In the past decade, specialty drugs have helped bring about advances in medicine that have greatly improved the quality of health care. However, at the same time, these drugs have been a factor in the rising cost of health care and, as a result, become a matter of concern for many employers.
According to the America’s Health Insurance Plans (AHIP), only 1 percent of patients use specialty drugs, yet this usage accounts for 20 percent of drug spending ($54 billion annually). The annual cost per patient ranges from $10,000 to more than $1 million. By 2010, the U.S. specialty prescription spending is expected to reach $99 billion as the volume of new specialty products continues to pour into the market.
“Taking control of specialty drug costs is not easy,” says Chronis Manolis, vice president of pharmacy services for UPMC Health Plan. “There is not one method that is right for all employers. But, an approach that incorporates evidence-based best clinical practices with sound cost-containment methods ensures the most sensible way to approach the problem.”
Smart Business spoke with Manolis about specialty drugs and what employers can do to control the costs connected to them.
What is a specialty drug?
A specialty drug requires a complex delivery system and has a cost that exceeds $5,000 per patient, per year. The average cost of a specialty drug is more than $1,500 per month. They are typically prescribed to treat rare, complex or chronic diseases.
Specialty drugs are high-cost injectable or oral drugs that typically involve intensive clinical monitoring and patient training. They often require specialized handling and/or frequent dosing adjustments to ensure proper treatment. Specialty drugs are sometimes limited or restricted to certain distribution channels, specifically specialty pharmacies.
Are employers taking a more active interest in managing specialty drugs?
According to a recent survey, 45 percent of employers from large companies say they recently reviewed their plan benefits or their limits for specialty or biotech drugs. This is an increase from the 34 percent that did so in 2005. Certainly, given the cost of these drugs and the number of new specialty drugs hitting the market in the next few years, there is definitely a sense of urgency and heightened interest with respect to the management of this class of drugs.
What are some of the factors driving up costs of specialty drugs?
First, a growing number of specialty drugs are in development and each year more of them enter the market. More than 600 specialty drugs are currently in the biotechnology ‘pipeline,’ including many oral formulations. In recent years, about one-third of all new drugs introduced were specialty drugs and specialty products are projected to be half of all U.S. Food and Drug Administration (FDA) approvals by 2010. Also, an increasing number of common chronic conditions, such as diabetes, osteoporosis and rheumatoid arthritis, are now being treated with this class of drugs. Specialty drugs already on the market continue to gain approvals for new uses.
An additional reason for the rise in costs is the increase in diagnoses of people with chronic conditions. An estimated 105 million Americans have chronic conditions, and in the first decade of the 21st century, the number is expected to increase by 16 million. In many cases, some diseases, such as many forms of cancer, have become chronic conditions that patients can live with, thanks to regular, sometimes lifelong, treatment with specialty drugs.
Are there generic versions of specialty drugs that can be utilized to help reduce the cost?
Specialty drugs are biologics so there is less of a chance that generic alternatives approved by the FDA can be developed. Biologics are genetically engineered proteins and are more difficult to manufacture. The FDA does not currently have a regulatory framework to quickly approve biologic generics, although this is expected to change in the next few years. Even when generics are created, they too can be expensive; sometimes the difference in price is only 30 percent, compared to nonspecialty generics, which are typically 60 to 90 percent less than their brand-name counterparts. However, there is still a huge savings opportunity for generic biologics as many specialty drugs currently on the market have already lost patent protection.
What are some strategies to effectively manage specialty drugs?
Effective pharmacy management requires a holistic approach to provide cost containment and management of this class of medications. Employers should take advantage of utilization management strategies, such as prior authorization and quantity limits to ensure safe, appropriate use of these medications in accordance with FDA guidelines.
Limiting supplies to 30 days per co-pay can reduce waste due to changes in dosing or side effects. Using specialty pharmacies helps to control the distribution of specialty drugs to provide high-touch clinical management of the patient, including counseling and training on the use of the medication, as well as better pricing and enhanced reporting.
CHRONIS MANOLIS is the vice president of pharmacy services for UPMC Health Plan. Reach him at firstname.lastname@example.org or (412) 454-7642.Chronis Manolis
Vice president of pharmacy services
UPMC Health Plan