Medical vs. Pharmacy Benefit

Medical vs. Pharmacy Benefit

Specialty drugs play an increasingly important role in the treatment of chronic conditions such as multiple sclerosis, rheumatoid arthritis, psoriasis, inflammatory bowel disease and cancer, yet little is known regarding the comprehensive medical and pharmacy benefit utilization and cost trends for these conditions.

With approximately 50% of the specialty drug spend occurring in the medical benefit and a variety of payment and dispensing options, it can be difficult for employers to get full transparency on specialty drug spending or overall utilization. 

Unfortunately, efforts to manage specialty drugs under the medical benefit still trail behind efforts under the pharmacy benefit. These gaps in benefit alignment across pharmacy vendors makes the problems even more challenging. 

Tracking and Managing Health Care Utilization

Employers want to more effectively track and manage total health care utilization and costs but need to make sure the following reporting elements are addressed: 

  • Integrated and/or actionable Data Reports:  Make sure vendor contracts set expectations for the reporting of data, integration of data (medical and pharmacy) and what vendors will do with the information to ensure it is actionable.
  • Care management reports: Contracts should also include language to ensure employers receive a robust assessment of the care being paid for by the plan sponsor. 
  • Patient care plan reports: Ensuring that the patient care plan follows the plan’s intent and achieves the desired results is an integral element to establish value. 
  • Plan performance reports: it is important to ensure employers also receive reporting on what the data is demonstrating about the plan performance.

To improve plan performance, employers should focus on the following:

  1. Determine what drugs are covered under the pharmacy benefit AND the medical benefit to obtain an accurate overall picture of the data.
  2. Use an evaluation process that manages and reviews drugs and services across both benefits and eliminates the potential for siloed drug management. 
  3. Determine which self-injected or oral drugs fall under the pharmacy benefit and which are maintenance medications.
  4. When trying to evaluate or assess plan design outcomes, quality drug use by site of care to determine if other factors are impacting plan design performance. 
  5. Identify what services are delivered for different sites of care. They generally fall under the medical benefit; this is especially true for oncology drugs as they are most effectively managed at the site of service.
  6. Determine costs associated with “carving out,” especially for oncology drugs.
  7. Implement a drug tiering strategy for the medical benefit to help manage costs.
  8. Managing provider reimbursement by linking physician practices with their parent organization to effectively evaluate plan design outcomes.
  9. Implement a comprehensive utilization strategy that includes the following control tactics:
    • Dose and quantity edits
    • Prior authorization simplification to avoid onerous rules
    • Step therapy minimization – only use when appropriate
    • Site of care in benefit design that simplifies the need for prior authorization.
    • Drug tiering strategy for the medical benefit in sync with the pharmacy benefit to better manage costs of appropriate therapy.
    • Dose and quantity edits

New Considerations for Medical vs. Pharmacy Benefit Strategies

The following are examples of strategies that have the ability to change the status quo for costs running through the medical or pharmacy benefit that are already available but not being used. 

Strategy #1:  Specialty drugs under one benefit


  • Regardless of which benefit covers the drug, a single benefits manager is responsible for evaluating the appropriateness of a therapy and its cost or value which addresses the need to obtain a more accurate picture of overall costs.


  • It remains difficult for vendors to efficiently share data in a timely manner making it important to establish clear boundaries and responsibilities among vendor partners.
  • This lack of data can cause the employer problems in determining the fiscal alignment of the benefit plan while achieving the desired patient outcomes. 

Strategy #2:  Determining which drug is under each benefit


  • Provides better understanding of which drug falls under each benefit, allowing for more effective management of existing contracts and vendor relationships while acknowledging the shift in benefit coverage between medical or pharmacy.


  • Because of the challenges of sharing data and new product updates in a real-time manner, it is important to establish clear boundaries and responsibility among vendor partners on a consistent basis (e.g. monthly).
  • This lack of data can cause the employer problems in determining the fiscal alignment of the benefit plan while achieving the desired patient outcomes.

Strategy #3:  Using a comprehensive payment by condition or service that includes the cost of drugs used by the clinician


  • Market-based or reference-based cost of care is established for all services that can be easily determined, updated regularly and caps the claim cost by procedure or condition being managed.


  • There are very few comprehensive market-based or reference-based cost of care bundles that are already established.
  • Most are hospital or surgically focused and do not include the most effective drugs, and it has been unpopular to-date among the hospital and provider community.