High Dollar Specialty Meds …. The New Normal?

November 11, 2016

Employee Benefit & HR News

The escalating cost of specialty medications has been a topic of discussion for many years.  In 2009, specialty meds were reported to be about 23% of total pharmacy spend.  And in just 5 years this grew to 33%.

Specialty meds were initially used to treat a small population of individuals with serious or complex health conditions.  They have expanded in recent years to treat a larger number of conditions and are being used for extended periods of time.  Drug manufacturers have kept the pipeline full as they work to create additional high dollar specialty meds for an expanding array of health conditions.

Pharmacy costs are responsible for an average of 20% of total group health plan expenses.  Insurers, employers and plan sponsors watch with concern as the cost of specialty meds continues to rise.

What’s driving these spiraling costs?  Here’s are some examples of specialty meds which are contributing to these costs:

Sovaldi made headlines several years ago as the $1,000 a pill breakthrough hepatitis C medication.  It was heralded as a cure for over 89% of patients with hep C.  And it was able to achieve this result in as few as 12 weeks with a price tag per treatment regimen of almost $100,000.  Not long after that several more high dollar hep C medications came onto the market with similar price tags.

New biologic medications continue to be created treating an array of complex health conditions. Biologics are created through a tightly controlled process proprietary to a particular manufacturer.  The proprietary nature of biologics often allows a manufacturer to set a high price since they are the sole source.  And it is difficult for another manufacturer to create a comparable medication, called a biosimilar, so these drugs on average are the only treatment available for as long as 12 years.

Biologics such as Enbrel and Humira improve the lives of those afflicted with serious conditions such as rheumatoid arthritis, psoriatic arthritis, Crohn’s disease and ulcerative colitis.  These medications carry an annual price tag of $40,000 or more.   Even common conditions such as high cholesterol have new biologic drug treatments available costing $14,000 a year or more.

Innovative cancer treatments using targeted therapies of monoclonal antibodies have been introduced.  These therapies are able to successfully treat without the dreaded side effects of traditional chemotherapy agents.  Ibrance is one such therapy holding great promise in the treatment of breast cancer at a cost per treatment of over $124,000.  Keytruda made front page news in former President Jimmy Carter’s successful battle against advanced melanoma.   Remarkable results with a remarkable price of over $150,000 per year.

Few will argue how miraculous and life-changing these innovative treatments have become.  The challenge continues to be providing these medications without straining the healthcare delivery system to the breaking point.  There are cost-saving strategies that can be taken to help reduce the financial impact of these meds.

Some specialty medications have already been on the market for a long time and multiple meds have become available from different manufacturers.  Multiple medication selections allow a preferred choice to be made by insurers, plan sponsors and consumers.  Some specialty meds now even have lower cost generic equivalents available.

Implementation of additional higher dollar Rx co-pays tiers for specialty meds by health plans can help guide members to select lower cost meds as the first choice in their line of treatment.  These co-pays also allow part of the cost of these medications to be carried by the member.  Specialty co-pay tiers can be designed, for example, using a stepped tier 4 and 5 with increasing dollar co-pays depending on which medication is selected.  These co-pays can also be structured in the form of a percentage of co-insurance up to a maximum dollar amount per script.

It is also important for plan sponsors and employers to consistently review the discounts and rebates offered through their pharmacy benefit manager to assure they are taking advantage of price competition between manufacturers of various meds.

In summary, specialty meds are here to stay.  Being diligent in effectively managing the potential high cost is key to mitigating the financial impact.

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About Rick Ewers

Mr. Ewers is an analytical consultant providing financial analysis, vendor evaluations, market & compliance analysis, as well as national industry trending for group employers.

View all posts by Rick Ewers

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