The cost of specialty drugs compared to the volume used is somewhat akin to the long-supported statistic that 20% of patients represent 80% of healthcare costs.
While specialty drugs comprise only 1.9% of total prescription volume, they account for 37.4% of spending within the retail and mail order distribution channels, according to a report by the IQVIA Institute.
PBMI estimates that by 2020, specialty drugs will account for half of total U.S. drug spend. They have increased 55% under the medical benefit since 2011.
“Today hundreds of specialty drugs are available, giving patients access to potentially life-changing treatments. Specialty pharmaceuticals are the fastest growing and most expensive segment of pharmacy care. As a result, specialty conditions drive a disproportionate segment of total health care costs,” says Michael Zeglinski, senior vice president of specialty pharmacy at OptumRx, UnitedHealth Group’s pharmacy care services business.
Almost half of the 150 drugs studied by America’s Health Insurance Plans in 2016 cost in excess of $100,000 per year, with expenditures for 3% of the drugs studied exceeding $500,000 dollars per patient per year.
Tools/strategies for lowering costs
Industry players continue to seek ways to manage specialty pharmaceutical costs in light of the many triggers pushing prices well above those for regular branded drugs.
PBMI says many employers have introduced high-deductible plans to encourage members to make better decisions; create specialty drug tiers; use coinsurance for cost sharing; place prior authorization and step therapy on certain drugs; and exclude certain specialty drugs.
Benefit design is one of the most efficient ways to keep drug prices in line, says Ken Majkowski, PharmD, chief pharmacy officer of Bethlehem, Pennsylvania-based FamilyWize—a discount prescription program partnership—pointing to closed formularies that exclude certain medications.
For example, when new hepatitis C drugs began entering the marketplace in 2014, Express Scripts, a St. Louis-based PBM, only covered Viekira Pak (ombitasvir/paritaprevir/ritonavir and dasabuvir) for the condition but added Harvoni (ledipasvir/sofosbuvir) in 2017.
In 2019, its National Preferred Formulary (NFP) lists Epclusa (sofosbuvir/velpatasvir), Harvoni, Vosevi (sofosbuvir/velpatasvir/voxilaprevir), and Zepatier (elbasvir/grazoprevir) for hepatitis C. CVS Health recognizes Sovaldi and Harvoni.
Express Scripts rolled out its National Preferred Flex Formulary on January 1, 2019, to provide a way for plans to cover lower list price products, such as new authorized alternatives with less reliance on rebated brands.
Majkowski says that 10 years ago, it cost about $1 billion to bring a drug to market, which has jumped to $2.7 billion today, according to the Journal of Medical Economics—partially attributable to the high cost of conducting safety and immunogenicity trials on biologics that have a smaller test population.
He realizes, however, that some biologics are worth their weight in gold: List prices for Sovaldi ($84,000 per course of treatment) and Harvoni ($94,500) tip the scales but have proved to cure hepatitis C.
The alternative would be a liver transplant, pricing out at an estimated $812,500 from 30-day pre-transplant to 180-day post treatment including surgery, care, and suppressants according to Milliman.
Related article: How the Specialty Pharmaceutical Market is Changing
Newer to the tool set in the industry are copayment accumulator programs, in which a drug coupon will not count toward a patient’s deductible or out-of-pocket cost limits, resulting in patients having to pay more for their drugs once a coupon expires.
“From a tactical perspective, prior authorization, including documentation of a particular condition and eligibility for the treatment are essential,” says Bruce Sherman, MD, chief medical officer, National Alliance of Healthcare Purchaser Groups. “Because some of the identified treatments address only one specific mutation, it’s critical that genetic abnormality has to be in evidence for the treatment to be effective.”
He sees novel contracting approaches as one solution to nibbling away at costs. “Most of these contracts are value-based, in that the patients have to respond to treatment for the drug manufacturer to be paid,” he says. “Amortized payments are another potential solution.”