Channel Management: How to compare drug costs, uncover savings, and validate results

Zach Fiedler
April 22, 2021

Channel management provides the ability to compare costs across pharmacy and medical benefits. It generates an opportunity to prepare new strategies and monitor programs already implemented.​


Channel Surfing: Should I administer drugs via the pharmacy or medical channel?

One of the most popular questions in the current healthcare climate is: does drug administration through the pharmacy or medical benefit optimize drug spend?

The answer often eludes payers and plan sponsors because of payment and reimbursement complexities in medical benefit channels and challenges accurately comparing to the pharmacy channel. Channel price comparisons are especially difficult within the medical benefit channels due to complexity and variances within billing methodologies.

Here’s the good news: data-driven channel management tools can clear up the murky cloud of questions surrounding medical benefit channels and help payers, and plan sponsors determine the most cost-effective benefit channel(s) for their organization.



How to Address Channel Management



1.  Identify Channel

Our focus on identifying channels considers three locations within the medical benefit, and the pharmacy benefit acting as the fourth channel.​

To understand the complexities of comparing these channels, think of these different channels as speaking in different languages. One channel may not directly translate to another without correlations occurring between them to make a connection​.


2.  Define Methodology

The methodology component is where these translations happen and where we built the infrastructure for channel management.

3.  Validate Results

Perhaps the most critical step is to validate the results, understand savings opportunities available, and target claims and patients impacted by the intervention

Our initial question was what channel is most cost-effective. Let’s use this channel management framework for how to answer it.



Case Study: Remicade

Understanding medical data is like unraveling a pile of yarn. When we then want to compare that medical data to pharmacy claims, it adds an entirely new pile into the mix.​

When Remicade is billed in the pharmacy benefit (under the National Drug Code), the strength per unit is 100MG, compared to when billed in the medical benefit in 10MG vials. This difference creates a disparity between the number of units ultimately billed on the claim making a unit price comparison not equitable.




Our methodology accounts for the conversion for Remicade and applies it to the pricing in claims data to reveal physician office is the lowest net cost channel​ in this example.





By identifying the lowest net cost channel, potential interventions and estimated outcomes can be generated.​ Intervention, in this case, is shifting utilization and members from the higher cost channels to the lowest cost channel.​




Expected results:

  • Shift 50 percent of members in the higher cost channels to physician office​
  • The conservative approach only impacts 24 members, out of the over 100 members utilizing Remicade​
  • Out of these 24 members, the expected annual savings is over $70,000
  • This equates to a per-member annual savings of almost $3,000​



Returning to the opening question: does drug administration through the pharmacy or medical benefit optimize drug spend? The answer is: it depends. As illustrated by this case study, the math is worth doing to get to optimized channel management. These results can vary by drug, provider, and fee schedule set up for an individual plan, which is why it is so important to analyze each plan’s specific data to answer this question. Without a data-driven approach, this analysis is not possible.

Channel management uncovers opportunity areas and provides viewpoints into data. Integrated data has historically been challenging to measure. Today, effective channel management unravels the tangled yarn and provides a clear and comprehensive answer to what channel will optimize drug spend.


Learn more about outliers from Zach Fiedler in this brief video.

Zach leads data-driven projects across the organization as Vice President of Analytics and Implementation. Although he wears many hats, his primary responsibilities include migrating client data, improving the quality of that data, and supporting a variety of complex ad-hoc analytics projects.