Perspectives from Payers, Specialty Pharmacies, Practicing

Physicians, and Provider Administrators

First Edition

RESPIRATORY2017 Genentech

TREND REPORT

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The 2017 Genentech Respiratory Trend ReportAn informational report provided by Genentech, South San Francisco, CAProduced by Navigant Consulting, Inc., Chicago, IL • www.navigant.com

Douglas Martin, MD Managing Editor and Director of Stakeholder Research

Christopher Capuano Editor

David Chin, RPh, CFA Project Management

Elizabeth Lenczowski, Mats Dreyer, Angelo EncarnacionEditorial and Research

NAVIGANT

MISSION STATEMENTThe mission of The 2017 Genentech Respiratory Trend Report: Perspectives from Payers, Specialty Pharmacies, Practicing Physicians, and Provider Administrators is to provide timely and useful information on the latest respiratory care trends and developments. To be updated annually, the publication is designed to serve as a unique resource for those seeking an understanding of the issues surrounding respiratory management and practice. The content of this report was prepared by Navigant at Genentech’s request, with guidance from an external editorial board and based on primary research of key stakeholders and published literature. Statements and opinions contained in the report do not necessarily reflect those of Genentech or the editorial board.

Bradley E. Chipps, MDMedical DirectorCapital Allergy & Respiratory Disease CenterSacramento, CA

Kathleen FrankPractice ManagerPulmonary Specialists of NW IndianaHobart, IN

David L. Larsen, RN, MHADirector of Quality ImprovementSelectHealthSalt Lake City, UT

Christian A. Merlo, MD, MPHAssociate Professor of MedicineJohns Hopkins University School of MedicineBaltimore, MD

Paul W. Noble, MDChair of Department of Medicine, Director of Women’s Guild Lung InstituteCedars-Sinai Medical CenterLos Angeles, CA

Albert A. Rizzo, MD, FACP, FCCPSenior Medical Advisor, American Lung AssociationSection Chief, Pulmonary MedicineChristiana Care Health SystemNewark, DE

EDITORIAL BOARD

SUGGESTED CITATIONThe 2017 Genentech Respiratory Trend Report: Perspectives from Payers, Specialty Pharmacies, Practicing Physicians, and Provider Administrators. 1st ed. South San Francisco, CA: Genentech; 2017.

The editorial board was compensated for time spent in review of the 2017 Genentech Respiratory Trend Report

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Introduction

Methodology

Respondent Demographics

Key Findings

Scope & Budgetary Importance of Respiratory Conditions

Respiratory Payer Management Trends

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Deeper Assessment of In-Scope Respiratory Conditions

Asthma

Chronic Obstructive Pulmonary Disease

Idiopathic Pulmonary Fibrosis

Cystic Fibrosis

Lung Cancer

Provider Trends

Provider Trends from Community, Hospital, and Academic-based Practice Perspective

Integrated Network/ Hospital System Trends from Administrator Perspective

Specialty Pharmacy Trends

Glossary

References

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NThe healthcare landscape in the United States is undergoing a period of profound change. In 2010, the Affordable Care Act (ACA) was signed into law. Impetus for reform was complex, but the law broadly sought to reform the private insurance market, expand Medicaid, and reduce growth of costs while promoting quality and value in healthcare.

The law was complex and sweeping. Despite challenges especially related to roll-out and stability of the insurance marketplaces, there were notable successes. More Americans have access to care, through a combination of increased options for individual coverage as well as expansions of Medicaid in some states. Furthermore, the law has accelerated adoption of payment and delivery reforms, which may help to slow the rate of growth of healthcare costs. While the future of the ACA is uncertain, recent progress towards value-based healthcare is significant and the trend towards value-based payment models may continue.

There were several notable headlines and developments in healthcare in 2016, some of which are highlighted in Table 1 (adapted from The Commonwealth Fund).1 These may provide useful context in reviewing and interpreting the findings within this report.

Table 1. 2016 Healthcare Year in Review

TRENDS KEY EVENT

Instability in the Health Insurance Marketplace

• Influx of new patients into the healthcare system as uninsured rate hits historic low

• Premium increases and insurer exists from the health insurance marketplaces

• The Department of Justice blocks Anthem-Cigna and Aetna-Humana mergers

Further Progress Towards Value- Based Healthcare

• CMS finalized regulations for the Medicare Access and CHIP Reauthorization Act (MACRA), which will transform how Medicare

pays clinicians• Center of Medicare and Medicaid Innovation (CMMI) implemented

mandatory provider participation in some payment experiments (such as CJR)

Changes Impacting Industry

• Nine of 22 novel new medicines approved by FDA have orphan designation2

• New constructs for assessing the value of pharmaceutical innovation

• 21st Century Cures Act boosts NIH funding and reforms FDA approval process

2016 HEALTHCARE YEAR IN REVIEW

AN EYE TOWARDS THE FUTURE

President Donald Trump was sworn in on January 20, 2017. He suggested throughout his 2016 presidential campaign that healthcare may represent an early legislative priority, including repealing and potentially replacing the ACA.

Notwithstanding this important development and its potential implications for the US healthcare landscape, the survey research conducted to inform the findings in this report were fielded from August through October 2016. As such, the data is not yet reflective of any known or speculated impact related to the results of the election.

This report focuses on respiratory diseases. Respiratory diseases include a range of conditions with high aggregate costs to the healthcare system – including highly prevalent diseases such as asthma and chronic obstructive pulmonary disease, and less common diseases such as cystic fibrosis and interstitial lung diseases (ILDs). These conditions vary with respect to epidemiology, burden of illness, prognosis, breadth of available treatment options, level of remaining unmet medical need, per patient costs and budget impact. Moreover, different respiratory diseases may be managed by different types of healthcare providers. While primary care physicians and advanced practice providers play an important role in managing common diseases, specialists and sub-specialists of pulmonology, allergy and immunology may play a more central role in managing more severe or refractory variants of disease and less common conditions. Still other respiratory diseases such as pulmonary arterial hypertension (PAH) and lung cancer may be managed in part by specialists who focus outside of the respiratory system.

As a consequence, there are differing viewpoints in the community in terms of the diseases that are and aren’t included within the “respiratory category.” In the interest of focus, this report set out to characterize and explore trends related to management of four sentinel conditions impacting the airways and lung parenchyma: 1. asthma and severe asthma; 2. chronic obstructive pulmonary disease (COPD); 3. idiopathic pulmonary fibrosis (IPF); and 4. cystic fibrosis (CF).

It also touches briefly on the role of non-oncologists in the management of lung cancer.

In order to capture a multi-faceted view of relevant trends, survey research was conducted with several stakeholder groups, including:

5. those who diagnose, treat and manage the conditions in focus (allergists, pulmonologists, and subspecialists);

6. those responsible for operations and management of respiratory practices (community practice managers, integrated network and hospital system administrators);

7. those who manage costs and reimbursement (payers); and

8. those who manage distribution of specialty medicines used to treat the conditions in focus (specialty pharmacies).

The report is organized into four major sections:

I. Respiratory Payer Management Trends, which examines payer mix and spend, distribution of specialty pharmaceuticals (i.e., therapies not commonly dispensed by retail pharmacies), perceptions of challenges in achieving optimal disease outcomes, and approaches and strategies employed by payers to manage spend

II. Deeper Assessment of In-Scope Respiratory Conditions, which provides more detailed analysis of the issues above as they relate to specific in-scope conditions, in addition to viewpoints on practice patterns, quality of care, care coordination strategies, and clinical decision support

III. Provider Trends, which characterizes the state, organization, performance and outlook of two key customer groups, physician practices and hospitals, involved in delivery and management of respiratory care, independent of the specific respiratory condition

IV. Specialty Pharmacy Trends, which examines the current state and future outlook for distribution of specialty respiratory products

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The surveys investigated policies and services delivered by each included stakeholder type, and sought to understand current and future perspectives on these issues. Questions also captured data related to the prescribing, coverage, and reimbursement of broad classes of treatments used in management of the respiratory conditions within the scope of this report. No specific pharmaceutical products were assessed in any of the survey instruments.

Surveys varied in length. All had a minimum of fifty questions, many of which required multi-part responses. Respondents were screened for participation (see Prequalification Criteria)

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Y The 2017 Genentech Respiratory Trend Report is sponsored by Genentech, a member of the Roche Group. The publication was developed by Navigant, a consulting firm specializing in healthcare and life sciences. Navigant developed proprietary survey instruments with the direction and review of an expert independent editorial board.

Surveys were developed to col lect information from four major stakeholder groups responsible for the delivery and payment of care to patients with respiratory illnesses:

1. PAYERS2. CLINICAL PROVIDERS

• Pulmonologists• Allergists• IPF Specialists• CF Specialists

3. PROVIDER ADMINISTRATORS• Community practice managers• Integrated network and

hospital system executives

4. SPECIALTY PHARMACIES

Navigant sent potential participants information about the research study via e-mail. These individuals were assured that their names, affiliated organizations, and individual survey responses would be held in strict confidence by Navigant, and that the final report would reflect blinded and aggregated data. Those who agreed to participate were directed to a web-based survey. Four surveys were in the field on an overlapping schedule from August 22nd to October 6th, 2016 – a total of seven weeks. Honoraria were paid to those who met qualification criteria during recruitment and submitted a completed survey.

Research participants were required to meet specific prequalifying criteria to ensure the integrity of their responses:

• Payers representing managed care organizations (MCOs), integrated networks and systems with insured lives, and pharmacy benefit managers (PBMs) were required to represent organizations of a minimum size (based on covered lives) and to have visibility into decision-making and policies related to management of respiratory diseases

• Clinical providers were required to be

practicing pulmonologists or allergists who follow set minimum numbers of patients with respiratory diseases (with questioning related to severe asthma, IPF and CF tailored based on individual physician case mix)

SURVEY DEVELOPMENT

RECRUITMENT AND FIELDING

PREQUALIFICATION CRITERIA

and survey logic was used to direct them to relevant questions based on their professional focus at times (e.g., payers were not asked for perspectives on diseases which they indicated a low level of familiarity with).

• Practice managers were required to hold responsibilities related to operations and business management of community-based respiratory practices owned by or employing practicing pulmonologists and allergists

• Integrated network and hospital system administrators were required to represent organizations which offer outpatient services in pulmonology and allergy/immunology, and to have knowledge of their organizations’ performance and priorities related to management of respiratory diseases

• Specialty pharmacy executives were required to represent organizations of a minimum size (based on lives served), to dispense specialty medicines for one or more of the conditions within the focus of this report, and to have visibility into decision-making and policies related to management of respiratory diseases

Additional pertinent details on the types of respondents permitted to respond to the surveys are provided in the Respondent Demographics section of this report.

Navigant collected, aggregated, analyzed, and reported the resulting data. All data were blinded and aggregated by stakeholder group. Subgroup analysis (e.g., based on specific demographic characteristics) was conducted in some cases, where sample sizes permitted. Individual survey responses have not been independently verified for accuracy regarding actual operations and practices in place across the stakeholder groups represented.

The Editorial Board reviewed the data analyses, resulting interpretations, and the manuscript. Any statements and opinions contained within the report reflect the responses of survey participants and do not necessarily reflect those of Genentech, Navigant or the Editorial Board.

a For this comparison, state level organizations were considered part of the applicable region; organizations were considered national if they were located in two or more regions.b Throughout this survey, geographic regions are defined as follows:Midwest: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI Northeast: CT, MA, ME, NH, NJ, NY, PA, RI, VTSouth: AL, AR, DC, DE, FL, GA, KY, LA, MD, MS, NC, OK, SC, TN, TX, VA, WV West: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY

Figure 1. Distribution of Survey Respondents by Geographic Region (N=330)a,b METHO

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DATA ANALYSES AND REPORTING

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S This section summarizes pertinent demographic data characterizing the aggregate sample of respondents who pre-qualified for participation in each of the four sentinel surveys informing the content included in this report:

1. PAYERS2. CLINICAL PROVIDERS

• Pulmonologists• Allergists• IPF Specialists• CF Specialists

3. PROVIDER ADMINISTRATORS• Community practice managers• Integrated network and

hospital system executives

4. SPECIALTY PHARMACIES

The survey was deployed to 75 health plan payers representing a variety of organization types, roles and titles; the breakdown of which is depicted in Figure 2 and Figure 3.

National managed care organization (n=22)Regional affiliate of a national managed care organization (n=20)Independent regional managed care organization (n=13)Integrated networks/system WITH insured lives (n=13)Pharmacy benefit manager (PBM) (n=7)

Figure 2. Payer Respondents by Organization Type (N=75 Payers)

The payer sample represents a broad range of organization types, including national and regional managed care organizations, integrated payer-providers and PBMs.

PAYER DEMOGRAPHICS

As illustrated in Figure 4, nearly all respondents (96%) reported that they were involved in their organization’s Pharmacy & Therapeutics (P&T) Committee, with 64% self-identifying as a “voting member” and 47% indicating that they “make recommendations to the committee.”

Medical Director

Pharmacy Director

Pharmacy/Program Manager

Figure 3. Payer Respondents by Role/Function (N=75 Payers)

Combined, medical directors and pharmacy directors represented 61% of the sample.

64%

47%

Voting member Make recommendations to the committee

Organizations ranged in size from 200,000-70,000,000 covered lives (mean = 1.3 million) with a pharmacy benefit. With respect to lines of business offered:

of represented payer organizations offered fully-insured employer group plans;

offered self-insured employer plans;

offered individual or small group benefits as part of a state of federal marketplace;

offered Medicare Advantage benefits;

offered stand-alone Medicare Part D drug benefits;

offered Managed Medicaid benefits;

offered DOD/Tricare or Veteran’s Affairs plans.

95%

88%

80%

84%66%77%66%

Figure 4. P&T Committee Responsibilities of Payer Respondents (N=75 Payers)

The majority of respondents are directly involved in drug formulary decision making.

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Quality Director

Other Executive

Surveyed payers were asked to indicate their familiarity with their organization’s priorities and strategies related to management of each of the in-scope respiratory conditions and were required to meet minimum thresholds for inclusion in the survey. For prevalent conditions such as asthma & COPD, 82% of surveyed payers indicated that management of these conditions is a major component of their role or that they have strong familiarity with relevant priorities and initiatives. A somewhat smaller majority (56%) indicated as such for less common respiratory conditions including IPF and CF. Only those familiar with these conditions were asked to complete portions of the survey that focused on these disorders.

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Community-based single-specialty and group private practice Hospital-integrated, private practiceHospital-owned, non-academic practice Academic/medical center-based practice that is private or hospital/institution-owned

Figure 6. Breakdown of Provider Sample by Specialty and Primary Practice Setting (N=150 Providers)

A greater proportion of allergists (86%) practiced incommunity-based private practices, relative to general pulmonologists. Additionally, IPF and CF specialists practiced disproportionately in academic settings relative to the overall sample.

Figure 6 examines the primary practice setting by designated specialist type. IPF and CF Specialists were more likely to practice in academic or medical center based practices. Surveyed allergists widely practiced in the community; while the aggregate sample of pulmonologists fell somewhere towards the middle.

On average, surveyed physicians indicated that they spend 62% of their time seeing patients in the outpatient setting, and 25% of their time seeing patients in the inpatient setting. Their remaining time is divided between research and clinical trials, practice management, and teaching.

The patient mix of surveyed pulmonologists and allergists is shown in Figure 7. Lung cancer, IPF, and CF may be over-weighted among surveyed pulmonologists relative to the general population due to survey screening requirements (minimum quotas were set for specialists treating relatively large numbers of patients with these conditions).

CLINICAL PROVIDER DEMOGRAPHICS

The survey was deployed to 150 physicians including Doctors of Medicine (MDs) and Doctors of Osteopathic Medicine (DOs). The majority (80%) were board-certified in pulmonology and/or pediatric pulmonology (referred to henceforth as pulmonologists) and 20% were board-certified in allergy and immunology (referred to henceforth as allergists).

Across both specialties, physicians reported that they see an average of 303 patients per month. A subset of responding physicians were designated, for the purposes of this survey, as IPF or CF Specialists. This classification was based on a minimum threshold of patients seen per month with either condition. This was done in order to determine eligibility to answer survey sections related to these conditions.

The survey included physicians from various settings of care, as depicted in Figure 5. Where respondents worked in more than one setting, they were asked to select the setting in which they spend the greatest proportion of their time seeing patients.

Figure 5. Overall Provider Sample by Primary Practice Setting (N=150 Providers)

Respondents represented a variety of settings of care including community-based, hospital-based and academic practices.

Community-based single-specialty and group private practice Hospital-integrated, private practiceHospital-owned, non-academic practice Academic/medical center-based practice that is private or hospital/institution-owned

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Figure 7. Types of Conditions Treated by Surveyed Respiratory Specialists (N=150 Providers)

Surveyed respiratory providers indicated seeing patients with a variety of different conditions, several of which are discussed in this report.

AsthmaRhinitis or RhinosinusitisAllergic or atopic skin conditionsAllergic or atopic eye conditionsPrimary immunodeficiency diseasesAllergic triggers not directly related to the above conditionsOther conditions

Chronic obstructive pulmonary disease (COPD)AsthmaLung CancerIdiopathic pulmonary fibrosis (IPF)Cystic Fibrosis (CF)Other conditions

Allergists (n=30)

Pulmonologists (n=120)

To be included in the survey, practice managers were required to indicate that practice financial performance and reimbursement represented key responsibilities or focus areas within their role (or that they had a high degree of visibility into these issues).

Community-based private practice Hospital-integrated, private practiceAcademic/medical center-based private practice

Figure 8. Practice Manager Respondents by Physician-Owned Practice Type (N=16 Practice Managers)

By the nature of the fact that we were selecting for physician-owned practices, most respondents represented community-based respiratory clinics.

The survey was deployed to 16 physician-owned practice managers, representing both allergy (56%) and pulmonology (44%) practices. The distribution of surveyed practice managers by practice setting is depicted in Figure 8.

PRACTICE MANAGER DEMOGRAPHICS

Of the 116 surveyed pulmonologists who manage IPF patients, 93% reported experience prescribing FDA approved drugs for IPF.

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The survey was deployed to 64 administrators employed by integrated networks and hospital systems. These administrators were Directors, Vice Presidents, and Presidents or C-Suite members within their integrated networks/hospital systems. To ensure they were able to comment on specific topics of interest in the survey, respondents were recruited from a variety of functions within their organization.

Nearly three-fourths (73%) worked for a system of hospitals, while the remainder represented an integrated delivery network. Surveyed integrated network and hospital system administrators indicated that their organizations on average have 29 acute care hospitals as part of their health system. Most (78%) indicated that their organization is affiliated with a medical school, and an even higher proportion (83%) considered their organization to be an accountable care organization (ACO).

Nearly three-quarters (73%) of surveyed administrators reported that their integrated network and hospital system provides insurance for members of the surrounding community. About half (47%) of responding administrators were more focused on the provider (institutional) side of the business, while the remainder (53%) were focused on payer (health plan) responsibilities.

INTEGRATED NETWORK AND HOSPITAL SYSTEM

DEMOGRAPHICS

All surveyed administrators indicated that their integrated network or hospital system includes acute care and hospital-based outpatient facilities. About two-thirds (67%) of administrators indicated that they work in institutions that include a retail pharmacy, 63% offer off-campus outpatient clinics, and 61% have post-acute facilities. Figure 9 depicts the specific respiratory-related services and facilities offered by these integrated networks and hospital systems.

Outpatient pulmonology clinical services

Outpatient allergy clinical services

Outpatient pulmonary rehabilitation facility

Specialty pharmacy

Figure 9. Types of Respiratory Facilities and Services Offered by Integrated Networks and Hospital Systems (N=64 Administrators)

Surveyed administrators represented integrated networks and hospital systems that offer a variety of respiratory-related services including to outpatients.

Surveyed administrators were asked to characterize their familiarity with their organization’s priorities and initiatives related to non-surgical outpatient specialties. Respondents indicated that they have high familiarity with pulmonology and allergy/immunology (80% and 76%, respectively) in that management of these specialties was reported to represent a major component of their role or that they have strong familiarity with relevant priorities and initiatives related to the specialty.

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The survey was deployed to 25 representatives of specialty pharmacy organizations. These individuals held a variety of roles/functions and titles, as depicted in Figure 10.

SPECIALTY PHARMACY DEMOGRAPHICS

Representatives of specialty pharmacies were screened to include only those organizations serving more than 50,000 patients. Nearly half (48%) of represented specialty pharmacy organizations served between 500,000 to 1,500,000 lives. Approximately one-quarter (24%) served more than 1,500,000 lives, with 4% serving more than 5,000,000 lives. Surveyed specialty pharmacy representatives were asked to characterize their familiarity with their organization’s priorities and initiatives related to management of members with specialty respiratory diseases. Respondents whose organizations dispense specialty medicines to patients with severe asthma, IPF and CF indicated high levels of visibility into these sectors of their business. A combined 87% indicated direct decision-making or strong familiarity with asthma; 80% indicated as such for IPF; and 63% indicated as such for CF. While visibility into CF is still quite high, it is notably lower than severe asthma and IPF – perhaps due to the very small number of patients by novel targeted therapies.

Respondents reported that public programs (Medicare and Medicaid) reimburse an outsized proportion of the prescription volume they dispense. Among organizations serving more than 1,500,000 patients, Medicare was indicated as the source of reimbursement for 35% of prescriptions dispensed; Medicaid for 26%; and Commercial (employer group and individual) benefits for 36%.

Pharmacy Director

Medical Director

Figure 10. Specialty Pharmacy Respondents by Role/Function (N=25 Specialty Pharmacy)

Combined, medical directors and pharmacy directors represented 76% of the specialty pharmacy sample.

Pharmacy/Program Manager

Quality Director

Other Executive

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S 1. THE RESPIRATORY CATEGORY IS IMPORTANT FROM A BUDGET IMPACT PERSPECTIVERespiratory conditions were reported to collectively represent a high budget impact area for the U.S. healthcare system. Indeed, when asked to rank respiratory diseases in terms of overall budget impact importance relative to thirteen other clinical areas, payers ranked the respiratory category third, trailing only cardiovascular diseases and cancer.

2. TWO ARCHETYPES OF CONDITIONS COMPRISE THE RESPIRATORY CATEGORYWithin the respiratory category, there are a variety of conditions and diseases. Payers were asked to identify which of these are most important in terms of overall budget impact, and their effectiveness in managing them. When analyzing these data, two “archetypes” of respiratory conditions emerged: highly prevalent conditions with lower average per patient spend but high overall costs that are relatively well-managed, and less common conditions with recent therapeutic innovations and higher average spend per patient, but lower overall budget impact and less effective management.

3. IN ASTHMA AND COPD, ACUTE CARE USE AND DISEASE MANAGEMENT ARE TOP PRIORITIESWithin the first archetype, asthma and COPD represent the two sentinel respiratory conditions. Top drivers of spend in these conditions were found to include 1) drug and drug administration, 2) planned physician and clinical services, and 3) urgent care, ER, and hospital stays. Patient adherence and compliance with treatment was found to be a key challenge as it relates to management of both asthma and COPD. In addition, trigger avoidance was found to be a top driver of suboptimal outcomes in asthma; and smoking cessation was among the most important challenges in COPD. Stakeholders reported several priorities related to management of conditions within this first respiratory archetype – primarily around management of exacerbations and acute care use, and disease management including education and patient engagement.

4. ASTHMA CHALLENGES AND PRIORITIES MORE PRONOUNCED IN SEVERE POPULATION Asthma may be treated with specialty biologics and as such is somewhat of a hybrid of the archetypes identified. Payers anticipate greater willingness to manage these therapies in the future. Respondents suggested a similar set of challenges and priorities in severe asthma as in general asthma – but considered these to be even more pronounced or important in those with more severe disease.

5. IN IPF AND CF, CLINICAL DECISION-MAKING & BURDEN OF TREATMENT ARE ALSO ISSUESWithin the second archetype, IPF and CF are sentinel respiratory conditions. In both conditions, specialists expect prescribing of novel specialty therapeutics to increase in the future. Patient education was considered to be a key challenge in management of both conditions. In addition, primary care physician (PCP) awareness and patient tolerability of IPF therapies were found to be key issues in IPF. The time burden associated with medical regimens and timely and appropriate use of medications emerged as key issues in CF. In both conditions, providers and administrators indicated that they are prioritizing patient engagement and education, management of resource utilization, and time to diagnosis and initiation of treatment.

6. WIDESPREAD ADOPTION OF UTILIZATION MANAGEMENT APPROACHES ACROSS RESPIRATORY Payers are employing a wide range of utilization management strategies to manage respiratory spend. Across archetypes and diseases, high rates of adoption were reported for medical management strategies such as network management, value-based payment, value-based insurance design, and disease/case management. A similar conclusion was drawn when assessing pharmacy management strategies in place for specialty respiratory medications, with a slightly more restrictive approach employed in severe asthma than in IPF and CF.

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7. RESPIRATORY PRACTICES ARE FINANCIALLY OPTIMISTIC BUT FACE NEW CHALLENGESThis research sought to characterize provider practices in which respiratory conditions are managed, and to identify trends related to practice management, operations and financial performance. The majority of surveyed physicians in both community and hospital-based practices indicated that their practice financial performance has improved over the prior twelve months, and more than half expected practice financial performance to improve in the year ahead. However, several downward pressures on financial performance were uncovered, including changing reimbursement, implementation of alternative payment models, changes in overhead, and time required per patient. Further, 17% of independent pulmonology practices indicated an expectation to be acquired within the next three years.

8. RESPIRATORY SERVICE LINES AHEAD OF THE CURVE IN CLINICAL TRANSFORMATION INITIATIVESThe research also looked at integrated network and hospital system administrator perspectives on the respiratory category. Outpatient volume is expected to grow in both allergy/immunology as well as pulmonology over the next twelve months. The majority of administrators indicated that specialized pulmonary services such as severe asthma centers, CF centers, ILD centers, and lung transplant centers are attractive revenue opportunities for their system. Surveyed administrators indicated a reasonably optimistic financial outlook for allergy/immunology and pulmonology service lines for the year ahead. These organizations are undergoing profound change and transformation, both in revenue transition to alternative payment models and clinical transformation as a result. Respiratory service lines were indicated to be ahead of the curve when compared to other clinical specialties as it relates to clinical transformation initiatives, particularly around clinical programs and technology infrastructure.

9. MEASUREMENT AND MANAGEMENT OF QUALITY ARE IMPORTANT IN RESPIRATORY DISEASESMany broader trends which are emerging and ongoing in healthcare also impact the respiratory category. There is growing focus and increased effort to measure and manage quality of care, and this trend is particularly

important in the context of respiratory diseases. Surveyed payers, physicians, and administrators all indicated that their organizations are tracking quality measures across respiratory diseases for a variety of reasons. Payers are expanding their quality programs to improve plan performance and population outcomes; and providers are tracking measures to satisfy reporting requirements, maintain accreditations and optimize reimbursement. Interestingly, many administrators indicated that respiratory service lines were of greater importance when compared to other clinical specialties as it relates to quality objectives. Further, patient experience measures were reported as being tracked to a greater degree in respiratory service lines than in other specialties.

10. TREND TOWARDS STANDARDIZATION OF CARE IS ALSO PRONOUNCED IN RESPIRATORY DISEASESBroadly in healthcare, there is a trend towards adoption of protocols, guidelines and clinical decision-support tools to manage variability and drive clinical best practices. This trend is also particularly important in the respiratory category. Across the diseases within the focus of this report, surveyed physician specialists reported considerable adoption of protocols or guidelines. Such protocols or guidelines were either developed internally by a committee or department head, or adopted externally from a foundation or society. However, top barriers to adoption of protocols/guidelines were reported to include lack of time/other priorities and concerns around restricting physician choice of therapy.

11. SPECIALTY PHARMACIES PERCEIVED TO ADD VALUE IN MANAGEMENT OF RESPIRATORY DISEASESFinally, the surveys looked at specialty pharmacy perspectives within the respiratory category. Respiratory diseases were found to be important for specialty pharmacy business, ranking third in prescription volume relative to other clinical areas with further growth expected in the future. Severe asthma accounted for the single largest specialty respiratory indication; IPF and CF were reported to be smaller but still considerable in terms of relative contribution to respiratory prescription volume. Specialty pharmacies reported that they provide many services to help manage respiratory conditions and will further build out these offerings in the future. Other stakeholders attributed value to these services and perceived them to positively impact patient outcomes.

We hope you enjoy reading more about these and other related topics throughout the report. 16

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Respiratory conditions encompass a wide range of diseases, from those that are highly prevalent and managed by a broad array of providers (e.g., primary care clinicians as well as specialists) to orphan conditions that are treated by specialists and sub-specialists within pulmonology, allergy/immunology and other medical specialties. As a consequence, the approaches employed by payers to manage

SCOPE & BUDGETARY IMPORTANCE OF

RESPIRATORY CONDITIONS

Figure 11. Top Five Clinical Areas Based on Overall Budget Impact (N=75 Payers)

spend within these diseases also vary, as will be discussed in greater detail in later sections of this report.

Notwithstanding this variety, respiratory conditions collectively represent a high budget impact area for the U.S. healthcare system, with total expenditures of $157 billion in 2012.3 Indeed, when asked to rank respiratory in terms of overall budget impact importance relative to thirteen other clinical areas, payers ranked respiratory third, trailing only cardiovascular diseases and cancer (Figure 11).

Percentage of Payers Indicating High Budget Impact

Figure 12. US Prevalent Population vs. Budget Impact for Respiratory Conditions (N=75 Payers)

More prevalent conditions such as asthma and COPD account for a considerable proportion of overall respiratory budget impact; notably, however, less common conditions such as IPF and CF have outsized budget impact relative to the size of the prevalent population, due to higher per patient spend.

Asthma

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Within respiratory, there are a variety of conditions and diseases. Payers were asked to identify which of these have greatest impact on overall budget. When analyzing these data, two “archetypes” of respiratory conditions emerged: highly prevalent conditions with lower average per patient spend but high overall costs, and rare conditions with recent therapeutic innovations and higher average spend per patient,4 but lower overall budget impact (Figure 12).

This report focuses on two sentinel conditions within each of these broad archetypes. Asthma and chronic obstructive pulmonary disease (COPD) represent the

former. Idiopathic pulmonary fibrosis (IPF) and cystic fibrosis (CF) represent the latter. Severe asthma, a subpopulation characterized by higher resource utilization and treatment costs relative to the broader asthma population, is examined separately at times and exhibits characteristics of both archetypes. Primary lung cancers are also briefly considered, with focus on characterizing the role of the pulmonologist in management of lung cancer and understanding whether and how other stakeholders are defining and addressing priorities related to lung cancer together with other diseases of the lungs.

Relative Prevalence within Respiratory

Relative Contribution to Overall Budget Impact

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asthma and COPD constitute a large portion of respiratory budget impact, both in terms of overall and pharmacy spend. However, less common conditions have an outsized budget impact relative to the size of the prevalent population, due to higher per patient costs

• New therapeutic options have, relatively recently, become available for less common respiratory diseases with high remaining unmet medical need such as IPF and CF. These conditions are characterized by more homogeneously poor outcomes. New treatments are impacting pharmacy budgets but may also bring value in cost and resource offsets

• Surveyed payers generally perceived the respiratory category to be relatively well managed today. However, they indicated many remaining challenges and ongoing management pr ior i t ies, suggest ing opportunities for improvement. They highlighted that CF and IPF, which may have been less of a focus in the past, will become more of a priority in the future

• There are many inherent challenges to management of respiratory diseases both at the patient and population levels. Surveyed physicians indicated that the top three persisting challenges from their perspective included:

1. prevention and patient education, 2. patient access to therapy and 3. patient adherence and compliance.

Payers indicated that disease and case management are a top priority in respiratory diseases and these interventions may help to address these persisting challenges

HIGHLIGHTS FROM SURVEY RESPONDENTS

• Payers are also focused on managing costs of unplanned and acute care including ER visits and hospitalizations – an important driver of respiratory budget impact. Throughout this report, we also consider whether providers are prioritizing management of costs and resource use in the context of shifting accountabilities and value-based payment

• Across respiratory diseases, payers indicated that they are employing a wide range of approaches and tools to manage medical and pharmacy spend. They are managing their networks, including evaluation of providers on process and outcomes measures specific to respiratory diseases and adoption of site of care policies for HCP-administered drugs. Many are implementing alternative, value-based payment approaches to respiratory providers, as well as value-based benefit designs to incent healthy behaviors among members with respiratory diseases

• As it relates to management of pharmacy spend in the respiratory category, payers are employing several utilization management approaches to specialty respiratory medicines, especially the biologics for moderate to severe asthma. These approaches were indicated by surveyed specialists to impact prescribing, and patient access to therapy was reported to be an important challenge which may impact outcomes. As such, this issue is considered further throughout this report, including at the disease level

Of the four sentinel conditions considered within this report, asthma and COPD account for the largest proportion of both overall and pharmacy budget impact.

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Surveyed payers were asked to quantify the relative contribution of many different diseases or conditions treated by pulmonologists and allergists to respiratory budget impact. Figure 13 depicts the results for the four sentinel conditions examined in this report, considering both overall (medical and pharmacy) as well as stand-alone pharmacy budget impact.

As common respiratory conditions, asthma and COPD constitute a large portion of respiratory budget impact. COPD was reported to have a slightly higher contribution to respiratory budget impact, potentially due to higher prevalence, the progressive nature of the disease, and association with older age and comorbidities. Notably, this observation may be reversed for some health plans, especially those with relatively “younger” membership (where asthma may be more prevalent than COPD).

This section compares and contrasts issues and trends related to payer management across the sentinel respiratory conditions considered in this report. Key areas of interest include:

• Relative contribution of each disease to respiratory budget impact;

• Payer perceptions of key barriers or challenges hindering optimal outcomes among members with respiratory diseases;

• Payer perceptions of the effectiveness of their organization’s management of respiratory diseases, and top priorities across the in-scope conditions; and,

• Key utilization management approaches employed by payers to manage medical and pharmacy spend.

These pan-respiratory analyses shed light on broad themes across the respiratory category that together provide context from which to consider detailed findings related to specific respiratory diseases later in the report.

BUDGET IMPACT – COMPARISON ACROSS RESPIRATORY

Figure 13. Relative Contribution of In-Scope Respiratory Diseases to Overall and Pharmacy Budget Impact (N=75 Payers)

With respect to less common respiratory conditions, IPF and CF were reported to represent a relatively smaller portion of respiratory budget impact. The results were ever slightly higher for CF, possibly due to the number of entrenched therapy classes and longer treatment duration as compared to IPF.

Comparing across archetypes, there are notable differences with respect to relative impact on overall respiratory vs. respiratory pharmacy budgets. Both COPD and asthma were indicated to have a greater relative impact on overall respiratory than on respiratory pharmacy budgets, potentially due to high rates of use and costs associated with emergency and hospital care. Pharmacotherapies used in asthma and COPD are non-specialty medicines. Qualitatively, however, payers highlight the host cost and pharmacy budget impact of re-branded inhalers which use hydrofluoroalkane (HFA) instead of chlorofluorocarbon (CFC) propellants.

Asthma COPD IPF CF

Relative Contribution to Overall Budget Impact

Relative Contribution to Pharmacy Budget Impact

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In questions employed across several stakeholder surveys, a l ist of challenges associated with management of respiratory conditions were presented and respondents were asked to indicate the extent to which they agree or disagree that each contributes to suboptimal outcomes. A broad set of issues were considered, spanning seven categories: prevention and patient education, access to provider care, availability

BARRIERS/CHALLENGES TO OPTIMAL OUTCOMES –

COMPARISON ACROSS RESPIRATORY

By contrast, the archetype including less common respiratory diseases such as IPF and CF is associated with higher relative impact on pharmacy budgets. This may reflect important new advances and pharmaceutical innovation within these diseases, which are characterized by more homogeneously poor outcomes and high remaining unmet medical need. These new treatment options may also offer value in the form of cost or resource offsets.

of effective treatments to manage the disease, appropriate clinical-decision making and prescribing by providers, access to medicines, patient adherence and compliance, and effective coordination of care across stakeholders.

Figure 14 depicts surveyed physicians’ perceptions of the extent to which each of these issues represents an important challenge in terms of impact on patient outcomes in each disease within the scope of this report.

Across respiratory diseases of interest, the top three challenges to which specialists attributed suboptimal patient outcomes were:

1. prevention and patient education; 2. patient access to medicines; and 3. patient adherence and compliance.

With respect to the specific conditions and archetypes, it was observed that in general many of the issues were considered to represent a relatively greater challenge in the less common respiratory diseases, especially IPF. Of note, responses related to appropriate choice of therapy suggested an important exception for CF. That this was

Figure 14. Physician Perceptions of Impact of Challenges on Outcomes in Respiratory Diseases

While all respiratory diseases had considerable challenges that impact outcomes, these were most pronounced in IPF and least pronounced in asthma.

Mean Rating Across DiseasesAsthma (n=103)CF (n=33)

COPD (n=179)IPF (n=55)

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STATE OF PAYER MANAGEMENT – COMPARISON ACROSS

RESPIRATORY

considered to be a somewhat lesser challenge for CF relative to other issues and corresponding data for IPF, may be explained by several hypotheses. First, CF is managed almost exclusively in specialist centers, and as such by a narrow network of CF specialists. Second, the Cystic Fibrosis Foundation (CFF) has helped to develop and maintain consensus guidelines that are broadly followed at designated CF Centers.

By contrast, the issues were generally considered to represent relatively less of a challenge in the common respiratory conditions (asthma and COPD). This said, the absolute scores suggest that challenges do persist related to management of these diseases – they are simply less pronounced than for IPF and CF. There is also a notable exception in that access to medicines represented was reported to be more of a challenge in COPD than in any of the other diseases considered. This may be related to differences in the out-of-pocket cost structures of these patients’ insurance coverage (many of whom are covered by Medicare, and as such may be required to bear considerable pharmacy costs out of pocket in the “donut hole”).

These challenges are explored in further depth at the disease level later in this report.

As discussed earlier, surveyed payers ranked respiratory third in overall budget importance relative to thirteen other clinical areas (Figure 11). When asked to indicate the level of perceived effectiveness of their organization’s current management of each of these same clinical areas, one-third (33%) of payers selected respiratory among the top three most effectively managed, while one-sixth (17%) selected respiratory among the three least effectively managed. These data suggest a bimodality in level of perceived effectiveness of management of respiratory diseases, although qualitatively most payers agree that respiratory represents a high spend area and that opportunities exist to improve management and population outcomes.

Figure 15. Effectiveness of Management of Respiratory Conditions (N=75 Payers)

Percent Ranking Among Top 3 Most Effectively Managed Respiratory Conditions

As previously reported, surveyed payers ranked COPD and asthma as top drivers of respiratory budget impact; while CF and IPF were considered to have lower budget impact (although disproportionate relative to the size of the prevalent population, see Figure 12). When payers were asked about the perceived effectiveness of their organizations’ management of these conditions, a similar story emerged. As seen in Figure 15, asthma and COPD were most frequently selected among the top three respiratory conditions most effectively managed by surveyed payers. By contrast, CF and IPF were most frequently selected among the three least effectively managed (indicated as such by 41% of payers). Taken together, these data suggest that payers observe greatest room for improvement in diseases with a lower (but disproportionate and increasing) budget impact than in more prevalent conditions where they may have historically focused. This also likely reflects that health plans have and continue to be evaluated on performance related to management of common respiratory conditions (e.g., Healthcare Effectiveness Data and Information Set, HEDIS; Medicare plan performance and quality five-star rating system).

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Hospital length of stay

Respiratory or asthma-related hospitalizations (excluding readmission)

Evidence / guidelines based prescribing

Patient education and engagement related to disease control

Appropriate inhaler technique

Hospital readmissions

Costs of unscheduled outpatient visits and testing

Adherence/compliance with drug regimens

Exacerbations and associated healthcare utilization

Alignment/coordination of care across providers and settings

Figure 16. Top Five Payer Management Priorities in Asthma (n=61 Payers)

Figure 17. Top Five Payer Management Priorities in COPD (n=55 Payers)

Those who perceived asthma to be well managed are focused to a greater degree on hospital readmissions, costs of unscheduled outpatient visits and testing, and adherence/compliance.

Payers who self-identified as effective managers of COPD were more likely to focus on patient education related to disease control, patient awareness and disease prevention, and appropriate inhaler technique.

Patient education and engagement related to disease control

Patient awareness and disease prevention

Appropriate inhaler technique

Adherence / compliance with drug regimens

Costs of unscheduled outpatient visits and testing

Adherence / compliance with drug regimens

Appropriate inhaler technique

Respiratory or asthma-related hospitalizations (excluding readmission)

Time to diagnosis and treatment initiation

Exacerbations and associated healthcare utilization

Payers Most Effectively Managing COPD (n=38)

Payers Most Effectively Managing Asthma (n=44)

Payers Least Effectively Managing COPD (n=17)

Payers Least Effectively Managing Asthma (n=17)

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Surveyed payers were also asked about current management priorities for asthma and COPD. Based on earlier findings, respondents were separated into two cohorts with respect to their perceived effectiveness of their organization’s management of more prevalent respiratory conditions: those who perceived asthma and COPD to be among the top three “most effectively managed” respiratory conditions and those who indicated these conditions were among the three “least effectively managed” respiratory conditions managed by their plan. A variety of potential priorities related to management of these conditions were considered, including awareness and prevention, member education and engagement, management of cost and resource utilization, adherence/compliance, and coordination of care.

Surveyed payers were asked about their organization’s current management priorities related to asthma. For purposes of reporting and analysis, respondents were bifurcated by perceived effectiveness of their organizations’ management of asthma. Respondents’ top five asthma management priorities are shown in Figure 16.

A similar analysis was conducted for COPD. Figure 17 shows the top five management priorities of payers who consider COPD to be among their organizations’ most and least effectively managed respiratory conditions.

Next, payers were asked why less prevalent respiratory conditions such as CF and IPF were perceived to be less effectively managed than more prevalent conditions such as asthma and COPD. The data suggested that this finding may be more systemically related to the fact that these conditions represent rare diseases than that they are diseases of the lungs. On average (and especially historically), payers exert more limited management in rare/orphan than common diseases. For example, 60% of surveyed payers indicated that their organizations have yet to deploy resources towards evaluation, design or implementation of management strategies in any rare disease. The top reasons for this lack of progress are outlined in Figure 18.

Figure 18. Top Barriers to Payer Management of Rare Diseases, Indicated by ≥20% of Respondents (N=75 Payers)

Small size of patient population

Lack of provider consensus/definitive guidelines

State/federal regulations limit ability to manage

Difficult patient population to engage

Desire to minimize barriers to care

Limited treatment options

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Figure 19. Management Priority for Respiratory and Non-Respiratory Rare Diseases (N=75 Payers)

While all rare conditions were considered to be current management priorities to payers, CF and IPF were indicated to be the two highest management priorities in the future.

Current Priority Future Priority Not a Priority

Pulmonary arterial hypertension

Hemophilia

Sickle cell disease

Chronic myelogenous leukemia

Primary immunodeficiency

Cystic fibrosis (CF)

Hereditary angioedema

Interstitial lung diseases including IPF

Duchenne’s muscular dystrophy

Rare enzyme deficiencies (Fabry, Gaucher)

Surveyed payers were also asked to select the top three rare diseases (from the same list considered above) that they perceive to be most effectively managed by their organization today. CF was among the most commonly selected, with one quarter (25%) of payers including it in the top three rare diseases most effectively managed by their organization. In contrast, IPF was selected by only 3% of responding payers. Specific strategies employed to manage these diseases are reported in the corresponding disease-specific sections of this report.

Taken together, a majority of payers considered rare respiratory diseases such as CF and IPF to represent important management priorities, but relatively few considered them to be effectively managed by their organizations. As a consequence, these conditions can be interpreted to offer important areas of opportunity for new approaches to payer management; an area that will be monitored in future editions of this report.

To further explore this hypothesis, surveyed payers were asked to indicate where IPF and CF fit relative to eleven other (non-respiratory) rare diseases on the basis of management priority. As shown in Figure 19, CF and IPF ranked in the mid-range with regards to management priority among examined rare diseases. Looking forward, however, CF and IPF represented the two highest areas with respect to anticipated growth in level of priority in the future.

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The strategies and approaches employed by payers to manage medical spend and utilization were analyzed, with a focus on comparing and contrasting rates of adoption of specific tools across the archetypes of respiratory conditions previously described. Surveyed payers were presented with a list of utilization management tools and asked to indicate whether

PAYER MEDICAL MANAGEMENT STRATEGIES – COMPARISON

ACROSS RESPIRATORY

Figure 20. Medical Management Strategies Employed by Payers in Respiratory Diseases

Across respiratory conditions of interest, surveyed payers indicated most extensive adoption of tactics within the disease and case management domain. Disease management represents a historical mainstay of management of chronic conditions; and case management is widely used to managed complex and high cost members. The extent of adoption of tactics within other domains is also notable.

Not in place but may adopt in 2017

Currently adopting Already adopted

Disease and case management

Network management

Value based payment

Value based insurance design

IPF & CF (n=71)COPD & Asthma (N=75)

they are or will in the near future be employed by their organization in each of the respiratory diseases in focus. These tools comprised four domains: network management, value-based payment, value-based insurance design, disease and management. The average level of payer adoption of the tools within each of these domains is depicted by archetype in Figure 20.

When comparing across respiratory disease archetypes previously described, adoption of medical management strategies is similar.

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Figure 21. Extent of Adoption of Drug Utilization Management Strategies for Specialty Respiratory Medications

Payers have adopted or are in the process of adopting most of the pharmaceutical utilization management strategies considered across specialty respiratory indications.

Asthma Injectables (n=51)IPF Medications (n=71)CF Medications (n=71)

of new drugs that address high unmet medical needs in small populations and which may offset use of expensive medical care. The specialty respiratory medications used to manage these conditions are typically distributed by specialty pharmacies.

Payers were asked about the types of pharmacy utilization management approaches their organizations employ to manage specialty respiratory medications including drugs for CF and IPF, and the asthma injectables. Figure 21 compares the extent of payer adoption of various approaches across conditions.

Medical (coverage) policies

Prior authorization/precertification

Step therapy

Drug quantity/supply limitations

Member copay

Member coinsurance

Selection of preferred drugs (tiering)

Optional specialty pharmacy distribution

Required specialty pharmacy distribution

Not in place but may adopt in 2017

Currently adopting Already adopted

As discussed earlier, less common respiratory diseases such as IPF and CF are characterized by higher average per patient spend,4 but lower budget impact. Similar dynamics are at play for the subpopulation of asthmatics managed with an injectable therapy.

Across these indications, budget impact skews towards the pharmacy benefit. This may reflect the availability

PAYER PHARMACEUTICAL MANAGEMENT STRATEGIES –

COMPARISON ACROSS RESPIRATORY

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Payers reported that their organizations have adopted or are in the process of adopting most of the pharmaceutical utilization management strategies considered across specialty respiratory indications. The data was pronounced for the asthma injectables, relative to other specialty respiratory medications, especially when considering extent of adoption of medical (coverage) policies, drug quantity/supply limits, selection of preferred drugs, and mandated distribution by specialty pharmacy.

Next, additional detail pertaining to the above topics, along with other trends, are discussed individually for each of the four sentinel respiratory conditions of focus in this report.

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A DEEPER ASSESSMENT OF IN-SCOPE RESPIRATORY CONDITIONS

• Payers indicated that the top three drivers of spend in asthma were:

1. drug and drug administration, 2. planned physician services, and 3. urgent care, ER and hospital stays

• Payers and physicians indicated that the most important drivers of suboptimal ou tcomes in as thma were pa t ien t adherence/compl iance and t r igger avoidance

• Top payer priorities in asthma included management of:

1. adherence/compliance, 2. costs of unscheduled outpatient

visits and testing, and 3. costs of respiratory or asthma-related

hospitalizations.

Surveyed physicians similarly prioritized management of hospitalizations; in addition to appropriate inhaler technique and exacerbations

• For patients who remain suboptimally con t ro l led desp i te op t ima l use o f and compliance with inhaled +/- oral medications, defined for purposes of this survey as “severe asthma,” payers and physicians highlighted management of hospitalizations and length of stay as greater priorities relative to the general asthma population

HIGHLIGHTS FROM SURVEY RESPONDENTS

• Payers reported that their organizations are employing a variety of approaches to manage medical and pharmacy spend in asthma. Considerable use of disease and case management programs and approaches was reported. Retail medications (inhalers and oral therapies) were widely indicated to be managed with member copays and differential formulary tiering. In addition, prior authorization and medical (coverage) policies were widely reported to be in place for injectables

• Payers are broadly seeking to track and manage quality in asthma. Hospitalizations were reported as the most widely tracked measure. Interestingly, a lower proportion of surveyed physicians indicated they were tracking measures compared to payers, suggesting that an awareness gap may exist

• Half of specialists indicated that their practices have adopted guidelines or protocols to guide clinical decision-making related to asthma

• Physicians perceived specialty pharmacies to have a positive impact on outcomes in severe asthma, with convenient product delivery as the single most impactful program or offering

Total Expenditures 2016(Medical & Pharmacy)

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Asthma is an obstructive lung disease characterized by inflammation and narrowing of the airways, causing recurring episodes of wheezing, chest tightness, shortness of breath, and cough.5 Medical therapies for asthma include inhaled therapies, oral medications, and injectables.

Payers were asked to characterize the overall and pharmacy budget impact of asthma relative to other respiratory conditions. Results are shown in Figure 22. Asthma ranked second only to COPD in budget impact among the various respiratory conditions considered. The data also suggest that asthma has a modestly greater proportional impact on overall budget than to the pharmacy budget. This may be related to use of high cost medical care in this population.

Surveyed payers reported a relatively even distribution of total asthma expenditures across the pharmacy and medical benefits (Figure 23). Considering only drug spend, there was a skew towards the pharmacy benefit. However, it is notable that a substantial proportion (43%) of asthma pharmacy expenditures are reimbursed under the medical benefit (presumably, buy and bill of injectables represents a large proportion of these medical benefit drug expenditures).

In this Report, we use the term “severe asthma” to include patients who remain suboptimally controlled despite optimal use of and compliance with inhaled +/- oral medications. Throughout this section, we will report the perspectives of a subset of surveyed specialists who treat a high proportion of severe asthma patients and delineate how perceived payer unmet needs and management approaches and priorities were reported to differ for this group relative to the broader asthma population.

DISEASE OVERVIEW

SPEND AND RESOURCE UTILIZATION

SEVERE ASTHMA PERSPECTIVE

Figure 23. Breakdown of Asthma Expenditures Across the Pharmacy and Medical Budgets (n=67 Payers)

Overall, asthma budget impact is relatively evenly split between pharmacy and medical budgets; pharmacy expenditures skew toward the pharmacy benefit.

Overall Budget Impact(N=75 Payers)

Pharmacy Budget Impact(N=67 Payers)

Other Respiratory Conditions Asthma

Figure 22. Asthma as a Subset of Respiratory Budget Impact (N=75 Overall, n=67 Pharmacy)

Payers reported that asthma constitutes 35% of respiratory budget impact on an overall (pharmacy and medical) basis and 31% when considering pharmacy only.

“Other Respiratory Conditions” refers to the other diseases within the scope of this report, including COPD, IPF, and CF

Pharmacy Expenditures 2016

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Surveyed payers indicated an expectation that asthma expenditures will grow in the future. On average they expected total asthma expenditures (medical and pharmacy) to grow by 20% over the next twelve months; and stand-alone asthma pharmacy expenditures to grow by 18%.

With respect to specific drivers of spend, respondent estimates are provided in Figure 24.

Figure 24. Breakdown of Asthma Expenditures by Service Type (n=67 Payers)

Payers reported that drug and drug administration accounts for one-quarter of total expenditures on asthma, while medical utilization including planned physician services, urgent care, emergency room visits and hospital stays account for 39% of total expenditures.

Percentage of Total Expenditures on Asthma

All other servicesHome health careLong-term care facilities(e.g., SNFs, rehab)Durable equipment (e.g., nebulizers, oxygen)Urgent care, ER, and hospital staysPlanned physician and clinical services (non-drug) including labs and imagingDrug and drug administration

Payer and physician respondents were presented with a list of potential issues or challenges related to management of asthma. They were asked to indicate the extent to which they perceive each to contribute to suboptimal patient or population outcomes. A wide range of issues were considered across four categories, as depicted in Table 2.

BARRIERS/ CHALLENGES TO OPTIMAL OUTCOMES

Responding payers and physicians indicated that most of the issues considered represent important challenges. Broadly, there were many areas of relative alignment of physician and payer perceptions of important challenges in management of asthma; an interesting finding in its own right.

However, there were some distinct differences. Issues considered to represent important challenges by a higher proportion of payers than physicians included:

• Patient access to care in-between appointments• Access to rescue medications• Timely and appropriate use of rescue medications• Safety and tolerability of controller medications,

and• Optimal coordination with community to avoid

asthma triggers

Conversely, issues considered to represent important challenges by a higher proportion of physicians than payers included:

• Out of pocket costs of provider care and for medications

• Efficacy of available controller medications• Optimal coordination between PCPs and

specialists• Identification of a complete and accurate list of

asthma triggers, and • Patient education regarding appropriate use

of therapies

The extent to which surveyed specialists considered identification of asthma triggers and patient education regarding appropriate use of therapies to be important challenges are particularly interesting. Providers may be thought to have greater control or influence over these issues than payers. However, these areas may fall within the remit of primary care providers for many patients; and surveyed specialists notably also highlighted sub-optimal coordination between PCPs and specialists as an important challenge in asthma.

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Table 2. Physicians and Payer Perceptions of Key Challenges in Managing Asthma and the Extent to Which They Hinder Optimal Outcomes (Physicians n=103, Payer n=75)

Regarding severe asthma, specialists were asked to indicate the extent to which the same set of issues represent more or less of a challenge in the severe asthma population. In most cases, respondents perceived that each of the examined issues constitute a similar challenge in terms of driving suboptimal outcomes in severe asthma relative to the broader asthma population. However, some specialists indicated that a subset of issues are more of a challenge in severe asthma, as indicated in Figure 25. Key challenges that were most pronounced in severe asthma included:

SEVERE ASTHMA PERSPECTIVE• Ability of patient to pay for out of pocket costs of

provider care• Optimal coordination with community to avoid

triggers• Identification of a complete and accurate list of

asthma triggers, and • Patient education on the role of comorbid conditions

impacting asthma control

These data might be interpreted to suggest that poorly controlled asthma may be related in part to exogenous or environmental issues.

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Ability of patient to pay for out of pocket costs of provider care

Optimal coordination with community to avoid triggers

Identification of complete and accurate list of asthma triggers

Patient education on role of comorbid conditions impacting asthma control

Ability of patient to pay for out of pocket costs of medications

Efficacy of available controller therapies

Patient access to care for urgent needs in between appointments

Timely and appropriate use of rescue medications

Optimal coordination of care between PCPs and specialists

Optimal coordination of care across settings

Figure 25. Issues Hindering Optimal Outcomes in Severe Asthma Relative to General Asthma (n=54 Physicians)Percentage of Physicians Who Rate as More Impactful

for Severe Asthma Relative to General Asthma

Surveyed payers generally perceived asthma to be effectively managed relative to other respiratory condit ions. Indeed, i t was most f requent ly selected by surveyed payers among the top three respiratory conditions most effectively managed by

MANAGEMENT PRIORITIES AND STRATEGIES

MANAGEMENT PRIORITIES – OVERALL SPEND

Payers and physicians were also asked to indicate how management priorities may differ for severe vs. general asthma. Figure 26 outlines the top five areas where respondents attributed a much higher level of management priority as it relates to the severe asthma population.

SEVERE ASTHMA PERSPECTIVE

their organizations (Figure 15). On the other hand, respondents indicated that asthma is a top driver of respiratory budget impact and anticipated considerable growth of asthma expenditures over the coming years. With this context, this section explores payer and provider management priorities related to asthma, as well as the types of management strategies and tools respondents currently employ.

Payers’ top management priorities in asthma were highlighted earlier in this report (Figure 16). Table 3 depicts results for the full list of asthma management areas that were considered and scored by payers. Surveyed physicians were also asked to indicate the extent to which these same areas represent important priorities to their practices, and the results are included in the same figure. This comparative view is of interest especially in the context of shifting accountabilities and incentives tied to alternative payment models.

The overall physician mean response was slightly lower than the overall payer mean response. Nevertheless, both stakeholder groups agreed that many of these management areas represent important priorities in asthma. The highest priority areas to physicians included: patient inhaler technique, management of exacerbations and associated healthcare resource utilization, and management of asthma-related hospitalizations. For each of these areas, surveyed physicians attributed a comparable or higher level of priority for their practice than did payers for their organization.

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Table 3. Comparison of Focus Areas within Asthma (Physicians n=103, Payers N=75)

Figure 26. Top Five Priorities for Payers and Providers that are More Important for Severe Asthma than General Asthma (N=75 Payer, n=54 Physicians)

Surveyed payers and physicians attributed even higher priority to management of acute care utilization (exacerbations and hospitalizations) in severe asthma than in general asthma; physicians also indicated that management of drug costs represents more of a priority for severe asthma.

Top Areas that are More of a Priority for Severe Asthma by Rank and Percentage

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In some areas of the payer survey, management priorities, strategies and tactics were assessed together for COPD and asthma. This was done for several reasons:

• Qualitatively, payers have reported some similarities in their approach to management of these conditions based on broad congruencies in the issues, needs and types of costs attributable to these populations

• Several of the medications used to manage these populations are indicated for use in both diseases; and indeed it may be challenging for payers to attribute the specific diagnosis to these medications when reimbursed under the pharmacy benefit

• There is a growing body of evidence suggesting overlap of asthma and COPD in some patients (“asthma-COPD overlap syndrome”)

By considering COPD and asthma together at times, survey length was managed so as to avoid respondent fatigue. As a consequence, however, some of the content in this section applies to both asthma and COPD.

Payers were asked to attribute their medication (pharmacy) expenditures in asthma and COPD by drug route of administration – namely, inhaled medications, oral medications, and injectable medications (biologics). Their responses are shown in Figure 27, for both the prior year (2016) and for 2017.

MANAGEMENT PRIORITIES – PHARMACY SPEND

Inhaled MedicationsOral MedicationsInjectable Medications

Figure 27. Distribution of Current and Future Drug Expenditures in Asthma and COPD, by Type of Therapy (Route of Administration) (N=75 Payers)

Surveyed payers indicated that inhaled medications account for the largest portion and injectables account for the smallest portion of drug spend in asthma and COPD.

Surveyed payers were then asked about their willingness to manage each of these categories of medications for asthma and COPD (i.e., willingness to control access or influence provider or patient choice of therapy). As indicated in Figure 28, the majority of responding payers reported high willingness to manage across categories. Very few (10% or less) reported low willingness to manage these products. A considerable proportion of surveyed payers also reported that willingness to manage these therapies is increasing.

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Figure 28. Current and Anticipated Future Payer Willingness to Manage Drugs for Asthma and COPD, by Type of Therapy (Route of Administration) (N=75 Payers)

Payers indicated they were quite “willing to manage” drugs for asthma and COPD, with the greatest net increase expected for injectable medications in the future.

Surveyed payers were asked about the specific strategies and tools employed to manage each of the diseases within the scope of this report, separately for medical and pharmacy utilization and spend. With respect to management of medical utilization, payers were presented with a comprehensive list of management strategies broadly spanning four domains:

1. Network management

2. Value-based payment

3. Value-based insurance design, and

4. Disease and case management

Minimally or not at all willing to manageSomewhat willing to manageVery or extremely willing to manage

Current Willingness to Manage Drugs for Asthma and COPD by Type of Therapy

Anticipated Future Trend in Willingness to Manage

PAYER MANAGEMENT STRATEGIES/TOOLS – MEDICAL UTILIZATION

As shown in Table 4, payers have adopted a wide range of approaches to manage medical utilization and costs in asthma and COPD. There is most widespread current adoption of programs within the disease and case management domain. A considerable proportion of surveyed payers also indicated that their organizations were implementing or will soon implement many of these approaches.

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Table 4. Medical Management Strategies Employed by Payers in Asthma and COPD (N=75 Payers, including n=13 Integrated Payer-Providers)

Payers have adopted a wide range of approaches to manage medical utilization and costs in asthma and COPD including network management, value-based payment, value-based insurance design and disease/case management.

Surveyed payers were presented with an analogous list of utilization management approaches that may be used to manage drug spend on the pharmacy benefit. As seen in Figure 29, payers have adopted a wide range of approaches to manage retail

PAYER MANAGEMENT STRATEGIES/TOOLS – PHARMACY UTILIZATION

medications for asthma and COPD (inhalers and oral tablets). Member copays and formulary tiering were the most widely reported pharmacy utilization management approaches in asthma and COPD.

ASTH

MA

Member copay

Formulary tiering

Drug quantity/supply limitations

Prior authorization/precertification

Member coinsurance

Fail-first requirements

Figure 29. Payer Pharmaceutical Utilization Management Strategies for Retail Drugs for Asthma and COPD (N=75 Payers, including n=13 Integrated Payer-Providers)

Payers have adopted a wide range of approaches to manage retail medications for asthma and COPD (inhalers and oral tablets).

The asthma injectables are generally distributed via specialty distributors or specialty pharmacies, with a different set of billing and reimbursement processes and parameters as compared to drugs more commonly distributed by retail pharmacies. For this reason, surveyed payers were asked about their management of the injectables in a separate set of questions.

With respect to how they are reimbursed, 24% of payers indicated that they require the asthma injectables to be billed to the pharmacy benefit; 15% require that they are billed to the medical benefit; 31% permit them to be billed to pharmacy or medical; and the remaining 30% reported that their organizations have integrated medical and pharmacy such that no distinction is made.

Utilization management of the asthma injectables was assessed by benefit coverage scenario as applicable. Surveyed payers indicated their organizations are employing a wide variety of utilization management approaches for the asthma injectables across the pharmacy and medical benefits, including coverage policies and prior authorization (Figure 30).

SEVERE ASTHMA PERSPECTIVE

Figure 30. Payer Management of Asthma Injectable on Pharmacy and Medical Benefits

Payers indicated they are employing a wide variety of utilization management approaches for the severe asthma biologics, including on both the pharmacy and medical benefits.

Member copay

Prior authorization/precertification

Formulary tiering

Drug quantity/supply limitations

Member coinsurance

Required specialty pharmacy distribution

Fail-first requirements

Preferred medical benefit drugs

Medical (coverage) policies

Fail-first requirements

Medical benefit drug copay

Drug quantity/supply limitations

Required specialty pharmacy distribution

Prior authorization/precertification

Medical benefit drug coinsurance

Optional specialty pharmacy distribution

Management on Pharmacy Benefit (n=65 Payers)

Management on Medical Benefit (n=51 Payers)

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One-quarter (25%) of surveyed payers indicated that their organizations are managing their provider network based on asthma and COPD performance measures (Table 4). Surveyed payers were asked about the types of quality and performance measures their organizations are tracking in asthma, and how they are managing incentives to improve performance within these measures.

A number of organizations have developed nationally recognized quality measures sets in common respiratory conditions. These include:

• The Joint Commission• Agency for Healthcare Research and Quality

(AHRQ)• National Committee for Quality Assurance

(NCQA)

» Healthcare Effectiveness Data and Information Set (HEDIS)

• Centers for Medicare and Medicaid Services (CMS)

» Physician Quality Reporting System (PQRS, being replaced by MIPS)6

» Merit-based Incentive Payment System (MIPS) » Medicare Shared Savings Program Quality

Measures

Surveyed payers were asked about the extent to which their asthma quality programs draw from these organizations and the measures sets which they have established. Most responding payers indicated that their asthma quality management programs draw heavily from all of these sources (Figure 31).

Payers were also asked about specific measures included in their asthma quality programs, and whether they have tied financial incentives to performance. Hospitalizations were the most widely indicated measure tracked by payers as part of managed care quality programs in asthma (Figure 32). Interestingly, more than half of surveyed payers reported that their organizations “pay for performance” for these measures (with the others simply paying for reporting of the data).

QUALITY MEASUREMENT & MANAGEMENT

Figure 31. Influence of National Organizations on Managed Care Quality Programs in Asthma (n=73 Payers)

Managed care quality programs in asthma are heavily influenced by established and widely accepted quality measure sets.

Joint Commission

Agency for Healthcare Research and Quality (AHRQ)

Centers for Medicare and Medicaid Services (e.g., PQRS/MIPS)

Medicare Shared Savings Program ACO Quality Measures

National Committee for Quality Assurance (e.g., HEDIS)

Already adopted Plan to adopt in 2017 No plan to adopt

Figure 32. Percentage of Surveyed Payers Tracking Specific Quality Measures in Asthma (N=75 Payers)

The measures most widely tracked by payers in asthma related to acute (hospital) care; more than half of payers have tied financial incentives to performance against these measures.

% of Payers Tracking MeasuresPay for PerformancePay for Reporting

Hospital admission rate

Hospital mortality

Hospital readmission rates

Prescribing of appropriate medications

Optimal control as measured by patient-reported outcomes

Frequency of use of preventative medicine

Education about avoiding triggers/lifestyle changes to avoid exacerbations

Relative resource use

Ratio of controller medications to total medications

Provision of a home management plan of care to patient/caregiver

Education about appropriate response to exacerbation

From the same list of measures, surveyed physicians were asked to indicate which were being tracked or reported by their practices. While physician and payer data aligned in terms of the most widely tracked measure (hospitalizations), it is notable that f