Industry Trends: Specialty and Compound Prescription Drugs

Industry Trends: Specialty and Compound Prescription Drugs

Insurance carriers, patients, politicians, business owners, and even physicians have stepped up their critical message to pharmaceutical and biotech companies about their expensive medications costs – do more with less!  However, many analysts and experts predict we shouldn’t expect a reprieve in the immediate future.  And from what Kistler Tiffany Benefits has been seeing in pharmacy trends and high cost drug expenses, it is certainly not slowing down for 2016 into 2017. The alarming trend in not only high cost for brand and specialty medications, but increase utilization in compound drugs appears to be what is also driving the market frustrations.

In a study conducted by the AARP Public Policy Institute in 2015, the average annual retail cost of specialty drugs used to treat complex diseases such as cancer, rheumatoid arthritis, Hepatitis C, and multiple sclerosis now exceeds the median U.S. household income.  The study of 115 specialty drugs found that a year’s worth of prescriptions for a single drug retailed at $53,384 per year.  The troubling result of that statistic is that insurance plans and employers cover most of that cost due to employee caps and maximums to plans.

Compound drugs represent a relatively new dynamic in the industry where a licensed pharmacist combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient.  Compounding in many cases is done ‘honestly’ at a physician’s request.  However, the idea of compounding at the pharmacist’s request– whether a comparable generic is available or not is starting to raise eyebrows.  Fifty years ago, 60% of drugs were compounded, today only about 1% of new prescriptions are compounded, but there appears to be resurgence.  In many cases, these drugs fall ‘outside’ the structure of a negotiated formulary program and are generally at non negotiated, more expensive fees.

In both specialty and compound prescription dispensing, both public and private insurers are starting to flatly refuse paying for certain expensive treatments that don’t represent a significant benefit to patients over other efficacy-based treatments.  These new trends certainly are being seen as a ‘threat’ to bankrupt health insurance programs.  In the past, companies would simply seek approval for a medicine that was slightly better than one that already existed.  Insurers are now pursuing treatments that need to be significantly superior to competitors’ drugs in order to pay or put them on a preferred status.  Minor innovations on existing pharmacy therapies just won’t be acceptable anymore to insurers, and insurers are gaining leverage to say ‘NO’ through payer consolidations that provide strength in size, particularly the likes of Cigna/Anthem and Aetna/Humana.

Ultimately, this leads to the question of what can be down to help control these costs.  In cases of appropriate utilization, there isn’t much you can do.  There are certain patients that are desperately in need of appropriate care.  However, you absolutely need to make sure you are aligned with a pharmacy provider/administrator that has a ‘comprehensive management approach’ that effectively improves patient care and outcomes while reducing waste or unnecessary spending.  New and innovative drugs are important to our health care system and should be available and AFFORDABLE to patients who need them most. But over utilization in unnecessary conditions will continue to stress the already confining financials many employers are facing.

As your benefits partner, our job is to help improve the experience of your company’s benefits package, including the evaluation of your pharmacy vendor and their dispensing and management protocols.  Please reach out to your Employee Benefits Consultant with any questions!