Specialty medications Q&A: key trends and strategies for brokers and employers

We recently caught up with Mark Campbell, vice president at RxBenefits, to discuss the current state of specialty medications, key strategies for benefits advisors and employers, and what to expect in the second half of 2023 and beyond. 

Can you explain what a specialty medication is, and how it can impact overall drug spend?  

Unfortunately, there is not an industry-wide definition for “specialty” medications.  Specialty status is determined by each PBM. Historically, the specialty designation was applied to medications that were classified as biologics or medications that required special storage and handling. Today, specialty designation can include high-cost oral therapies and medications that have limited distribution.

How can benefits brokers/advisors and employers ensure their members are taking the appropriate and necessary specialty medications?

Specialty medications account for 50% to 55% of the overall program cost for most employers. Cost for specialty medications can range from <$1,000 to more than $50,000 per month. The average specialty medication cost is approximately $7,200 (pre-rebate). Because the vast majority of specialty medications are considered maintenance therapy, it is essential to have a review process in place to validate that the requested medication is appropriate clinically first and foremost. Because multiple therapeutic options are available for most conditions, it is also necessary to ensure that product choice is based on all available options and takes into consideration the relative cost of therapy. For example, there are multiple choices for atopic dermatology; while all may have strong clinical data to support their use, the net cost to an employer can often vary by $20,000/year or more.

Regarding addressing specialty drug costs, how can benefits brokers/advisors and employers manage specialty spend?  

As previously mentioned, the cost of specialty medications can vary across a wide range. For most plans, the utilization rate is typically 1.5%, meaning that a 1,000-member group would expect to have 15 members utilizing a specialty medication. Roughly two-thirds of specialty prescriptions are prescribed for inflammatory or dermatological conditions.   This would include treatments for psoriasis, atopic dermatitis, ulcerative colitis, Crohn’s disease, rheumatoid arthritis, and psoriatic arthritis primarily, and these conditions are treated with medications such as Dupixent, Humira, Stelara, Otezla, Taltz, etc. 

Relative to the other one-third of specialty utilizers, these conditions would be considered high-volume/ lower-cost specialty conditions and therapies. While it may sound odd to refer to a medication with an AWP of $7,000 as lower cost, in relation to many oncology therapies, and treatments for hereditary angioedema, cystic fibrosis and other orphan conditions, $7,000 is comparatively low. It’s important to note that for employers with good discounts, rebates and access to MCAP (manufacturer copay assistance programs), the cost of most anti-inflammatory and dermatological products ranges between $900 and $2,600 per month.

So with regard to how brokers/advisors and employers can manage spend, achieving the best therapy at the lowest cost requires three things:

• Utilization management: Good discounts and rebates will not make up for paying for a medication that is not appropriate. Having an independent prior authorization process that engages with the prescriber to collect appropriate medical history is essential. The difference between an independent review process and an automated Prior Authorization process produces a 20% to 25% difference in overall approval rates. In addition, an independent process will identify opportunities for lowering cost on parity priced medications and medications that are dosed based on the patient’s weight. For example, four 1mg Pomalyst tablets have an annual cost of $960,000, whereas one 4mg tablet has a cost of $240,000/year — a savings of $720,000. Most prescribers would not be aware of this and an automated Prior Authorization process would not typically catch this.

• Purchasing: When a product is appropriate, get the lowest cost possible by applying the most competitive discounts, rebates and when available manufacturer copay assistance program discounts.

• Ensure appropriate response:  An individual’s response to therapy can change over time.  Paying for a medication that isn’t well tolerated or is not producing the desired response will only lead to treatment failure and delay effective treatment.

Do you have any tips for employers on how they can best prepare for the inevitable impact of specialty medications on their pharmacy benefits plan, without impacting the health outcomes of their employees?  

While specialty medication utilization is small in comparison to brand and generic medications, it does represent 1.5% of utilizing members and 50% to 55% of cost for most plans. There is a great deal of research and development in this area which will lead to new therapies and greater competition in existing categories. In the anti-inflammatory and dermatological categories, we have seen AWP rise over time, but we have also seen increased competition drive rebates up by nearly seven-fold over the past six years. 

 For the first time, we now have biosimilars in these categories that will likely decrease cost over the next two years. Offering a comprehensive benefit includes coverage of specialty medications. If a plan has proper utilization management programs in place and good purchasing, they are well poised to provide their members with a strong clinical benefit at a cost that trends below market.

There will be times when a plan has a member who is on the right drug, right cost, and right clinical response, but the cost is extremely high. In addition to traditional stop loss, supplemental stop loss coverage for specialty medications can supplement the cost of these medications while helping to preserve traditional stop loss premiums.

Heading into the second half of 2023, what trends do you think will emerge in the benefits landscape as it relates to specialty drug costs?  

Without a doubt, everyone is looking to see what impact the biosimilars for Humira will have. One product already has interchangeability status granted by the FDA and more are seeking the same status. This is extremely important because interchangeability makes it possible for a pharmacist to make the change whenever the provider has consented to substitution. Humira is the number one specialty medication for a number of reasons, including that Humira is approved by the FDA for a very broad range of uses. For providers, that makes it an easy choice. Having interchangeable biosimilars will make it easier for pharmacists to increase adoption. Having competition among biosimilar manufacturers will drive competition and presumably lower cost. This will take some time, but this is unfolding now and the picture should begin to take shape through this year and into next year.