Industry Trends: Specialty Medications Can Equal Big Costs

Industry Trends: Specialty Medications Can Equal Big Costs

If you haven’t heard much about specialty medications, it’s time to prepare yourself. They represent the fastest growing and most expensive cost element in pharmacy care today and pose a serious challenge to maintaining stable health care costs.

There is no standard definition for a specialty medication, but drugs in this category typically share one or more of the following characteristics:

  • First, they are expensive — the average monthly cost to payers and patients for a specialty medication is $3,000, ten times the cost for non-specialty medications.
  • Second, they can be difficult to administer. They are often given by injection or infusion to treat complex, chronic conditions such as rheumatoid arthritis, multiple sclerosis and psoriasis just to name a few.
  • Third, the drugs may require special handling, including temperature control.
  • And finally, patients taking these medications may need ongoing clinical assessment to manage challenging side effects and conditions.

CVS Caremark estimates that specialty drugs could account for about half of the total pharmacy spend in 2018, which is up from one-third from two years ago. The specialty pharmacy marketplace has changed dramatically over the past two decades. In the mid-1990s, there were only a handful of specialty drugs on the market, focused on treating a limited number of cancers and rare diseases. Today, there are hundreds of specialty drugs available giving patients extraordinary access to potentially life-changing treatments.

The number of specialty medications is increasing rapidly. In the past four years we have seen 97 new drugs launched. The numbers show that more and more patients are taking advantage of this increased availability. In 2006, only three of the top 10 drugs in the U. S. were specialty drugs; in 2016 eight of the top 10 drugs will be specialty drugs.

There are a number of factors driving specialty spending, and clearly, drug price is a big one. Population shifts are also a factor. With 10,000 Americans turning 65 every day, a larger proportion of the population is aging into diseases like rheumatoid arthritis and cancer, which are treated with specialty medications. In fact, patients in their 60s consume three times as many specialty prescriptions at six times the cost of patients in their 20s.

The specialty patient demographic is changing in other ways, too. Specialty drugs are no longer just for those with rare and complex conditions—researchers have addressed more common conditions such as high cholesterol, asthma and hepatitis C, significantly increasing the potential of patient consumers.

Research and development of these drugs is complex and costly, resulting in high prices. And in most cases, branded specialty drug makers have little to no competition from generics, allowing prices to stay high for quite some time.

There are a number of traditional strategies that can be employed to help manage specialty spending increases.

Traditional utilization management strategies including prior authorization and step therapy can be highly effective in controlling costs. Another approach is the use of tiered formularies that require higher member cost sharing for more expensive therapies. Ensuring that the drugs are administered at the lowest-cost site of care is also very important — in most instances the hospital outpatient center is the highest-cost site of drug administration, while patients’ homes and doctors’ offices are typically the lowest.

Although the expense of these specialty drugs are great, their efficacy and life-changing effects are incredible. Some are absolute cures to what would otherwise be a costly, life long battle with illness (Hepatitis C for example). While others allow patients to live more normal lives while managing crippling pain and debilitation.

By Chris Elvidge, Director of Account Management