It’s time to rethink prior authorization

The current structure of most Canadian prior authorization (PA) programs is broken and needs to be fixed because traditional PA hasn’t changed in decades.

Better programs PA programs are needed across the industry, programs supported by the realization among plan sponsors and advisors that you can’t pay in the neighborhood of $50 to process a PA submission anymore if you want this mechanism to have any meaningful impact in managing these claims.

Plans will need to get used to paying more for effective and comprehensive PA reviews, but given the financial liabilities (see example below), how does a $50 administration charge to process a PA request based on an infrastructure built long ago make any sense in today’s era of rapidly expanding specialty therapies?

Read: Protect your drug plans with enhanced PAs

The problems
There are a number of structural problems with the ways that PA processes are set up today:

  • Lack of transparency – Plan sponsors routinely do not know how many PA claims were submitted, how many were approved, how many were rejected, the reasons for rejection, and what happened to members who had their PA claim for a given therapy rejected as ineligible for coverage.
  • One-size fits all – Vendors tend to offer one set of criteria for any given PA drug—wouldn’t you in their shoes? However, you can have varying degrees of rigour with PA criteria for a drug that are all still based on evidence-based medicine (EBM). If you only offer one size fits all, there is a good chance things fall to the lowest common denominator of “is it an approved use by Health Canada?” This isn’t to criticize the vendors in this space, it’s simply to recognize what $50 buys you: the lowest common denominator.
  • Perception – Rightly or wrongly, fairly or unfairly, PA is perceived to be a rubber-stamping process for plans with very high stop-loss thresholds and/or no stop-loss in place. That sentiment is toxic for proper plan management because it leads plans to completely disregard PA as a meaningful and necessary plan management tool.

Read: Drug plan trends in Canada

Where PA needs to go—and soon

  • Complete transparency – How else can the utility of a program be measured? How else can a plan sponsor be confident that there is value to the process, while members are being treated fairly and consistently, if detailed PA statistics are not shared in a way that still protects member privacy?
  • Multiple offerings – Recognizing that each plan sponsor faces different circumstances, there are ways to offer varying levels of robust eligibility criteria which responsibly balances the health of the member with the ability of the plan to pay for these expensive therapies.
  • Embedded into formulary design – This opens up opportunities for the pharmaceutical industry to partner with private plans on preferred listings, risk-sharing agreements, and plan member support opportunities.
  • Technology centric – We need to enable and embrace technology that allows a clinical reviewer, specialist(s), and plan member to efficiently communicate required information, render decisions, and discuss any alternative solutions.

I’m a pharmacist. I want to see every member have access to therapies they need. That being said, I also spend most of my waking hours looking at how to ensure plans like the two below can responsibly weather the storm ahead. There are ways to be fair, consistent and responsible without having to forget who is on the other end of a PA claim—a member, a colleague, a friend, maybe even a family member.

One thing we do owe all members is to make sure that we’re safeguarding the sustainability of plans in the face of what is undoubtedly a wave of new and very significant financial challenges the likes of which most plans have not seen in years. We can’t do that with the current state of PA.

Read: Tackle the plan-spend challenge

You can’t spend $50 to manage $20,000 to $120,000 worth of claims

I fielded two calls last month from plan sponsors asking about the same specialty drug preferred provider network (PPN) solution that was being promoted to them. Here are some key numbers for context:

  • In 2014, these plan sponsors spent a combined $6,504,416 on drugs for their members.
  • $1,811,103 of that total spend in 2014 (an astounding 28%) was for expensive specialty therapies (only 0.8% of that spend was related to Hepatitis C by the way.)

These plans sponsors are looking for help managing this specialty experience where 1% of the claims experience is accounting for 28% of the total spend. Their vendor partner offers a specialty PPN network that will cap dispensing fees and will provide savings on the drug markup.

If we assume an extremely ambitious savings of 7% on the markup (which is very likely materially higher than reality—the markup savings in the program are not disclosed), let’s look at the numbers:

  • Assuming every single specialty claim has a $1,200 base ingredient cost (for ease of math) and went through the PPN, if a plan pays 8% markup on $1,200 instead of 15%, it will save $84 per prescription and therefore, 6% of its total specialty spend.
  • With these plans having a combined 28% of their overall spend for specialty therapies, a 6% savings on 28% of the experience equals a total plan savings of 1.68%.
  • If an average dispensing fee is $10 on a prescription that costs $1,296 prescription ($1,200 base plus 8% mark-up of $96), the impact of any fee cap is completely negligible.

Here’s the problem. These two plans spent $1,811,103 on 1,502 specialty claims, but looking at their current, plan-specific demographic, disease state and utilization profiles, there are some very concerning future financial liabilities:

  • These plans are facing a combined annual increase in chronic specialty spending of $492,290 from being currently under-saturated for chronic specialty claims.
  • They are sitting on an additional combined annual financial liability of $435,878 from members converting from first- and second-line traditional therapies to higher-cost specialty treatments to deal with worsening conditions.
  • Combined, their recurring annual financial liability related to specialty drugs is $928,168. That amount represents a 51% increase on what they are already paying for specialty drugs, or a 14% increase in overall plan spending. In other words, although 28% of their overall spend has been for specialty, it could have been far higher.

That doesn’t even consider the 30 combined possible Hepatitis C claimants within two plans because the above figures refer only to chronic specialty claims. I mention Hepatitis C twice now because it seems to be the current “hot” topic in specialty drug discussions.

In addition, a specialty pharmacy provider is not a standard offering, much like different traditional pharmacy providers are not alike. Just having a specialty network in place doesn’t consider the ability of a specific provider to help manage aspects other than mark-up such as administration, cold-chain management, inventory and waste management, clinical support, and a host of other considerations. We need to be careful not to equate all PPN offerings and assume they will all magically add the same value.

Full credit to the intent of this specialty PPN program being proposed to these two plan sponsors to help manage costs, but based on what they are facing, they will need more tools to manage this area.