Specialty drugs: employers are weary (and for good reason)

The specialty drug pipeline is evolving and contributing to rising costs. Over the last 10 years, the total specialty-drug market spend has approximately doubled, and is expected to hit $310 billion this year. 

The staggering specialty market increase is due in part to two major shifts. First, the market has historically been impacted by less than 2% of the population with relatively rare diseases using specialty prescriptions. However, rare diseases impact 30 million people in the U.S. Specialty drug utilization has also moved beyond rare diseases to now target more common, chronic conditions, opening the door for more people to use these prescriptions.

Second, nearly 80% of the drugs that the FDA is expected to approve in 2023 are specialty drugs. The cost of specialty drugs has also increased due to high demand, greater availability, and laborious manufacturing and handling. Manufacturers are increasingly focused on specialty because these drugs are more profitable to make due to the high markup potential and lack of competition. Therefore, they have become more frequently prescribed and yet less affordable.

Implications of high-specialty costs on employers and their members

The issue of skyrocketing costs really comes down to the threat it poses to patient health. Specialty drugs do not just serve as the best option to improve the quality of life for many, but also serve as life-saving treatments. With the rise in costs, however, some patients are forced to consider not filling a prescription, cutting pills in half, or skipping doses of medicine due to their financial situations.

To combat the effects, employers and their benefits advisors are increasingly offering more robust benefits plans that include pharmacy coverage. For employers, this could mean the difference between having a happy, healthy employee that performs at top-productivity levels, or an employee or covered family member suffering with disease progression on top of the financial strain of managing medication costs.

Despite offering comprehensive benefit coverage to employees, employers could also be putting themselves at risk of absorbing exponentially growing costs. If a business offers an employer-sponsored pharmacy benefits plan, one specialty claim could blow out an employer’s budget. At a member level, it’s reported that plan sponsors see an average annual cost of $38,000 to cover specialty drugs, whereas, it only costs $492 to cover non-specialty medications. That’s why specialty prescription costs are known to account for 50% or more of an employer’s total drug spend.

Rather than choosing between the health of an employee or the company ROI, there are two key strategies employers and their advisors can use to manage costs and risks associated with specialty medications:

1. Identifying wasteful practices, such as inappropriate use.
2. Adding a layer of protection within a pharmacy benefits plan.

Identifying wasteful practices

Wasteful practices can happen without an employer’s knowledge. Take dose creep, for example. It is a main driver of inappropriate use in pharmacy benefits, yet it is a relatively unknown concept, as it conflicts with traditional pharmacy benefit manager (PBM) business models. Dose creep is a process of increasing a medication’s dose or frequency beyond what is needed for care, meaning patients can be over-prescribed medications with high costs that ultimately seep into an employer’s budget.

To prevent unnecessary spending on low clinical value medications, employers need a system in place to evaluate whether a medication is appropriate and properly prescribed. It is especially critical to introduce a system before claims are paid. Additionally, this process should include the removal of any non-essential, high-cost drugs by continually watching the market for appropriate, yet less expensive alternatives. To do so, employers should tap a team of licensed clinical pharmacists to design a comprehensive review process of pharmacy benefits claims.

Adding a layer of protection to pharmacy benefits plans

Self-insured employers shouldn’t feel alone. There are a lot of options available that allow employers to gain protection from catastrophic pharmacy claims, such as stop-loss insurance, also known as excess insurance. Stop-loss insurance coverage goes into effect when a self-funded employer is unexpectedly hit by a catastrophic drug claim. The insurance provides monetary reimbursement after exceeding a predetermined deductible. However, even stop-loss insurance isn’t a full solution, as it still allows for gaps in coverage.

All self-insured employers need to consider a layered approach to pharmacy benefits protection – and they need to do it now before it’s too late. Catastrophic claims can be unpredictable, and without proper protection in place, a business could experience great financial hardships without alternative options for true recovery. Only with plan features like having favorable contract terms, clinical oversight, maximized rebate dollars, patient assistance solutions and both traditional and supplemental stop-loss insurance, can an employer sleep soundly knowing they are protected.

Paul Fortunato is the Senior Director, Clinical Initiatives, RxBenefits, Inc. and RxPharmacy Assurance Product Owner.