Curbing specialty drug spending: Where to start?
Pharma and specialty drugs are among the top targets of employers attempting to rein in their health care spending. But what's the best approach?
Ask any employer and they’ll tell you the same thing: pharmacy spending is eating up a bigger portion of their health care budgets, specialty drugs in particular. In fact, last year Cigna saw drugs and biologics comprise 26 percent of medical spending for Cigna, making it the top contributor to costs.
“That trend is expected to continue out into the future,” Cigna VP of value-based partnerships Thomas Stambaugh told attendees at a recent webinar hosted by EBRI. “We expect that by 2020, pharma will be 31 percent of our total cost.”
Related: Health plans differ greatly in their approach to specialty drug use
This isn’t just a blip on the the radar, or a dastardly plot by the pharma industry to increase profits; it’s an evolution of how drugs are used to treat patients. “One of the things that you’re seeing is that we’re moving from the traditional mass-market of drugs to biologics,” Stambaugh said. ”We’re seeing more mass-customized, targeted therapies. Recently you’ve started to see very hyper personalized therapies.”
More-targeted treatment are good for patients’ outcomes, but not for their (or their employer’s) wallets. Specialty drugs can cost thousands of dollar per dose, and while, as EBRI director of health research and education Paul Fronstin noted that frequency of administration for such drugs may be lower, the one-time cost is nothing to sneeze at.
“We certainly see where that trend is going and how cost increases are outpacing everything else,” Fronstin said. “Specialty medication costs are trending at double-digit rates. I don’t want to say it has plan sponsors panicked, but it certainly has their attention and is going to be a factor in how they design their health plans.”
Pharma and specialty drugs are among the top targets of employers attempting to rein in their health care spending. But are the strategies their employing–namely, shifting more costs to works via consumer-directed and high-deductible health plans–doing more harm than good?
A recent study conducted by EBRI attempted to quantify the relationship between health plan type, specialty drug adherence and worker productivity, and while the results were mixed, the analysis is an important first step in bringing attention to the growing issue.
The survey looked at five rare conditions that, despite a prevalence rate of just .1 percent to .2 percent each, account for a quarter of pharmacy spending: rheumatoid arthritis, Crohn’s disease, ulcerative colitis, psoriasis and muscular sclerosis. The cost of the specialty drugs used to treat these conditions ranged from 19 percent to 66 percent of total spending on each condition.
For each condition, researchers looked at average use of specialty drugs by plan type. For RA, for example, 49 percent of out-of-pocket costs are spent on specialty drugs by a consumer with an HMO; for a consumer with a PPO or an HRA plan, this drops to 35 percent; for an HDHP plan, it’s 39 percent. “If you look at average use by plan type, there’s not a whole lot of variation,” Fronstin noted. “HDHPs use less, but it’s not a whole lot less than PPOs and HMOs.”
A major caveat is that researchers had no way of knowing whether participants had opted into their plan due to their medical condition or whether their employer offered only a limited option…“We’re not able to control for the choice set of available health choices,” Fronstin said. “They might be in an HDHP or low-deductible because it was the only option available.”
So while it’s still too early to say what impact health plan choice has on specialty drug adherence, there are still plenty of other factors that employers and their benefits consultants can be looking at.
“When you’re looking at specialty pharma costs, it’s important to look across pharma and medical to really get a full picture of what you’re spending.” Stambaugh says. Specialty drugs in particular are typically given at a medical facility, and the different site administration fees can vary significantly.
And even if plan type isn’t a factor in adherence, the out-of-pocket costs still represent a significant financial burden for some, a factor that should be considered in plan design. “We see the phenomenon of patients hitting their deductible and out-of-pocket limits fairly early in the year,” Stambaugh says. “That’s why the question is really around what do we do about this affordability crisis? Drug selection makes a big difference in formulary design.”
Then, there’s the role of the health care provider. “Part of this goes back to how we make sure the physician has the right incentive to prescribe the most effective therapy,’ Stambaugh says. “We’re learning more about the importance of contractual relationships with the treating provider. How we align outcome incentives?”
A final factor to note, says Stambaugh, is for employers to consider their own level of risk. “When you get into some of these high cost therapies, we’re making sure our clients are considering a stop-loss benefit to really limit the impact of these lightning strikes where one plan participant makes a major impact.”
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