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panies and government payers, be- lieve step therapy is a necessary and effective cost saving tool that limits patient risk for newly approved medications.
As we move into an era of patient- centric care and the promise of per- sonalized medicine, it’s important to understand step therapy — including the bene ts and challenges—and how the process impacts patients and their access to innovative medi- cations, as well as the healthcare providers who serve them.
Offspring of Managed Healthcare
Regardless of recent headlines, controlling the cost of prescrip- tion medications is nothing new. Throughout several decades, policies were developed and procedures established to address rising costs. Hospital pharmacy and therapeutics committees (P&T committees) have used formularies, which once indi- cated formulas used to compound drugs by pharmacists, to negotiate “preferred” drug pricing from drug manufacturers and suppliers since the 1970s.
Health insurers, pharmacy bene t managers and group purchasing or- ganizations (GPOs) also established P&T committees and formularies; in addition to P&T committees negoti- ating costs with drug manufacturers and distributors, commercial and government payers have used formu- laries to further guide consumers to lower costing medicines.
When generic medications began entering the U.S. healthcare market in the 1990s, managed healthcare companies helped steer a dubious public toward acceptance using sig- ni cantly lower out-of-pocket cost, or copays, as incentives. Copays
for generic drugs were remarkably lower — up to 85 percent — than their brand-name counterparts.
Health insurance companies fur-
ther controlled the cost of prescrip- tion drugs by applying policies and procedures existing in managed healthcare plans. Preauthorization (or prior authorization) and utiliza- tion reviews for medical services, which promised patients would re- ceive the appropriate medical care at the lowest possible cost, extended to prescription drug bene ts through drug utilization review (DUR).
DUR now employs algorithms, or data sets that compare population statistics to a patient’s diagnosis and medication history, to ensure appropriate decisions are made for prescription medications, as well as ensure patients achieve the best pos- sible outcome with cost ef ciencies.
Also known as drug utilization evaluation or medication utilization evaluation, DUR occurs throughout the patient journey:
Prospective: evaluates the patient’s therapy before dispensing medication;
Concurrent: monitors drug therapy during the course of treatment;
Retrospective: reviews drug therapy after the patient received the medication.4
Contrary to its primary purpose, studies reveal these preauthorization processes increase healthcare costs by a whopping $69 billion for physi- cian practices alone.5 (At the time
of writing, data was not available for cost impacts in retail, community and hospital pharmacies.) A DUR, however, is not the only cost-con- tainment measure implemented by commercial and government payers.
Pharmacy bene t plans also employ tiered levels of coverage. Generic medications typically appear as Tier
1 drugs and have the lowest copay. Brand name medicines that appear on an insurance company’s or pharmacy bene t manager’s for-
mulary typically appear as Tier 2 drugs; the copay amount is gener- ally at least twice the cost of Tier 1 drugs. Brand name medicines not on a formulary typically appear as Tier 3 drugs; copays again increase. Specialty medicines used to treat rare diseases and cancers, as well
as breakthrough pharmaceuticals, often appear as Tier 4 drugs. Many pharmacy bene t plans require the patient to pay a percentage of the specialty drug’s cost — rather than a xed dollar copay — for Tier 4 drugs. A 2009 study showed specialty tier medications cost $45,000 to $95,000 per year, per patient.6
Step therapy, also known as “step protocol” and “fail rst,” is a type of DUR that occurs when newer to market medications, including spe- cialty and biologic pharmaceuticals, are prescribed.
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