Perspectives

Carve-in evidence continues to build

Linking pharmacy and medical benefits in one contract is better for the bottom line.

June 1, 2020
Pat Gleason

PharmD, FCCP, FAMCP, BCPS | Assistant Vice President, Health Outcomes

It’s not a turkey. It’s not a pumpkin. And you can count on it all year long, not just at Thanksgiving.

What is it? It’s your carve-in pharmacy benefits.

The evidence continues to build. Our latest award-winning study shows that carving-in pharmacy with medical benefits is associated with cost savings and potential health benefits.1 

This study, co-authored by researchers at Prime and Regence Health Plans, is to our knowledge, the only scientifically peer-reviewed study published on the subject. The authors received a platinum ribbon for this research, which is published in the peer-reviewed Journal of Managed Care & Specialty Pharmacy (JMCP).

While this study does not prove a link between carve-in and lower costs, it extrapolates findings of lower costs and better outcomes from real world claims data. These findings are consistent with those of a similar study using a national database we conducted several years ago. In fact, multiple studies have found a link between carve-in pharmacy benefits and positive outcomes.

This newest study compared medical costs from 2017 and 2018 for Regence members whose pharmacy benefit was either managed as a carve-in or a carve-out model. Regence Health Plans operate in Oregon, Idaho, Utah and select counties in Washington.

Over a two-year period, the results for an employer with a carve-in pharmacy plan showed:

  • 15 percent lower odds of hospitalization over 2 years
  • 7 percent lower odds of an emergency room visit over 2 years

Employers also saw a 4 percent reduction in annual medical costs, with an associated medical cost savings that averaged $148 per member per year.

Take the time to define some challenging terms 

Let’s review the definitions of carve-in and carve-out pharmacy benefits, and why it makes a difference which model an employer chooses.

Carve out model compared to carve-in model

The carve-out model creates a division between pharmacy and medical costs

Health care is complicated. Each individual outcome stems from countless interactions between patients, doctors, pharmacists, and others across the health care system. It’s hard to tie so many activities to one specific result.

We believe the positive results seen in groups with carve-in pharmacy benefits are generated by a more coordinated approach to every aspect of care. For example:

  • Plan sponsors can see and influence pharmacy benefit management decisions that drive the best overall outcomes, not just lower pharmacy costs
  • Medication formulary decisions are based on assessing medication cost-effectiveness and impact on total cost of care, not in silos, assessing the pharmacy benefit impact only
  • Doctors have more accurate information, so they’re able to make more informed decisions and apply timely interventions
  • Members may be able to understand their benefits more easily and receive more comprehensive support, increasing the likelihood that they’ll follow treatment plans

Looking at the carve-in results for members with chronic conditions 

Employees with more chronic conditions use more medical services. In contrast, employees with chronic conditions –but who have carve-in benefits — may use fewer medical services. That can lead to healthier employees, and fewer work days lost due to illness.

Emergency department visits by number of chronic conditions; Ipatient stays by number of chronic conditions

The Prime/Regence study used data from patients covered by a Regence self-insured plan in 2017 and 2018. There were 206,000 members who had insurance plans with integrated benefits (carve-in) and close to 125,000 with a pharmacy benefit separate from the medical benefit plan (carve-out). The data represented members in self-insured plans only.

The study looked at the total medical cost for all members and specifically those with:

  • Asthma
  • Depression
  • Diabetes
  • Congestive heart failure (CHF)
  • Chronic obstructive pulmonary disease (COPD) and
  • Coronary artery disease (CAD)
  • Rheumatoid arthritis (RA)

The data showed that looking specifically at members with chronic conditions of asthma, depression, diabetes, COPD, or CAD, those in a carve-in plan had 12 percent to 17 percent lower associated total costs. Additionally, the study found that across five chronic conditions, members with carve-in benefits had a:

  • 22 percent to 36 percent lower odds of hospitalization over 2 years
  • 16 percent to 20 percent lower odds of an emergency room visit over 2 years1

The study did find lower cost among individuals with CHF and RA, but these results were not statistically significant. This is potentially due to the small number of members identified with these conditions, relative to the other five chronic conditions evaluated. Again, this data suggests the value of carving-in pharmacy with medical benefits.

Carve outs are common, despite the downsides

If the results aren’t as good for companies who carve out, why do so many do it? That’s a good question. Primarily, it’s large companies who carve-out their pharmacy benefit.3 They may have the purchasing size and volume to negotiate drug costs and rebates directly with manufacturers. Or they may believe they get a more flexible benefit design if they use a carve-out pharmacy model.4

Some PBMs claim they can save employers money in drug costs over time, but what are they saving? When you look at a list of chronic conditions, how can you look at just the drugs that treat those conditions in isolation from a patient’s entire treatment plan?

Specialty drugs present special challenges to the carve-out model

More than half of all specialty drugs are processed under the medical benefit. In a carve-out situation, the true cost of specialty would never show up on a pharmacy report. Likely, these costs would remain buried in medical data.

With carve-in, Prime can find the best methods for administration and coverage of specialty drugs and uncover hidden inefficiencies and waste. Carve-in can provide a consistent, coordinated experience for members who need specialty drugs, no matter where the drugs are obtained or how the claims are paid.

A more complete picture of members’ health

With Prime, carve-in doesn’t mean the pharmacy costs are hidden. We were built by and we are owned by Blue Plans. We understand the strong linkages between medical and pharmacy costs.

We can show how the carve-in model helped provide a more complete picture of members’ health to support more informed:

  • Utilization management
  • Authorization decisions
  • Chronic condition care management, including medication adherence
  • Quality of care provider contracting and pharmaceutical outcome-based contracting

Considering the complexity of the health care system, I believe Prime’s carve-in model can make a difference in pursuing better health outcomes and lowering overall health care costs. And at the end of the day, that is why we are here.

References

  1. Medical Costs and Health Care Utilization Among Self-Insured Members with Carve-In Versus Carve-Out Pharmacy Benefits. Julia J. Smith , MS1*, Yang Qiu , MS2, Steve V. Lam , PharmD, 1 Chondra M. Lockwood , PhD1, Cheryl Pegus , MD, MPH1, Patrick P. Gleason , PharmD, FAMCP, BCPS3. J Manag Care Spec Pharm, Volume 0 Issue (0). 2020 Mar. Accessed at: https://doi.org/10.18553/jmcp.2020.19411.
  2. Multiple Chronic Conditions in the United States, by Christine Buttorff, Teague Ruder, and Melissa Bauman. Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2017 RAND Corporation. Accessed at: https://www.rand.org/content/dam/rand/pubs/tools/TL200/TL221/RAND_TL221.pdf
  3. Pharmacy Benefit Management Institute. 2018. Trends in Drug Benefit Design. Plano, TX: PBMI. Available from www.pbmi.com/benefitdesignrpts.
  4. Molis J. Pharmacy plan ‘carve-outs’ help employers control prescription costs. Minneapolis/St. Paul Business Journal. November 7, 2019. Available at: https://www.bizjournals.com/twincities/news/2019/11/07/pharmacy-plan-carve-outs-help-employers-control.html
Pharmacy Benefit Carve-in Versus Carve-out: Cost and Medical Events Two-year Retrospective Cohort Study (Fall 2020)

About Prime Therapeutics

Prime Therapeutics LLC (Prime) is a diversified pharmacy solutions organization serving health plans, employers and government programs. Prime is collectively owned by 19 Blue Cross and Blue Shield Plans, subsidiaries or affiliates of those plans. Magellan Rx Management LLC, a Prime Therapeutics LLC Company, is a pioneer in specialty and medical drug management and a leader in serving public sector state government programs. Together Prime and Magellan Rx provide a wide range of clients with solutions that bridge the distance between medical and pharmacy management. For more information visit primetherapeutics.com and magellanrx.com or follow us on X (Twitter) at @Prime_PBM and @Magellan_Rx.

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