Business Group Blog

How can Employers Contain the Skyrocketing Cost of Specialty Pharmacy Drugs?

For the first time in 2010, the number of specialty drugs approved by the FDA surpassed that of traditional drugs, kick-starting a trend that we're continuing to see year after year.1 While only a small fraction (approx. 4%) of the patient population uses specialty medications, these costly drugs now account for 25% of total US drug spending and is the fastest growing cost in most employers' health benefits.2 Employers are facing annual trend increases ranging from 18% to 30% due to generic and brand drug inflation and, most notably, to new breakthrough specialty medications.3-4 It is predicted that specialty pharmacy spend will outpace that of traditional pharmacy by 2018 (Figure 1).5 What's more, there is substantial price variation among these drugs based on where the patient receives the medication (Figure 2).

Figure 1

 

Figure 2.

Figure 2

 

At this stage, specialty pharmaceuticals most commonly address complex conditions such as cancer, respiratory illness, central nervous system disorders and inflammatory conditions such as rheumatoid arthritis and psoriasis. However, this catalog is expected to expand and diversify immensely in the coming years.

 

Employer Priorities

Regardless of industry type, employers looking to reduce their overall health care trend must prioritize these costly drugs. Specialty pharmacy is identified as the second top cost driver for 2016 after high-cost claimants.6

Employers can influence their specialty pharmacy trend at the following touch points:

Figure 3

 

Employer Solutions

Below are six effective ways employers can drive down prescription drug costs:6

  1. Step therapy: Employees are required to start with lower-cost options before progressing to a specialty medication.
  2. Prior authorization: The employer’s health plan gathers information to determine if the medication should be paid for (e.g., if the patient meets guidelines for receiving the medication).
  3. Quantity limits: To avoid wasting medication in the case of drug intolerance, place quantity limits on specialty medications.6
  4. Tiering: Institute a fourth tier or higher formulary cost sharing.6 Although, some advocates warn that a higher cost share may lead to reduced adherence among those that are truly in need of a particular medication, given a lack of ability to pay for it.
  5. Site of care steerage: Encourage employees to receive their specialty drugs through a pharmacy instead of a hospital, avoiding costly facility fees.6
  6. Freestanding or PBM Specialty Pharmacy: Routing employees to in-network pharmacy will optimize discounts for both the employer and employee.6

The National Committee on Pharmacy Benefits and Specialty Medicine focuses on ways employers can optimize these, and other strategies for specialty medication management. Members — please visit our Specialty Pharmacy Management Series for an in-depth look at a variety of specialty topics of interest to employers.


References

 

  1. AHIP (July 2015). Issue brief: Specialty drugs – Issues and challenges. Retrieved from www.ahip.org/IssueBrief/Specialty-Drugs-Challenges-Issues/
  2. PWC (June 2014). Medical cost trend: Behind the numbers 2015. Retrieved from www.pwc.com/us/en/health-industries/top-health-industry-issues/assets/pwc-hri-medical-cost-trend-2015.pdf
  3. Express Scripts. The 2013 drug trend report. Retrieved from lab.express-scripts.com/~/media/ previous%20reports%20pdfs/drug%20trend%20report%202013.ashx
  4. Express Scripts. The 2014 drug trend report highlights. Retrieved from lab.express-scripts.com/lab/drug-trend-report
  5. Artemetrx (2013). Specialty drug trend across the pharmacy and medical benefit. Retrieved from www.artemetrx.com/wp-content/uploads/2014/08/artemetrx-specialty-drug-trends.pdf.
  6. National Business Group on Health. Large employers’ 2016 plan design survey. August 2015. https://www.businessgrouphealth.org/pub/205da3ce-782b-cb6e-2763-4981e6992468.