On Finance: MCOs face financial challenges with growing specialty pharmacy segment

December 1, 2005

Establishing the right program can balance the value of specialty drugs

Specialty medications, already the fastest growing segment of total pharmaceutical expenditures, are poised to consume an increasing percentage of healthcare dollars. Specialty pharmaceutical sales prices are growing at nearly double the rate as general pharmaceutical sales-about 20%, year over year. With hundreds of new specialty drugs in the pipeline, including almost 200 drugs in Phase II and Phase III clinical development, the upward trend will probably continue for the foreseeable future.

Specialty drugs are generally expensive ($8,000 to $300,000 per-patient-per-year) and are used to treat a small population of patients with chronic, potentially life-threatening diseases. Most require injection or infusion, as well as refrigeration and special handling.

Rising utilization will also impact how much managed care organizations will pay for specialty pharmacy benefits in the future. While only 2% to 3% of a typical health plan population currently requires specialty medications, those members are responsible for at least 25% of a health plan's costs and eventually could account for up to 50%. Currently, conditions most commonly treated by specialty pharmaceuticals include: anemia, cancer, growth hormone deficiency, hepatitis C, immune deficiency, rheumatoid arthritis and multiple sclerosis. But utilization will soar as new specialty drugs in the pipeline to treat cancer, autoimmune conditions, infectious disease and HIV/AIDS are approved.

The high cost and complexity of specialty drug regimens, fragmented coverage split between medical and pharmacy benefits categories, and the need to ensure that patients receive the right drug, in the right dose, at the right time, present significant challenges. MCOs must implement innovative, comprehensive, integrated programs to balance effective cost management and member care. Otherwise, soaring costs and employer dissatisfaction will erode their bottom lines.

Establishing and managing evidence-based specialty pharmacy programs that provide the right balance between cost control and patient care can be daunting. For many MCOs, partnering with an organization with a proven track record in delivering best practices in specialty pharmacy program implementation and coordination is often the best approach. However, since no two payer organizations are alike, it is vital to select a partner with the expertise and resources to fully assess an MCO's needs and challenges, as well as to develop a customized program that addresses specific requirements.

To ensure the success of a specialty pharmacy program, MCOs should select a partner that can offer comprehensive cost containment services, clinical services designed to improve outcomes and maximize member care, sophisticated data analytics and reporting, as well as accountability.

Capabilities should include:

Cost Containment

Clinical Services

Data Analytics and Reporting

Based on current trends, specialty medications will likely remain the fastest growing segment of the prescription drug spend for years to come. MCOs that don't implement an effective specialty pharmacy management program now run the risk of serious bottom-line erosion in the near future. However, establishing a cookie-cutter program that doesn't meet an MCO's specific needs can also hurt their bottom line. One solution is for MCOs to align with an organization that has the experience, resources and proven track record to help them develop and implement an effective, flexible, targeted specialty pharmacy program that delivers cost savings and quality care for patients and families.

Kerr Holbrook is the vice president of marketing for McKesson Specialty, which provides comprehensive specialty pharmacy solutions for payer organizations to expand access, reduce costs, and improve outcomes for treatment of patients with chronic and complex conditions.