From Hospital to Pharmacy: A Case Study in Reducing Specialty Drug Costs for a Nonprofit

Problem: Egregious mark ups on Medical Specialty Drugs, aka J-codes/white bagging

An existing client, a large nonprofit with 6,000 employees, was faced with an unusually high renewal proposal due to a very high-cost medical specialty drug. They had an employee with a chronic condition who had been receiving this expensive drug treatment from a major hospital system in a hospital setting.

The cost of their medical specialty drug started to significantly increase just prior to the plan renewal. The client’s health insurer wanted to severely limit coverage reimbursement for this employee (laser liability), thus shifting the majority of the financial burden to the client.

Oswald immediately began investigating why the drug treatment costs went up exponentially and was initially told it was simply due to a higher dosage needed by the employee. However, after a thorough search, Oswald determined that the cost of the medication was being marked up 3,000% (white bagging) by the major hospital system that was administering it to the employee.

Solution: Alternative sourcing results in reduced financial burden to the client

Oswald intervened and requested the health insurance carrier and major hospital system negotiate a lower allowed cost on the medical specialty drug. The insurer negotiated a reduced markup on the drug; however, it was not significant enough to remove the client’s laser liability from the renewal contract.

Oswald found a better solution, which was to source the drug from the client’s Pharmacy Benefit Manager. This resulted in a cost decrease of 77%. Oswald was able to get the health insurance carrier to agree to remove the laser liability and cover this employee under the stop-loss insurance policy. Since all involved are clients and partners of Oswald, the conversation could have turned sour at any moment. However, Oswald was able to call upon its knowledge and extensive industry relationships to solve the problem.

Result

The nonprofit saved $1.7 million annually just by finding a new supplier of the medical specialty drug, moving it from the hospital setting to the pharmacy benefit manager.

The employee saw no delay or change in coverage and, in fact, is unaware of the situation that transcribed on the back end.

This is just one example of how Oswald goes beyond just placing insurance. Oswald drives the boat, not the carriers. Though we have ongoing relationships with all major carriers, our experienced team knows how to disrupt the status quo. We routinely use analytics to question the entire system and cost structure to determine how we can improve coverage and costs.

Contact us to explore how you can improve your employee benefits coverage and cost.

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