October DTR Analysis: Specialty Pharmaceuticals

October 1, 2005

Specialty pharmaceutical spending continues to grow at almost 20% per year and more aggressive payer organizations are applying tighter controls on utilization and access to keep costs in check, according to industry experts.

Specialty pharmaceutical spending continues to grow at almost 20% per year and more aggressive payer organizations are applying tighter controls on utilization and access to keep costs in check, according to industry experts.

"As specialty pharmaceutical spending grows as an issue for payers, services such as prior authorization, utilization management, and drug and category review services for specialty formulary development are becoming commonplace in the industry," says Kerr Holbrook, vice president of marketing for McKesson Specialty. "Specialty pharmacies are instrumental in providing these critical services needed not only for cost control, but for management services that increase patient care, such as Medication Therapy Management [MTM] programs."

As specialty program outcomes become more standardized, McKesson anticipates specialty pharmacies will develop more fee-for-service offerings that support overall specialty pharmacy goals, according to Holbrook.

"We often hear from clients that internal buy-in and resources are the biggest obstacles in successful implementation of a specialty program," Holbrook continues. "Among all of the challenges facing healthcare payers, a robust specialty program represents one the largest opportunities for savings and improved treatment outcomes."

Top five categories

The top five specialty drug categories can represent up to half of a payer's annual specialty spend; therefore payers are looking for significant cost savings in these categories, according to Holbrook.

"With four of the five categories representing chronic conditions, payers need to find a balance between unit cost control and care coordination services, which can impact the long-term well-being of the patient," Holbrook says.

Key factors in understanding this balance are adequate reporting on clinical and financial activity and integrated pharmacy and medical data for evidence-based decision making on patient and program needs, according to Holbrook.

Experts agree that the big cost increases will be coming from biotech drugs.

The rheumatoid arthritis drug category is an area "being highly promoted by the pharmaceutical industry," according to Tim Thomas, senior vice president of clinical services at HealthTrans, a PBM in Greenwood Village, Colo. "The medications should be predominately in the pharmacy benefit area."

Practitioner-administered injectables might be subject to closer review by HMOs, due to a lack of cost management capability, according to Thomas. Self-administered injectables is an area that is increasing, "but may need more care management than is provided by a typical retail pharmacy," Thomas says.

A category that has been relatively unmanaged is human growth hormones, according to Thomas. "With more specialty pharmacy involvement and increasing prior authorization criteria, this area is a likely target for HMO and specialty pharmacy cooperation," he says.