Specialty Drugs Insurance Denial

Suppose you have a serious medical condition, and your doctor tells you that you need a specific medication for it. Yet when you approach your pharmacy, they tell you something you are not expecting.

When your pharmacist tells you that your insurance company is refusing to cover a drug prescribed by your doctor, you may feel betrayed and frustrated. While many drugs can be denied by insurers, specialty drugs – which are typically expensive due to the conditions they treat – are often the target of drug coverage denials.

It is important that you understand that your insurance company’s refusal to cover a specialty medication in no way means the drug is not medically appropriate for you, or that you must simply accept the denial. Insurers may deny specialty medications for a variety of reasons, including formulary restrictions, prior authorization rules, step therapy requirements, medical necessity requirements, or claims that the treatment is investigational or experimental.

In many cases, however, the real reason behind the stated reason may be simpler: the drug costs more than your insurer wants to pay. When you are unsure of where to turn to get the medication you need, Attorney Scott Glovsky is here to help. Scott and his legal team understand that the word “denied” on an insurance letter does not always mean the fight for coverage is over and that a fight for justice is a fight we are here for.

What is a Specialty Drug?

A specialty drug is a higher-cost prescription medication used to treat a rare, chronic, or complex medical condition. Prescription spending in the United States rose to more than $630 billion in 2022. Of that, approximately 51 percent of total pharmaceutical spending was on specialty drugs. This growing disparity in the amount spent on drugs that are a relatively small subset of pharmaceuticals has led policymakers to focus on these specialty drugs.

Specialty drugs often require special handling, including refrigeration, administration via infusion or injection, and close clinical monitoring. Specialty drugs often cost thousands of dollars per month and are used for serious illnesses like:

• Rare genetic disorders
• Ulcerative colitis
• Cancer
• Rheumatoid arthritis
• Multiple sclerosis
• Crohn’s disease
• Hemophilia
• Psoriasis
• Cystic fibrosis
• Hepatitis
• HIV
• Immune disorders
• Certain neurological conditions
• Hepatitis C

Specialty drugs usually include biologic drugs, gene therapies, CAR-T therapies, and immunotherapies and can require specialized medical devices for delivery or strict temperature control. The distribution of specialty drugs can be restricted, as the drugs are often dispensed through specialized mail-order or clinical pharmacies rather than “standard” pharmacies. Specialty drugs generally require prior authorization from insurers, extensive patient training, and dosage adjustments to manage side effects.

Who Defines a Medication As a Specialty Drug?

While the FDA is the universally accepted regulatory body for prescription drugs, the designation of a specialty drug is often made by health insurance companies, pharmacy benefit managers (PBMs), or professional organizations like the ASHP Specialty Drug Information (a clinical database covering roughly 400 complex, high-cost, or rare-disease medications) or the National Association of Specialty Pharmacy (NASP).

To protect consumers, legislative bodies and state insurance departments often track and regulate the definitions used for specialty drugs. The designation of a specialty drug is based on cost, handling requirements, and the complexity of the drug. Individual health insurers may create internal formularies and lists that classify which drugs require prior authorizations or higher co-pays.

Pharmacy Benefit Managers are companies that handle prescription drug plans for health insurers and large employers. Essentially, a PBM is a middleman between drug makers, pharmacies, and insurance plans, whose main job is to process claims, make drug lists, and negotiate price cuts. PBMs are incredibly powerful. In fact, the three biggest PBMs – CVS Caremark, Express Scripts, and OptumRX control about eighty percent of drug benefits for around 260 million Americans.

How Are Specialty Medications Different Than Non-Specialty Medications?

Specialty medications treat many chronic conditions, yet are both more complex and less widely used than traditional medications. Specialty medications are not available at every pharmacy and may require special storage and handling as well as additional considerations. Specialty medications were originally created to treat rare or complex diseases, and while their use has broadened, they still target much less common diseases than traditional medications.

In addition to the conditions mentioned above that are often treated by specialty medications, some fertility medications also fall under the category of specialty medications. This is due to limited distribution, cost, and special handling, storage, and administration. Many specialty medications are biologics. These are medications that are derived from natural sources, such as the sugars, cells, proteins, and tissues of plants, animals, and microorganisms.

Biologics are produced from cutting-edge technology and are often considered true medical breakthroughs. In many cases, biologic specialty medications may be the only effective treatment for a condition because they can target a very specific body pathway. While some specialty medications can be self-administered, many others require close medical supervision. Since many specialty drugs can have serious side effects and interactions, routine testing, clinical monitoring, and side effect management generally accompany specialty drugs.

Specialty drugs are almost always much more expensive than more traditional medications due to the complexities associated with production, as well as the relatively small number of people the drug is targeted to. Although any traditional drug can be dispensed at both retail and mail-order pharmacies, specialty drugs have more limited distribution and may be available only at specialty pharmacies.

Do I Need a Prior Authorization for a Specialty Drug?

If your doctor prescribes a specialty drug for a medical condition, it is highly likely that your insurer will require prior authorization from your insurer before covering the cost. Ostensibly, insurers use this prior authorization process to verify medical necessity and ensure you meet the specific guidelines for the drug. It is also likely that you may be required to go through step therapy, which requires you to try cheaper, alternative drugs prior to approving the specialty drug.

The prior authorization process requires your doctor to send medical records and clinical proof to your insurer or PBM. Approval can take anywhere from days to over a week. Requirements for specialty drug approval are different from one insurance provider to another, so it is important that you carefully read your plan.

Why Does My Insurance Company Want Me to Get My Specialty Drug from a Specialty Pharmacy?

Insurance companies may require your specialty drug to come from a specific specialty pharmacy. This can be for a variety of reasons, including lowering costs, managing high-risk medications safely, and controlling the supply chain. Insurers may negotiate lower prices with specific specialty pharmacies by agreeing to send all patients to them. Many insurance plans own or partner directly with their own specialty pharmacy network. In fact, the three big insurance companies own PBMs. Optum Rx is owned by UnitedHealth Group, one of the nation’s largest health insurers.

Express Scripts is owned by Cigna, another huge global health and insurance company, and CVS Caremark is owned by CVS Health, operating as Aetna – one of the country’s oldest and largest health insurance providers. This means that these huge conglomerates control multiple steps of your individual healthcare, from medical insurance and drug formularies to mail-order and retail pharmacies. This gives “middlemen” immense control over out-of-pocket costs and drug availability, although this is increasingly leading to scrutiny from federal regulators.

How Are Formularies Involved in Specialty Drugs?

A formulary is a list of covered prescription drugs managed by health plans and PBMs. Drug formularies are developed by a Pharmacy and Therapeutics committee comprised of practicing physicians, clinical pharmacists, and other healthcare experts. These lists have drug “tiers,” which are categories that group medications by cost and type. Lower tiers have lower out-of-pocket co-pays for the policyholder, while higher tiers have higher costs and stricter approval rules. Most insurance and Medicare plans have three to five tiers, with higher-tier drugs generally costing substantially more and requiring prior authorization from insurers.

Formularies place specialty drugs at Tier 4 or higher, subjecting these complex medications to rules like specific specialty pharmacies and prior authorization. Tier placement also dictates higher patient coinsurance. Rather than a flat dollar co-payment, your plan may charge a percentage (typically 20-33 percent) of the drug’s total negotiated price for a specialty drug. Formularies may mandate that specialty drugs be filled only through specific specialty pharmacies (often mail-order) rather than your local drugstore.

Will Pharmaceutical Manufacturers of Specialty Drugs Help Me Pay for My Specialty Drug?

In some cases, pharmaceutical manufacturers may help you pay for specialty drugs through assistance programs or copay savings cards. Eligibility for this assistance will depend heavily on the type of health insurance coverage you have, your household income, and the specific drug. If you have private insurance, a copay card can significantly lower your out-of-pocket costs for a specialty drug. If you are uninsured, underinsured, or low-income, you may be able to qualify for a patient assistance program (PAP) that may provide the medication at no cost to you, or at a deep discount. Drug manufacturers are prohibited from offering copay cards to those enrolled in government-funded programs like TRICARE, Medicaid, or Medicare. You can check the specific drug manufacturer’s website for enrollment forms, or ask your specialty pharmacy coordinator about financial assistance for a specialty drug.

Why Do Health Insurance Companies Deny Specialty Drugs?

There are many different reasons your health insurance company may have denied a specialty drug prescribed by your doctor, including:

The Drug is Not on Your Insurance Company’s Formulary

If the specialty drug prescribed by your doctor is not on your insurer’s formulary (your plan’s list of covered prescription medications), it may not be covered by your plan. Just because the drug has FDA approval, this does not mean that your insurance plan must cover that particular drug. Your denial letter may state that the prescribed specialty drug is a “non-formulary medication.” In some cases, you may be eligible for a formulary exception.

Your Insurer Requires Prior Authorization

Before your insurer covers your specialty drug, your prescribing physician may be required to demonstrate that the drug satisfies the plan’s coverage criteria. These requirements could include your specific diagnosis, your laboratory test results, the severity of your disease, whether you have taken prior medications or had previous treatment failures, clinical guidelines, and the dosage and frequency of the specialty drug. Unfortunately, the prior authorization process can delay medications, tests, and procedures for days or even weeks.

You Have Not Completed Step Therapy

Step therapy is also known as “fail first.” Your insurer may require you to try one or more less expensive medications before it agrees to cover the prescribed specialty drug. The problems with step therapy include the fact that the alternative medications may have already failed, the alternatives may be contraindicated for your medical condition, your condition could make delaying medical treatment dangerous, or you may have already successfully used the specialty drug under previous insurance coverage. If any of these are true in your case, you may be able to obtain a step-therapy exception.

Your Insurer Says the Specialty Drug Is Not Medically Necessary

In a common paradox, your physician may say a specialty medication is necessary for your condition, while your insurer says the medication does not satisfy its criteria for medical necessity. The insurer may be relying on internal coverage policies, clinical guidelines, treatment history, diagnosis requirements, FDA-approved labeling, medical literature, or utilization-review criteria. Denials that involve medical judgment may automatically qualify for an independent external review.

The Drug Is Being Prescribed Off-Label

FDA approval for prescription drugs applies to a specific use, which is identified in the drug’s labeling. That said, physicians often prescribe approved medications for other medically appropriate purposes. This is known as off-label prescribing. Even though off-label prescribing is extremely common (20-30 percent of all general prescriptions are given for an unapproved age, dose, or medical condition), insurers may use off-label prescribing as a reason to deny a specialty drug. Evidence that can be extremely important in an off-label specialty drug denial include:

• Lack of appropriate alternative drugs
• A comprehensive explanation by your physician
• Treatment guidelines
• Clinical studies
• Peer-reviewed medical literature

Your Insurer Calls the Treatment Experimental or Investigational

Your insurer may deny the specialty drug by calling it “experimental,” or “investigational.” This means the insurer is claiming that the specific specialty drug prescribed for your medical condition is unproven, not supported by sufficient evidence, or is not generally accepted as a “standard” treatment. Under federal external review protections, denials claiming a drug is experimental or investigational may qualify for independent review.

Your Insurer Says You Must Use a Designated Specialty Pharmacy

Even if your specialty drug is technically covered, your insurer or pharmacy benefit manager may require you to obtain the drug through a designated specialty pharmacy. Your insurer may have mail-order requirements, restricted distribution, or a requirement that your physician administer the medication. So, the dispute with your insurer may not be whether the medication is covered, rather how and where you are allowed to obtain the specialty drug.

Your Insurer Approves the Drug but Denies the Dose

Your insurance company may approve the specialty medication but at a lower dosage. The frequency or quantity of the specialty medication may be limited, or the insurer could even deny continued treatment following an initial authorization period. This means that your doctor may have received approval on your behalf for the specialty drug, but not for the specific treatment regimen he or she believes you require.

The Insurance Company Requires a Biosimilar Instead

Your doctor may have prescribed a biologic drug – a complex medication made from living organisms like cells, tissues, organisms, or bacteria. A biologic drug has a large, highly complex molecular structure and is used for severe or chronic conditions like cancer or autoimmune diseases. A biosimilar drug is a similar, lower-cost version of the already-approved original biologic. Because living materials vary, biosimilar drugs are not identical copies. Biosimilar drugs cost substantially less than the original biologic drug and are generally administered in the same dosage and the same manner. In this case, the dispute is not necessarily about whether you receive a specific treatment; rather, it concerns which version of the treatment your insurer will cover.

Your Insurance Company No Longer Covers a Previously Approved Drug

Your insurer may have originally covered your specialty drug, but then you could receive a denial. While this is certainly confusing, the new denial could be the result of new prior authorization criteria, formulary changes, new biosimilar drugs on the market, annual insurance changes, changes in your plan, or changes in your insurer’s medical-necessity criteria. This type of denial can significantly interfere with your continuity of care, and there may be exceptions that will allow you to continue getting the treatment your doctor believes is necessary for your health.

What Should You Do if You Receive a Specialty Drug Insurance Denial?

In some cases, specialty medications are not optional treatments. Your specialty medication may be controlling a serious, progressive, disabling, or life-threatening disease. Delays in your ability to obtain the specialty drug could potentially lead to the progression of your disease, a relapse in your symptoms, increased symptoms, hospitalization, treatment resistance, loss of function, and permanent complications. Because the stakes are so high, receiving a specialty drug insurance denial is a problem that requires exceptional knowledge and experience. Attorney Scott Glovsky can help you file an internal appeal and expedite it if the denial could harm your health. If the internal appeal is unsuccessful, an external appeal before a neutral third party can help you get the medication your doctor believes you need.

Does FDA Approval Mean My Insurance Has to Cover the Drug?

Just because a specialty drug has FDA approval, this does not automatically mean your insurer must cover the drug. The specialty drug may be prescribed off-label by your physician, may be denied under your health plan, or may have prior authorization rules, exclusions, medical necessity requirements, or formulary provisions.

How Do You Appeal a Specialty Drug Denial?

The first thing you must do after receiving a specialty drug denial letter is to determine why your coverage was denied. The denial letter should explain the denial with language like “non-formulary,” “not medically necessary,” “prior authorization required,” “step therapy required,” “experimental or investigational,” “benefit exclusion,” “out-of-network pharmacy,” “insufficient clinical information,” or “quantity limit exceeded.”

A successful appeal attacks the actual rationale for the coverage rather than simply arguing that you need the drug. For example, if your insurer claims that step therapy is incomplete, you and your doctor will explain why the alternatives failed, are contraindicated, or are medically inappropriate. Your physician may submit a letter of medical necessity, your treatment history, any failed medication history, your lab results, clinical records, and any relevant medical literature to further your appeal.

Can a Specialty Drug Appeal Be Expedited?

Your specialty drug denial appeal may potentially be expedited if delaying your medication could jeopardize your life, your health, or your ability to regain maximum function. If your prescribing physician believes a delay could cause any of those issues, you can ask for an expedited appeal or external review.

What Laws Apply to Specialty Drug Insurance Denials?

Many employer-sponsored health plans are governed by ERISA (Employee Retirement Income Security Act). This can affect the claims procedures, appeal requirements, deadlines, the documents you can obtain, and lawsuits challenging benefit denials. State insurance laws regulate step therapy, formulary exceptions, external reviews, network adequacy, and prescription coverage, although applicability will depend on the type of insurance plan. California’s Department of Managed Health Care explains that in some circumstances, a plan may be required to cover a medication that is not on its formulary.

Can You Sue Your Insurer for Denying a Specialty Drug?

The answer to this question will depend heavily on your specific insurance plan, the circumstances surrounding your specialty drug denial, applicable state laws, and whether required administrative remedies have been properly completed. Perhaps your benefit denial was wrongful, your insurer failed to follow your insurance contract, or failed to comply with claims procedures. You could have a bad faith claim or a state-law insurance claim, depending on your situation.

It is imperative that you contact a highly experienced insurance claim denial attorney, such as Scott Glovsky, who can review the specifics of your situation and help you obtain justice. While an overturned denial does not automatically establish insurance bad faith, the manner in which your insurer investigated, reviewed, or handled your claim is important in determining whether additional legal remedies are available.

Getting the Help You Need from the Law Offices of Scott Glovsky

When your health and future are dependent on a specialty medication, you may not have the necessary time to wait through repeated insurance delays and denials. Attorney Scott Glovsky has decades of experience in health insurance disputes. He can review your denial letter, identify your insurer’s stated refusal reason, and determine what options are available to you in challenging the decision. You have important legal rights, and we are here to ensure those rights are upheld. Contact the Law Offices of Scott Glovsky online or call 626-243-5598 today.