From what I’ve seen, more than three quarters of employers are facing at least one J-code issue. And because medically administered and infused drugs are being prescribed at higher and higher rates, risk and costs to employers are increasing.  

It’s not an easy issue to sort through; the structure of infused drug administration and medical versus pharmacy benefits can be confusing, which leads to less scrutiny and oversight and leaves a lot of room for egregious billing and waste.  

When you dig into the J-code issue, you’ll probably be surprised by what you find. I discovered that one of my clients was being overcharged by $60k every three weeks for a high-cost specialty infusion therapy.  After investigating further, it was identified that the billing provider was owned by the same parent company that owned the third-party administrator… I’m happy to say that with a little pushback, the employer, who had hit their stop-loss deductible, was refunded more than a half-million dollars. So, they not only got a big portion of the overpayment back, but they also avoided getting clobbered on their stop-loss renewal. 

Are you overpaying, too? Maybe not as egregiously as this example, but the chances are good that you are overpaying, and fortunately, you can do something to cut your risk.  

It’s safe to say at this point that pretty much everyone is paying attention to growing pharmacy costs. J-codes are unique in that they are medication costs that are hidden in the medical benefit claims and cost. These therapies are injections or infusions that must be administered by the provider instead of being self-administered by the patient. Provider-administered medications must be either purchased by the provider or sourced from a specialty pharmacy.  Most often, the provider buys the medication and is then reimbursed for it as a medically billed product – known as a J-Code.  This practice is also known as “buy and bill”, and it circumvents the pharmacy benefit and associated discounts, rebates, and utilization management.    

With so many more of these drugs being prescribed, employers are still playing catch-up, and many may be paying close attention to pharmacy vendors without considering that a substantial amount of pharmacy-related cost is going through their medical benefit.  And in certain cases, conflicts of interests (like the example above) could be driving additional cost and waste. 

Another layer of complexity comes from the site of care—that is, the location where the provider actually administers the J-code meds. Receiving an infusion in the home is less expensive than at an outpatient center, which is also less expensive than a major medical center or hospital. The difference can be quite stark, for example, hospital administration costs could exceed $20k for the same infusion that might cost $5k at a clinic.  

Most employers have vendors that offer some form of a solution that looks to optimize the “site of care” to save on the cost of the medication administration; however, these solutions don’t address the hidden issue of J-Code costs.  PBMs are charged with securing the most competitive price on drugs, but because J-Codes are processed through the medical benefit, employers are not realizing the best price or other solutions to significantly reduce cost.   

Do I have you sufficiently confused? 

Even with so much complexity surrounding J-Codes, you do have some options for keeping costs down.  

You as the plan sponsor can insist that certain medically administered medications be filled by a pharmacy and paid through your pharmacy benefit. The price can be substantially lower when you take advantage of pharmacy discounts, obtain drug rebates, and leverage cost-containment programs like copay maximizers or international sourcing. There is no difference in the product – only who provides it and how they are paid. The prescription is shipped to the administration location instead of using the “buy and bill” model the provider would prefer (due to the profits they realize).  

Yes, shipping the medication may take an extra couple of days, and, no, that usually doesn’t matter. Most conditions under which these drugs are utilized aren’t emergencies. The medications in question are used for chronic, ongoing conditions where infusions are scheduled weeks or months out.  

Carriers will fight this strategy for several reasons, including the fact that most carriers retain all manufacturer rebates from J-Codes. In some scenarios, the medical carriers or TPAs own the hospital or provider that would provide the J-Code, which only strengthens their incentive to keep the drug covered under your medical benefits.  

In nature and in pricing, balance prevails. Which means that carriers who agree to block J-Codes on the medical benefit and redirect to pharmacy might find ways to recoup lost revenues.   

Making J-Codes part of a broader negotiation may be a better route to savings. Instead of asking carriers to block J-Codes, the strategy could be to simply demand more competitive pricing.  

Ultimately, it depends on how bad you’re being burned. We’ve certainly seen staggering price variations, and in cases where a carrier is on the pricey end of the spectrum, it might simply be time to find a new carrier and start fresh.  

For any employer, in all cases, risk management matters. When it comes to J-Codes, depending on your utilization, your carrier or TPA might be exposing your plan to unnecessary risk. If you don’t have an active risk management strategy, the J-code conundrum could become a serious issue.  

I’d be happy to help you see where you stand and how you can start measuring your risk. Contact us today!