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Special delivery: health insurers need to manage the cost and use of specialty drugs.

Key Points

* Specialty-drug costs, which reached $40 billion in 2005, are expected to more than double to $90 billion in 2009.

* The number of specialty-drug types and the diseases they treat are expanding quite rapidly.

* According to a recent study, health plans that use an exclusive pharmacy network save on average 10% more than those that don't.

Most specialty drugs treat chronic or complex illnesses that affect less than 3% of the general population, but they come with a significant price tag--these patients account for 25% to 30% of a company's overall medical costs. On average, a specialty-drug patient spends $1,400 for a 30-day supply of medication, and this figure continues to rise. Escalating specialty-drug costs, which reached $40 billion in 2005, are expected to more than double in four years--to a total of $90 billion in 2009--a rate three times faster than traditional pharmacy. In order to continue providing effective and affordable health care to their members, plan sponsors must find ways to manage their specialty-drugs costs.

Specialty Drugs

Although historically used to treat rare genetic diseases such as hemophilia, specialty drugs are no longer limited to treating such disorders. The diseases they treat and the number of specialty-drug types are expanding rapidly. In recent years, specialty drugs have become increasingly important in treating conditions such as multiple sclerosis, cancer, Hepatitis C and rheumatoid arthritis, making specialty drugs the fastest-growing segment of pharmaceuticals in the drug pipeline. Currently there are more than 600 specialty drugs in development.

For specialty drugs covered under the pharmacy benefit, the trend is toward greater use of specialty pharmacies as they provide coordinated delivery of specialty drugs and management of multiple aspects of a patient's treatment. (These services can include instruction on the self-administration of a therapy; clinical support; assistance with billing and reimbursement issues; and the supply of various educational materials, including online information portals.) According to the 2005 Express Scripts Drug Trend Report, specialty pharmacy increased 77% in 2005 from 2004, measured by clients' prescription volume basis. During the same time period, home delivery decreased 30% and local pharmacy decreased 2%, also based on client volume.

Increasing Specialty-Drug Costs

Specialty-drug costs are expected to account for more than 25% of total drug spend by 2009. This escalation is fueled by the increase in the number of people diagnosed with conditions that can be treated by specialty pharmacy therapeutic categories, advancements in biotechnology, the expansion of indications for current specialty drugs and the release of new products. While these are exciting developments from a health improvement and medical treatment perspective, they're daunting facts for companies and organizations providing prescription drug and medical benefits, as well as individuals who are increasingly paying a higher percentage of their health-care costs.

A 2004 online survey conducted by Harris Interactive on behalf of the California HealthCare Foundation revealed that consumer reactions to increasing drug costs should also be a major concern for plan sponsors. When faced with increases, 37% of chronically ill consumers missed doses, split pills or did not fill their prescriptions altogether. Although this study didn't focus specifically on high-cost drugs, the majority of specialty drugs treat chronic illness, with most members on multiple medications. Given the high-cost nature of specialty drugs and the fact that fewer cost-saving strategies are available, this may further increase the likelihood of patients failing to adhere to their drug therapy, which would add to the overall cost of specialty drugs.

Future Cost Savings

Competition may eventually emerge if a regulatory pathway is approved for the manufacturing of generic biologics, which may reduce prices 20% to 30% and will play an important role in the specialty-drug environment. Unlike traditional drugs, biologics do not currently have a Food and Drug Administration review and approval process for biogeneric drugs once the innovator drug's patent has expired. With approximately a dozen biotech drugs losing patent protection by 2006, many of which are considered to be blockbusters, the FDA is under increased scrutiny from consumer groups, manufacturers of generic drugs and public officials to develop an approval process for generic biologics.

How to Manage Specialty-Drug Costs

Plan sponsors can develop a program that helps them gain control of specialty drug spending by incorporating the use of specialty pharmacies, which present cost savings through a number of benefits:

Controlling the channel of distribution: Plan sponsors have found that limiting the size of pharmacy networks used to dispense specialty drugs can significantly reduce costs. According to the Drug Trend Report, plans that implement an exclusive pharmacy network save on average 10% more than those that do not. Specialty drug distribution tends to be impractical for traditional retail channels. Retail pharmacies tend to avoid maintaining large supplies of specialty drugs and therefore cannot leverage high-volume discounts. They also often lack the clinical support that is essential for optimal specialty care. Specialty pharmacies, however, are able to provide high-touch clinical support and maintain a large inventory base, enabling them to take advantage of volume-driven price reductions. These cost savings can then be passed on to the plan sponsor and plan members.

Providing consistent, on-call patient care: Specialty pharmacies offer a unique patient-care model, which can include a patient-care coordinator, specialty nurse, case worker and an on-call pharmacist round the clock. Specialty pharmacists and nurses have advanced training in the use of complex medications and specialized knowledge of the relatively uncommon diseases they treat. The patient-care team works with the patient to address questions regarding medications, proactively manage medication side effects, monitor patient progress and help identify resources for those needing assistance with copays and other issues.

Ensuring the patient is following the prescribed course of treatment: A plan sponsor may avoid paying for drugs that aren't being taken and reduce the risk of patients worsening because they are failing to take their medications. In some cases, failure to take prescribed specialty drugs can lead to serious and expensive medical procedures such as an organ transplant. For example, although consistent treatments are crucial to ensuring successful control of Hepatitis C, patients begin to feel very sick when treatment begins. As a result, they become noncompliant and stop treatment in hope of relieving the side effects brought on by the medication. Data shows patients receiving Hepatitis C treatment through a specialty pharmacy achieve a compliance rate of 91%, while the compliance rate for retail pharmacy was only 84%.

Monitoring the proper use of the medications: Because of their coordinated patient-care model, specialty pharmacies can work directly with the physician to ensure the drug is appropriate for treatment and the medication is prescribed at the proper dosage level. Pharmacy benefit plan initiatives such as prior authorization can help protect against underdosing or overdosing.

Timing the delivery of medications to minimize waste: By enabling the careful coordination of specialty drug delivery, which often requires strict storage conditions, specialty pharmacies prevent plan sponsors from paying for medications that, when improperly stored, become unsafe to use.

What Are Specialty Drugs?

They are high-cost drugs that generally require close supervision and monitoring. On average, a specialty-drug patient spends $1,400 for a 30-day supply of medication.

Specialty drugs have the following characteristics:

* Need frequent dosage adjustments

* Cause more severe side effects than traditional drugs

* Need special storage, handling and/or administration

* Have a narrow therapeutic range

* Require periodic laboratory or diagnostic testing

Source: Express Scripts

Top Specialty Drugs and Their Costs

Injectable Biologics for Inflammatory Diseases

Injectable biologics include four medications, yet account for more than 19% of total specialty-drug per-member per-year expenses.

Average cost per prescription was $1,400.

Total drug spend for just this class increased 33.9% during 2005, primarily driven by utilization growth because of earlier and longer treatment for these diseases. Multiple indications for treating diseases such as psoriasis also expanded use.

Drugs to Treat Multiple Sclerosis

Multiple sclerosis affects approximately 400,000 people at an annual estimated cost per-patient of $18,000.

The five drugs in this category account for 15% of total per-member per-year spending for specialty drugs within the pharmacy benefit at an average cost of $1,300 per prescription.

Drugs to Treat Clotting Factor Deficiencies

The average cost per prescription is $28,000 to treat the 18,000 Americans suffering from hemophilia.

Estimated annual total treatment cost is $125,000 per patient.

Overall cost trend for hemophilia medications rose 25% in 2005, driven in part by an 8% increase in use.


Largely used to treat cancer, antineoplastics represented the fourth-leading specialty-drug therapy class in 2005.

Average cost is nearly $1,600 per prescription and represents a 19.2% increase in the drug trend.

Advances in cancer screening technologies, which often lead to earlier treatment of cancer, contributed to the increase in use.

Hematopoietic Agents

Frequently an adjunct to chemotherapy, the hematopoietic agents therapy class includes medications to treat anemia and to increase the production of certain blood cells to help fight infection.

The per-member per-year cost for this category rose 10.5% in 2005 with an average prescription cost of S 1,400.

Contributor Dr. Steven B. Miller is chief medical officer and vice president of specialty for Express Scripts. He can be reached at
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Article Details
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Title Annotation:Health/Employee Benefits
Author:Miller, Steven B.
Publication:Best's Review
Date:Jan 1, 2007
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