Estimated cost savings associated with the transfer of office-administered specialty pharmaceuticals to a specialty pharmacy provider in a Medical Injectable Drug program.

Abstract

A large managed care organization (MCO) in western Pennsylvania initiated a Medical Injectable Drug (MID) program in 2002 that transferred a specific subset of specialty drugs from physician reimbursement under the traditional "buy-and-bill" model in the medical benefit to MCO purchase from a specialty pharmacy provider (SPP) that supplied physician offices with the MIDs. The MID program was initiated with 4 drugs in 2002 (palivizumab and 3 hyaluronate products/derivatives) growing to more than 50 drugs by 2007-2008. To (a) describe the MID program as a method to manage the cost and delivery of this subset of specialty drugs, and (b) estimate the MID program cost savings in 2007 and 2008 in an MCO with approximately 4.6 million members. Cost savings generated by the MID program were calculated by comparing the total actual expenditure (plan cost plus member cost) on medications included in the MID program for calendar years 2007 and 2008 with the total estimated expenditure that would have been paid to physicians during the same time period for the same medication if reimbursement had been made using HCPCS (J code) billing under the physician "buy-and-bill" reimbursement rates. For the approximately 50 drugs in the MID program in 2007 and 2008, the drug cost savings in 2007 were estimated to be $15.5 million (18.2%) or $290 per claim ($0.28 per member per month [PMPM]) and about $13 million (12.7%) or $201 per claim ($0.23 PMPM) in 2008. Although 28% of MID claims continued to be billed by physicians using J codes in 2007 and 22% in 2008, all claims for MIDs were limited to the SPP reimbursement rates. This MID program was associated with health plan cost savings of approximately $28.5 million over 2 years, achieved by the transfer of about 50 physician-administered injectable pharmaceuticals from reimbursement to physicians to reimbursement to a single SPP and payment of physician claims for MIDs at the SPP reimbursement rates.