What happens at the biggest and best pharmacy event in the world? Join the best and brightest pharmacy professionals in New Orleans this December for an energizing and riching, enlightening experience like no other. Simply put, there is nothing like it. ASHP's mid-year clinical meeting offers everything you need for your career to blossom, including countless professional development and career advancement opportunities. Just imagine what you can accomplish at an event that brings together 20,000-plus pharmacy professionals from across the globe. Special rates are available when you register and book your hotel before September 27th. Learn more at midyear.ashp.org. That's M-I-D-Y-E-A-R.ASHP.org. Welcome to the ASHP official podcast, your guide to issues related to medication use, public health, and the profession of pharmacy. Thank you for joining us for the ASHP Advocating for Impact Podcast, where every episode covers a policy issue impacting the practice of pharmacy. We'll do our best to translate the policy and the politics to help you understand how these issues affect your practice and your profession. I'm Tom Krauss. I lead the ASHP's advocacy team, and I'll be your host for today's episode. Today I'm joined by Kyle Rob, ASHP's Director of State Policy and Advocacy. This is the second episode in a series of discussions focusing on pharmacy benefit managers or PBMs. The first episode focused on the Federal Trade Commission's investigations into the practices of PBMs and how those practices affect patients and the profession of pharmacy, and also considered how policymakers are seeking to rein them in. That episode was released on August 6th. If you haven't had a chance to listen to that episode, please go check it out. You don't need to listen to these episodes in the series in order. We'll cover the different aspects of PDM policy in each episode, and you can take them one at a time. In today's episode, we're going to focus on specialty pharmacy practice. Specifically, we're going to examine the way PDMs exploit gray areas in the law around specialty pharmacy to boost their profits, often at the expense of optimal patient care. So let's jump right in. So Kyle, for starters, can you give us a bit of context and background? What is specialty pharmacy? Where did that term come from and where? Yeah, so specialty pharmacy was really born out of the need to rein in so-called high-utilizer healthcare spenders. So there's a lot of data that's been out there for a long time. We all sort of know that there is a narrow, small population of patients that are really driving most of the healthcare expenditures. So recent data suggests that the top 1% of healthcare spenders are responsible for a total of 23% of healthcare spending in comparison to the bottom 50% that only constitute 3% of total healthcare spending. So in terms of dollars, the average expenditure for someone in the top 1 percentile is about $166,000 per year, and the average expenditure for someone in the bottom 50% across that entire 50% is $385 per year. So really, the core concept behind specialty pharmacy is to provide an escalated level of service to those most complex patient populations that are typically associated with the highest level of healthcare consumption. So for that reason, you've seen a traditional focus in specialty pharmacy around the conditions like cancer, cystic fibrosis, hemophilia, bleeding disorders, hepatitis, rheumatoid arthritis, solid organ transplant, and etc. From both a clinical and a financial standpoint, the stakes are simply much higher for these patients, right? One can draw a straight line from sub-optimal therapy in these populations to high healthcare spending and bad outcomes. So this is really the primary reason that specialty pharmacy was founded, and the driving reason why it's been a high growth area in pharmacy, really the high growth area in pharmacy over the past decades. And when we talk about complexity of specialty pharmacy, especially pharmacy is more complex than non-specialty, as the name would suggest. But that complexity could be complexity of the patient's condition, right? It could be a patient that requires a lot of therapeutic laboratory monitoring. It could be complexity in terms of the drug safety profile. It could be a drug that if misused could have very serious safety consequences. It could also just be that the patient's condition is complex, but the drug itself is not. So one example of that would be hepatitis C oral therapies. It's just an oral medication you take once a day. However, it costs $1,000 a pill. So being adherent with that medication and making sure the patient doesn't just lose track of it needs another replacement of it is a little bit higher stakes than some other typical oral medications, even though the medication itself is not necessarily all that complex to prepare an administer. Okay, so you, well, that's kind of incredible the numbers that you threw out about of overall health care spending and how those how how utilizers drive spend. So how does that translate to drug spend and specialty medications in particular? Yeah, so in 2010, that at the time indicated that about 1% of all patients were taking a specialty medication and those specialty medications accounted for 24% of all drug spending. So 1% of patients taking one, 24% of all drugs spend. In 2015, the share of drug spending went up to 37%. As of 2024, most recent estimates estimate about were up to about 2% of patients taking a specialty medication. And the overall spending the overall spending of specialty medications is a portion of total drug spending has increased to about estimates range anywhere from 44% to upwards of 60%. So okay, that's interesting because you kind of gave a range of estimates there and I noticed the portion of patients taking what's defined as a specialty drug doubled over that time period you described. So that kind of should already give listeners a sense that there's something going on with that definition. So maybe can you kind of tell us what's going on there? What like where does that range come in? Yeah, well, it all comes down to really how you define a specialty drug. And shockingly, there's actually a real lack of definition in the law when it comes to being perspective about this. So, you know, in terms of federal law, the first time that the concept of specialty pharmacy and specialty drugs really appeared in federal law was the Medicare Modernization Act of 2003, which created the Medicare Part D program. That law and subsequent regulations basically said that Medicare Part D plans can classify certain drugs as specialty drugs, and then they can limit those drugs to only being dispensed at specialty pharmacies. Now, the initial statute and the regulations, they defined a specialty drug as a drug that requires quote special handling and administration and is a high cost therapy. So the regulations do define the actual cost threshold, which is $890 a month as of 2023. But they actually don't give any definition of specialized handling. And for this reason, there's a lot of variation in how people interpret a drug to require specialized handling. And that's interesting because in answering the previous question, you sort of suggested some of these drugs actually aren't that complex in and of themselves. So, all right, so let's talk about PDMs here in the payers. So, as you get a sense that kind of this is where some of the manipulation of the term is going to get played, so how do payers define specialty drugs? Put simply, however, it best suits them. In Medicare, they're only really bound to that monthly cost figure. For other types of health insurance and other payers, they might not be bound by anything, not even a dollar amount. And really, from the plan side, the primary benefit of adding these specialty designations is, again, it creates the ability to restrict access to that drug to just the plan's specialty pharmacies. So, rather than having to provide access to that drug across the entire network of outpatient retail pharmacies, the plan could say, no, no, no, this drug is special. Only special pharmacies and special facilities are able to provide you with these drugs, so you must go through those very special facilities. And it creates sort of a leverage and a mechanism for them to narrow their specialty pharmacy networks. Okay, so you have to go through a specialty pharmacy and a specialty pharmacy network, so that leads us to the question of, okay, so what's a specialty pharmacy? It may shock you to hear this, Tom, but there is no standard definition of a specialty pharmacy. So, especially pharmacies are often described as a distinct dispensing format or a distinct subspecialty within the practice of pharmacy, but specialty pharmacies themselves can be a traditional outpatient retail pharmacy or they could be a mailover pharmacy or a combination pharmacy. And in fact, there are only currently three states, Florida, Maryland, and Ohio, three states out of 50 that have a separate and distinct licensing category for specialty pharmacies. In the remaining 47 states, there is no distinction in licensing between a specialty pharmacy and your typical outpatient retail pharmacy. So, okay, so if in 47 states, the boards of pharmacy aren't distinguishing between specialty and non-specialty pharmacies, then what do we use to distinguish? Really, the primary distinguisher is accreditation. So, there are a number of third-party organizations. Some common ones are the accreditation commission for health care, the Center for Pharmacy Practice accreditation, Joint Commission, and URC. These organizations accredit specialty pharmacies, and that accreditation is a demonstration of their commitment to quality safety accountability, either ability to provide higher levels of complex service. But usually there is not, in most places, there is not an actual legal regulatory definition, especially pharmacy. So, okay, well, so it sounds like there's not a legal definition, but I can understand how some medications would require a higher level of handling, and it sounds like these accreditations can kind of go to or speak to the ability of certain pharmacies to provide that higher level of handling. So, what's the PBM issue? How are they explaining this? Yeah, and I think we should be clear that, you know, I'm not really questioning the idea of specialty pharmacy or the concept of specialty pharmacy as you sort of, you know, laid out just now. Like, all of this makes sense. The problem is when you look at how these things are actually being implemented and practiced, there's a lot of things that really seem very non-clinical in nature. So, for example, the specialty pharmacy networks, a lot of health systems operate their own and how specialty pharmacies, they are accredited oftentimes. Oftentimes, they're accredited by every one of the accrediting organizations. They get every single one because they don't know what the PBM's are going to require. I've heard countless stories from our members and their health systems of their specialty pharmacies just being frozen out of network. They have all of the accredations. They meet all of the plan requirements. They're willing to accept the same reimbursement terms as everybody else in the network, and the payer just says, "No, thanks. We're good. We don't need you." So, you know, there's no seemingly no clinical standard that they can reach that would be good enough for the payers. And similarly, we've heard a lot of other stories of where they will apply to join the network and they'll be told, "Oh, well, now you need another accreditation," or, "Oh, you didn't adopt this lowercase J." So, this application is incomplete. And also, we have a one-year waiting period between when you can apply. You know, all these different policies that really seem to be by design to exclude certain pharmacies from the specialty pharmacy network. So, what's the advantage for a PBM to do that to have that narrow map? So, there are some data in the FTC report that sort of shines a light on this, right? So, one would be that when you look at all licensed pharmacies in the United States about, excuse me, when you look at all pharmacies that are accredited by at least one accreditation organization as a specialty pharmacy, 10 percent of all of those pharmacies are PBM-affiliated pharmacies, meaning 90 percent are non-affiliated pharmacies. And when you say affiliated, you mean owned by or have some kind of a financial relationship? Correct, yes, owned or under some sort of pounding control by the PBM. So, PBM-affiliated pharmacies are 10 percent of all licensed specialty pharmacies, but they account for 68 percent of all specialty pharmacy dispenses. Wow, so they're really being very successful at driving volume through their own firms? Correct, yes. And even when you look at sub-analysis of this, you can even look so they're obviously commanding a very large portion of the volume of the specialty dispenses, but even when you dig further than that, if you look at the number of dispenses versus the proportion of income, they're actually getting a higher on average revenue per dispense, especially medication versus non-affiliates, which would suggest preferentially higher reimbursement to their own affiliates. Interesting, okay. So, you know, in addition to playing games with these specialty pharmacies themselves and the networks, they also are playing games with, again, you know, the gray areas around what is a specialty drug itself. So, we are seeing across the board analysis of all the major PDMs show that by and large they are increasing their specialty pharmacy formulas year over year. And these increases in the number of the drugs that they're calling specialty drugs is far above and beyond the number of new approved drugs. It cannot just be explained by new approved drugs. So, the FTC report also analyzed this. They look at formularies, specialty formularies, at a five of the biggest six PBMs between 2017 and 2022. They determined that all five of those PBMs added more drugs, especially less than new approved drugs. And even between those fives, there were massive variations between what they designated, especially in what they didn't. In 2022, the PBM with the smallest specialty formulary had about 500 products, designated specialty products, whereas another PBM had 800 products. This is the same year, you know, same drug pool. That's a big difference. 300 products, you know, that are specialty one, not the other. And there are other analysis, specifically of the big three PBMs that have also showed a lot of variation between their specialty formularies. Specifically, this analysis showed that they're out of all of the drugs between all three PBMs. Only about a third of them were universally designated, especially drugs across all three payers. So, there's nothing innate about these drugs. Right. If there was a standard clinical criteria driving that you would not see this much variation. That's a strong indication that this is not primarily clinical in nature, these decisions. Interesting. Okay. All right. So, okay, so let's talk about how this impacts patients then. So, if there are all these restrictions and diversion of dispensing to affiliated specialty pharmacy, so how does that harm patient care? Yeah. I mean, on the most basic level, it reduces patient's choice and it delays their access to care and it fragments their care coordination, right? More and more, patients are encountering situations where oftentimes even like, you know, bread and bread or chronic therapies that they have been taking for many years, historically have gone to their local pharmacies to get, you know, one day they get a letter from their insurer or they go into the pharmacy and they're told, oh, actually, you're not allowed to get it from this pharmacy anymore. You have to go through a mail order pharmacy. There's a lot of data that indicates when drugs are reclassified as specialty, it increases the patient's average cost sharing. And also too, as well, by requiring these drugs to go through this third-party mail order pharmacy, particularly in the context of disproportionate share hospitals and other safety net providers, there may be financial assistance programs that are run through that specific institution, that health system, that if you require the prescription to be routed through that, well, then now we can't provide financial assistance or copay assistance that would have been available to you if it was able to go directly through the health system. Yeah. So, you know, patients oftentimes don't realize this is exactly what's going on. They just know something's changed, they know they don't like it. And, you know, but really behind the curtain, we can sort of see that these are the things that are driving these sort of changes. So, okay, so what can ASHP members and pharmacists do about this? Yeah, I mean, first and foremost, I think we need to leverage our position as the health team's medication use experts to really call out the non-clinical nature of these policies, right? So, to raise awareness of that, both to patients, right, to help patients better understand, like, you know, look, I don't agree with this either, you know, as a pharmacist, I can tell you, I don't think what they're doing is driven by, you know, quality of care. It seems to be more driven by, you know, getting to your wallet faster. But not only with patients, but with other clinicians. Again, other clinicians are frustrated by all of this, right? They're frustrated by, you know, their patients not being able to get access to their medications by having to coordinate with all these different pharmacies, but they might not realize exactly what's going on either. So, you know, having pharmacists can have conversations with their patients with the other practitioners and their health care team, to really get everybody sort of fired up and on the same page to understand what is going on here by and large. But then beyond that, right, we can educate other non-pharmacist-like policy makers through engaging with advocacy through our state affiliate organizations, really advocating with legislators and with boards of pharmacies to really adopt some policies, to really tamp down these practices and get things back to being evidence-based and clinical-based again. Yeah, that's right. And for listeners, I assume that many of you were shocked by some of the numbers that Kyle was sharing. I know I was. Policy makers are not deeply aware of these issues, but there is an increase in interest. So, we have seen members of Congress calling hearings around PBM practices. Recently, we've, of course, as Kyle shared with us on the prior podcast, seen the Federal Trade Commission looking into PBM practices. And so, there are policy makers looking under the hood and trying to understand these issues. So, you know, I think there is an opportunity for educating policymakers, and it is kind of, it's on us to do some of that education. ASHP plays some of that role at the federal level, but you can do that in your own community as well. So, speaking of in your own community, Kyle, you're not just our PBM expert, you're our state policy expert. So, what can states do to address this issue? I really think the core of addressing this issue is we need to develop a standard objective and evidence-based criteria to define specialty drugs and specialty pharmacy practice. That's really the core of it. There's a number of different ways that this can be accomplished, and the states have attempted to address this. So, one of them is really to empower the Board of Pharmacy to, again, create formal distinctions of these things that are based on clinical criteria. So, really empower the Board to define what is a specialty drug. Make sure the Board is separately licensing specialty pharmacies and holding them to, again, the most relevant clinical criteria. Once you get the Board involved in defining specialty drug and specialty pharmacies, at that point, you can say you can potentially pass PBM legislation as well to say, and several states have done this, several states have passed PBM legislation to try to stop these practices by basically saying, "Look, if there is a drug that is covered by the healthcare plan, and you have a pharmacy that is in the pharmacy network for that plan, and that pharmacy is legally authorized to acquire and dispense the cover drug, you have to let them do it." And that could be either because you have the state-specialty drug list, you have the state-specialty pharmacy licensing pathway, and the pharmacy is licensed by the state, and sanctioned by the state. The PBM can't create, you know, you have the regulatory body that's primarily responsible for ensuring patient safety saying that this pharmacy is safe. There shouldn't be any excuse for the payer to create artificial reasons not to cover it there. And how does this interact with long-standing any willing pharmacy laws that exist in certain contexts? Yeah, so, I mean, a lot of states are looking more into any willing pharmacy, you know, laws because of the specific activity that we're seeing here, right? So, again, the sort of traditional logic around any willing pharmacy and really any willing provider laws is that it would actually increase premiums, right? Because the plan can't be aggressive in negotiating, right? If you say that there's a pool of 10 pharmacies, now I only have to take five. Well, I can take the five that offer me the lowest price, and I can keep the other five out, right? That's the argument against any willing pharmacy. But what we're saying here is, in this situation, the plan is saying, "Well, I can pick one pharmacy and keep the nine pharmacies out, and I own that one pharmacy." Well, now they're not really necessarily incentivized to be giving the lowest price possible. They can actually freeze out everybody who's willing to offer lower prices. So, again, I think this has flipped the traditional logic and the way that we look at some of these issues, and the specific activity that we're seeing in the market places, I think, changed the way people look at these things. So, I think it has actually increased these types of practices, has increased the appetite in various states to adopt any willing pharmacy laws. Great. Okay, well, thank you for that explanation, Kyle, and that's all the time that we have for today. Kyle, I do want to thank you for joining us to discuss these PDM issues, we're going to be doing some more of these episodes specifically around PDM's. Our next episode in the series will continue to delve into PDM's steerage and common practices around white bagging and brown bagging. And ASHP members and listeners, please be sure your voice is heard as a pharmacist and as a constituent. You have tremendous influence at the state and federal level. You can visit ashp.org to learn more about our advocacy issues, grassroots efforts, and ways you can get involved in ASHP's advocacy today. Thanks. Thank you for listening to ASHP Official, the voice of pharmacists advancing healthcare. Be sure to visit ashp.org/podcast to discover more great episodes, access show notes, and download the episode transcript. 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