Beyond Prior Authorization: 4 Ways to Control Specialty Drug Costs

By Matthew Hawley, Executive Vice President of Payment Integrity Operations and Jonathan Starr, PharmD, Senior Consultant, Cotiviti
Twitter: @Cotiviti

A patient receives automatic refills from a specialty pharmacy for a drug he no longer uses and ends up stockpiling $1 million worth of medication. A pharmacy miscalculates the number of units of a specialty drug prescribed for a patient, resulting in a claim that is $16,000 higher than necessary, yet the claim is paid for by insurance.

These are just two examples of why specialty drugs are complex to manage and costly to cover—and why prior authorization alone is not enough to prevent overspending or fraud, waste and abuse.

In 2020, specialty drugs accounted for more than half of total pharmacy spending despite being used by less than 2% of the population. Meanwhile, the fast pace of specialty drug approvals by the U.S. Food and Drug Administration (FDA) makes it difficult for health plans to ensure their claim editing software, which helps control inappropriate or excessive disbursements, keeps up with specialty drug policy. Of the 103 new drugs approved by the FDA in 2020 and 2021, 75% were considered specialty drugs.

Typically, health plans rely on prior authorization as a mechanism for preventing inappropriate or excessive specialty drug expenditures—and for some health plans, it is their only defense against specialty drug payment errors. But prior authorization is far from foolproof. As a result, relying solely on prior authorizations to protect payment integrity can expose health plans to significant financial risk:

  • Once a patient’s claim is approved, the criteria for approval might not be reviewed again for another year, during which time the patient’s circumstance might not warrant continued use of the drug.
  • Errors in coding and billing—such as the number of units billed—might not be monitored following initial approval of the prior authorization.
  • When duplicate billing occurs—for instance, when a clinic should only bill for administering a medication, yet inadvertently bills for the drug as well.

Unless there are tools in place to detect these errors as part of claim adjudication, the health plan may end up absorbing the extra expense. Limitations such as these point to the value of a robust payment integrity solution to combat excess specialty drug spending.

Ensuring Payment Accuracy for Specialty Drugs

The rules for payment of specialty drugs are complex, and the drugs themselves are expensive, making it critical that health plans scrutinize every specialty drug claim. But because specialty drugs can be covered by two different benefit sets—pharmacy benefits and medical benefits—health plans might not have full visibility into their specialty drug claim expenditures. This is true even when both pharmacy and medical benefits are covered by the same plan. The reason: the data is often siloed, often with separate claims adjudication workstreams, hindering efforts to monitor for inappropriate claims.

Additionally, the nuances of specialty drug classification and administration, along with the speed with which new drugs are introduced, make it challenging for health plan claim editing systems and personnel to spot mistakes in specialty drug claims. These errors include inaccuracies in diagnosis codes, maximum daily dose, National Drug Codes (NDCs) and the method of administration.

Without the benefit of pharmaceutical and medical expertise, health plans face high risk of fraud, waste and abuse, including excessive use of brand-name drugs, lack of clinical indication to support the use of a drug, and refills for medications that patients should no longer be taking.

Action Steps for Payment Integrity

How can health plans more effectively ensure that patients receive the appropriate treatments and that specialty drug claims are billed correctly? Here are four action steps to consider.

  1. Establish a well-rounded team for specialty drug review. Increasingly, health plans are leaning into the expertise of pharmacists and pharmacy technicians as well as specialty nurses, physicians, data scientists and claim specialists to evaluate specialty drug claims. This helps health plans gain a more complete perspective on which specialty drugs should be prescribed and in what circumstances.
  2. Look for a partner with niche expertise. Each detail in a specialty drug claim presents an opportunity for errors—as well as corrections. Whether it’s a matter of reviewing a claim prepayment, catching an error postpayment, or identifying fraudulent or wasteful patterns, maintaining access to a variety of expertise and solutions is essential. Some plans will benefit from partnering with an expert in a specific classification of drugs. Others might benefit from expertise in prepay or postpay reviews, depending on their strengths in either area, to close gaps in their prevention processes.
  3. Develop a postpay safety net solution. Such a solution helps health plans monitor for inappropriate activity that involves not just the prescriber, but also patients and pharmacies. They involve the use of data analysis to identify scenarios that require additional verification or confirmation to ensure the appropriate payment was made. Leading solutions leverage both medical and pharmacy claims data to identify and recover high-value claim overpayments, such as specialty drug duplicate billing and other areas of waste or error.
  4. Connect your prepay, postpay and special investigations teams. For example, pairing postpay claim review results with machine-learning analyses that search for patterns in fraud, waste and abuse reduce duplicative effort. They also protect the health of members and the health plan’s bottom line.

By taking a multifaceted approach to specialty drug payment integrity, health plans can bolster payment integrity beyond prior authorization while ensuring patients receive the appropriate treatment.