Top four approaches to reduce pharmaceutical costs

As rising pharmaceutical costs continue to challenge healthcare leaders, Managed Healthcare Executive conducted its second annual managed care pharmacy survey during the first quarter of 2017. More than 200 executives at benefit management organizations, community/retail pharmacies, hospitals, health plans, specialty pharmacies, and more, weighed in.

Overall, survey respondents agreed that the top challenge facing managed care pharmacy is rising pharmaceutical costs, particularly when it comes to specialty drugs. However, they were split on what drives specialty drug costs, with 36% stating that the biggest driver is growing demand due to an aging or increased population; 21% saying it is manufacturer pricing for new products; 16% choosing new specialty drugs; 12% blaming broadened labeled indications and off-label use of existing products; and 11% citing inflation rates for specialty drugs already on market.

RademacherKellie Rademacher, PharmD, senior director, specialty solutions, at Precision for Value, a pharmaceutical consulting firm, says growth rate is a huge factor indeed, as the number of specialty agents and demand for specialty drugs is projected to be 15% to 20% annually for years to come, according to the Alliance of Community Health Plans. In fact, the alliance reports that specialty drugs have been projected to comprise 50% of all drug sales and reach approximately $402 billion in spend by 2020. Manufacturer pricing of new products is also a significant driver of specialty drug costs. For example, since 1990, the cost of newly approved oncology agents has risen tenfold.

Constance Wilkinson, of Epstein Becker & Green, a law firm with a focus on federal healthcare contracting, also believes that the survey’s responses reflect aspects of the current landscape, specifically the higher prices manufacturers typically assign to specialty products when launching them.

WilkinsonShe agrees with survey respondents that a major factor in rising specialty drug costs is increased demand due to more people being at an age where they are likely to experience a condition requiring them. “This is the case for some treatments such as those for rheumatoid arthritis, but not necessarily for others such as oncology drugs or those for rare diseases,” Wilkinson says. For the latter drugs, the price may be driven more by a condition’s criticality or the smaller population for which the drug is indicated (i.e., a more limited market). 

Regardless of the reasons for rising costs, the current model is unsustainable. For patients to have access to the medications they need, MCOs must identify ways to address the rising costs.  

Here are four more key findings from the managed care pharmacy survey that reveal how your peers believe this issue can be addressed.

Internal server error