (n = 40; 38%).
To conclude, as the role of PBMs in the administration of prescription drug benefits has expanded, their opaque business practices and impact on drug prices have come under increasing scrutiny. PBMs are thoroughly integrated into the drug supply chain, and it is difficult to isolate PBM actions from those of insurers, plan sponsors, and manufacturers. However, evidence suggests that PBM practices likely impact the cost of and access to care for patients. The ASCO 2018 practice survey begins to quantify the perceived impact of PBMs on cancer care delivery among oncology practitioners. A large proportion of survey respondents were not confident in their understanding of the complex role and impact of PBMs, but most respondents reported experiencing disruptions to patient care and uncompensated administrative burden resulting from interactions with PBMs. General familiarity with and negative impressions of PBM activities were both more prevalent among physician-owned than hospital-owned oncology practices, suggesting that practices that have closer interactions with PBMs are more likely to perceive a negative impact on oncology care. The survey findings underscore the need for greater system transparency and increased provider education so the actions and influences of PBMs are more widely understood.
ASCO is committed to protecting oncologists’ ability to provide the best treatment at the right time so patients have access to the most effective cancer treatments, and ASCO strongly supports efforts to control the costs of prescription drugs.8,46,47 Some of the cost and access challenges associated with PBMs result from a lack of communication or coordination between PBMs and oncology practices. The high proportion of practices in the 2018 survey that reported errors and waste as a result of direct PBM contact with patients could be reduced, for example, by improving communication between the PBM and physician. At a minimum, the prescribing physician should always be consulted before any medication, regimen, or dosing changes. Addressing many of the challenges described in this article will require policy-based solutions. In comments responding to various CMS proposals, ASCO expressed its concerns regarding patient access and timely care and urged CMS to more carefully examine the impact of PBM practices on patient care and outcomes. ASCO is actively advocating on Capitol Hill and in states legislatures for reforms to many of the PBM practices described herein, such as utilization management, as well as for improvement in transparency. Moving forward, ASCO will continue to monitor the impact of PBMs on patients and practices and advocate for policies that ensure fair and transparent drug pricing, direct communication between patients and their oncology care providers, and oncology specialist representation in formulary design and other processes related to the delivery of cancer drugs.

Acknowledgment

We thank the members of the ASCO State of Cancer Care in America editorial board, including Morganna Freeman, Blase Polite, Jerome Seid, and Robin Zon, who provided guidance on the focus and goals of this article. We also thank the following ASCO staff for their contributions to the project: Suanna S. Bruinooge, Allyn Moushey, Deborah Kamin, Michael Francisco, Sybil Green, Richard L. Schilsky, and Shimere Sherwood. Finally, we thank the practices who completed the 2018 ASCO Practice survey.
See accompanying editorials on pages 270 and 273 and accompanying oncographic on page 275

Authors' Disclosures of Potential Conflicts of Interest

Impact of Pharmacy Benefit Managers on Oncology Practices and Patients

The following represents disclosure information provided by authors of this manuscript. All relationships are considered compensated unless otherwise noted. Relationships are self-held unless noted. I = Immediate Family Member, Inst = My Institution. Relationships may not relate to the subject matter of this manuscript. For more information about ASCO's conflict of interest policy, please refer to www.asco.org/rwc or ascopubs.org/op/authors/author-center.
Open Payments is a public database containing information reported by companies about payments made to US-licensed physicians (Open Payments).

Sheetal Kircher

Stock and Other Ownership Interests: Penrose Therapeutics, Abbott/AbbVie
No other potential conflicts of interest were reported.

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Information & Authors

Information

Published In

JCO Oncology Practice
Pages: 276 - 284
PubMed: 32310720

History

Published online: April 20, 2020
Published in print: May 01, 2020

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Authors

Affiliations

Trevor J. Royce, MD, MS, MPH
Department of Radiation Oncology, University of North Carolina at Chapel Hill, Chapel Hill, NC
Caroline Schenkel, MSc [email protected]
American Society of Clinical Oncology, Alexandria, VA
Kelsey Kirkwood, MPH
American Society of Clinical Oncology, Alexandria, VA
Laura Levit, JD
American Society of Clinical Oncology, Alexandria, VA
Kathryn Levit, PhD
Independent Consultant
Sheetal Kircher, MD
Department of Medicine, Hematology Oncology, Robert H. Lurie Comprehensive Cancer Center of Northwestern University, Evanston, IL

Notes

Caroline Schenkel, MSc, American Society of Clinical Oncology, 2318 Mill Rd, Alexandria, VA 22314; e-mail: [email protected].

Author Contributions

Conception and design: All authors
Administrative support: Caroline Schenkel, Kelsey Kirkwood
Collection and assembly of data: Trevor J. Royce, Kelsey Kirkwood, Sheetal Kircher
Data analysis and interpretation: All authors
Manuscript writing: All authors
Final approval of manuscript: All authors
Accountable for all aspects of the work: All authors

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Trevor J. Royce, Caroline Schenkel, Kelsey Kirkwood, Laura Levit, Kathryn Levit, Sheetal Kircher
JCO Oncology Practice 2020 16:5, 276-284

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