by Lisa Higgins, Contributing Editor
The next time you spend an hour on the couch in front of the TV, take note of the commercials. An impartial observer might conclude that, besides driving a lot of new cars, Americans benefit from a lot of new wonder drugs. Perhaps we can discuss the cars another time. For today, let’s focus on the drugs.
You’ve likely noticed the proliferation of direct-to-consumer advertising for a wide range of specialty drugs, those treating everything from cancer to psoriasis to Hepatitis C. For the most part, these aren’t drugs one can access for a $10 copay at the local pharmacy. Rather, they are often drugs that must be closely monitored, or even administered, by a physician in a medical setting. And they are very expensive.
 |
In fact, while there is no dictionary definition of the phrase “specialty drug;” it is a category based on price. Medicare defines specialty drugs as those costing $600 or more per month. With the rapid introduction and increasing availability and use of these drugs, employer plans are taking notice.
Small Number Benefit from Them, at a Very High Cost
According to IMS Health 2015 Report of Use of Drugs in the US, 35%–40% of pharmacy-related costs for employers can be attributed to specialty medications, even though they are used to treat just 1%–2% of pharmacy benefit members. That shouldn’t be a surprise, considering the dollars involved.
The Pew Charitable Trusts found that, for some chronic conditions, treatment with a specialty pharmaceutical may cost upwards of $100,000 per year. And the prices continue to rise; CVS/Caremark said that in 2013 alone, the average wholesale price of existing specialty drugs went up more than 10%.
A study from Blue Cross Blue Shield Association (BCBSA) and HealthCare reported an even more significant increase in spending on specialty pharmaceuticals. From 2013 to 2014, it says, spending on this class of drugs increased 26 %.
The impact can be felt in both medical plans and pharmacy benefit plans, according to the report, with about one-half of specialty drug spending funded by each.
“The recent, rapid increases in specialty drug costs are a concern for everyone—the public, medical professionals, health care companies, employers of all sizes, and taxpayers who bear the cost of prescription drugs provided by government programs such as Medicare, Medicaid and those who receive financial assistance to purchase individual coverage,” said Trent Haywood, MD, JD, chief medical officer for BCBSA.
Employers are concerned. The National Business Group on Health released a survey in August 2016 reflecting that concern. For the first time in the Large Employers Health Plan Design Survey (2017), most employers now consider specialty pharmacy the highest driver of health costs and are taking steps to curb them.
According to the survey, nearly one-third of respondents (31%) indicated specialty pharmacy was the highest driver of health costs. That compares to only 6% who cited specialty pharmacy as the number one driver in 2014. Overall, 80% of employers placed specialty pharmacy as one of the top three highest cost drivers, along with high cost claimants (73%) and specific diseases and conditions (61%).
Cost Management Tips
Managing costs for these drugs is becoming more and more critical to containing rising healthcare costs. In the fact sheet Specialty Drugs and Health Care Costs, the Pew Charitable Trusts suggests a combination of strategies to control both premiums and out-of-pocket costs. The strategies include:
- Formularies and cost sharing. Specialty drugs are often placed into the highest drug formulary tier within a health plan, which results in higher out-of-pocket costs for patients. Higher out-of-pocket costs can result in lower patient compliance rates, which may result in even more expensive conditions and treatments.
- Step therapy. Some plans require that patients try more traditional (and less expensive) treatments before moving on to the newer, more expensive ones. If the results are positive, there is no need to utilize the more expensive option.
- Prior authorization. By requiring a healthcare professional to validate the patient’s need for a given drug, the plan may avoid unnecessary cost.
“To promote affordability and access to new innovative medicines, it is important to have greater competition and choice to bring costs down for everyone, including speeding up the approval of generic and biosimilar drugs,” says Haywood of BCBSA. “There also should be transparency regarding the pricing of prescription medicines with information about price and a drug’s effectiveness made widely available to the public.”
Carolyn Pare, president and chief executive officer of the Minnesota Action Health Group, believes the potential for the quickly and substantially rising costs of specialty drugs could soon overwhelm employers who purchase health care. She recommends they join together to take action.
Writing on the website of the Institute for HealthCare Consumerism, Pare recommends looking for or creating opportunities to help drive change. Among the Minnesota group’s drug management goals:
- Understand your current specialty pharmacy drug spend, including all drugs administered as part of your medical benefit.
- Ask vendors to project specific future costs given your company history and drugs in the pipeline.
- Make sure your benefit plans don’t drive patients to higher cost care settings, such as outpatient hospital visits.
- Require health plans to contract with providers to eliminate any incentive for them to administer more expensive drugs in more expensive settings.
- Require pharmacy benefit managers and health plans to administer prior authorization and step therapy programs on the basis of clinical, objective evidence.
Even with the high cost of specialty drugs, the benefits they offer to those who need them may make them worth the price. Discussing the issue with your medical plan provider and pharmacy benefit manager can help you develop a strategy for managing the costs—and the sooner, the better.