Psst! You Are Spending Too Much on Drugs

Updated: Jan 23



So, you bought some milk online for $15 a gallon, only to go to the store and see that you could have spent $4. Believe it or not, this happens in healthcare all the time. (But with drugs, not milk.)

That’s why we’re here talking to Kathy Campagna, Vice President of Business Development and Director of Specialty Drug Strategy at Magellan Rx, which has a site of service program to help you save money without a lot of member disruption.

She has over 40 years of experience in healthcare and has worked for the last 10 years in the medical pharmacy area for Magellan Rx Management. Basically, medical pharmacies are programs that specifically deal with the high trends in spend that occur for medical drugs.

One of Campagna’s aims is to bring Magellan Rx’s programs to the self-funded marketplace so that employer groups can control their cost and trend within medical drugs.

Campagna explains that when you get your drugs through your pharmacy, everything is processed through your pharmacy benefit. But why, oh why, (you ask) is it so punishingly expensive?

Because that is only 50% of the spend. An additional 50% of the spend is processed through the medical benefit. “The cost, if you look at the overall spending now, is at a 50/50 mark,” Campagna said.

“Of the 50% of drugs spent on the medical benefit, with the latest and greatest high-cost drugs, only 1 to 2% of the population is driving that overall spend,” she said.

So what do you do if one in 10,000 people is proscribed a drug that is seriously expensive, like $200,000 to $350,000 a year?

How to Manage the Spend

It’s all about reading the data. Often, employer groups are more concentrated on high cost spends like hospitalizations, ER costs, surgeries, and anesthesia, when they really need to be as conscious of drug costs through the medical benefit.

“For every dollar spent on the pharmacy benefit, there’s another dollar spent on medical drugs through the medical benefit,” Campagna said.

And those numbers are climbing anywhere from a 12% to 13% trend per year. “What is causing that climb is the high cost of specialty drugs that are coming to market on an ongoing basis,” Campagna said.

First, Campagna gets the data. “The data tells us the entire story,” she said. “When we go out and look at a client, we first ask them to send us some data.” Even though sometimes that gets people concerned because they have never requested or seen their medical data.

“That is one thing that I am here to change,” Campagna said. “I believe that even small self-funded groups should be getting some kind of reporting process from their medical health plan.”

Then she reads the data. “Basically, every solution is unique to each group.” She’s there to figure out how to apply her experience from saving money for health plans to the self-funded space.

Then she makes recommendations, like the site of service program that has been in place for about three years. “It has been tremendously successful and we’ve been able to drill it down to where the best successes are,” she said.

Why Healthcare Data Is Awesome

A bit of background. Years ago, there was an influx of moving care out of the outpatient clinic environment and into the physicians’ offices. Eventually, many physicians joined practices with hospital groups and/or just shifted to the infusions to the outpatient clinic because it cost less.

But lately, the exact opposite has happened. There’s been a decline in a lesser cost environment in the physician’s office to a higher cost in the outpatient clinic.

A claim that is $45,000 for one infusion in an outpatient clinic could be as low as $10,000 to $11,000 in a physician’s office—or in home care.

Imagine how much more comfortable it would be if the patient could receive their infusion on a Saturday in their own home without having to take a day off from work. Everybody is a lot happier during that stressful time of receiving IV infusions.

Which is the origin of the Magellan site of service program.

Data told Magellan Rx which would be the best drugs to have in the program. Other companies have a list of 50 or 60 drugs, but when you look at the outcomes, some might be hardly or never used.

“What we did is we isolated on two groups,” Campagna said. Rheumatoid arthritis drugs and autoimmune drugs can both comfortably be given either in the physician’s office and even home care.

Remicade is a rheumatoid arthritis drug that is given about 6 to 7 times a year for the rest of the patient’s life. It can easily be given in the home care setting. It’s also super expensive.

“To constantly have to take PTO or constantly go to a clinic is not convenient,” Campagna said. “It can cost even more money because you may be in a rural area and you have to drive to a facility.” Mobility could be an issue for patients, too.

“We can get right down to the member, work with the employer group on what their benefit structure looks like and see if it, number one, supports the transfer of these clients from a hospital outpatient setting to a home environment. Then we ask for permission to reach out to the physician and to the member to talk with them about their movement to the different area of treatment.”

Even though sometimes patients are reluctant to change. But when the individual employers see the savings, they pretty much jump for joy.

You Could Save Half Your Spend—or More

An average savings of 46% per claim. “This is real data,” Campagna said, “and it’s usually a minimum of $70,000 average savings for the life of that client’s infusions.”

And she’s seen it much higher than that on average. “Our program is based on the data, and we work individually with the employer group so that the employer group can understand the program.”

“When the employer group sees the amount of money that they have been spending that they really didn’t need to spend, we can rewrite their benefit structure to add some incentives to the member to look at the least costly site of care,” Campagna said.

Again with Remicade. A typical claim could be between $35,000 and $44,000 each time the patient receives their infusion—but only $10,000 if given in the home.

“What you’re seeing over the course of just three infusions is a difference between $124,000 versus $53,000,” Campagna said.

There was this one unbelievable case study. An outpatient clinic was charging $103,000 per infusion for a Remicade infusion to this small self-funded group of only about 400 members.

“You could see how this cost could just strain them tremendously,” Campagna said.

After they called her, she had the Remicade dispensed from their specialty pharmacy for $8,500 per infusion. “It was an overcharge of $94,500 per infusion.” Incredible.

“You can see how these things could be coming through your data and you don’t realize it. That’s what we do for you. We get your data, we find these anomalies, and we help you put a solution in place that will change the course of your overall spend.”

If you’re one of those employer groups eager to see the savings, contact Kathy Campagna at kcampagna@magellanhealth.com or (716) 913-6092. She can send you case studies and set up a time to discuss what she can offer.

To hear this episode, and many more like it, you can subscribe to Healthcare Simplified.

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