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The pharmacy landscape continues to evolve rapidly, presenting challenges and opportunities for pharmacy benefits advisors and employers alike. Specialty drugs now command a significant share of drug spend due in part to their complex formulations, manufacturing processes, and often, their life-saving capabilities. Specialty drug spending totaled $301 billion in 2021, a 43% increase since 2016¹, and is projected to grow 8% annually until 2025² .

However, the cost burden is increasingly felt across the healthcare spectrum, affecting premiums, coverage decisions, and, ultimately, member access. It's crucial for benefits advisors to understand the current state of the specialty drug market and help their clients develop actionable strategies to mitigate increasing drug spend, trend, and risk.

Specialty Drugs Soar Past $100K, and Benefits Budgets Pay the Price

In recent years, the scope of drug spending has shifted considerably. Brand-name drugs, especially those classified as specialty medications for conditions such as cancer and autoimmune diseases, have seen an uptick in price.

High-cost specialty drug prices are not just statistics –they represent a significant concern for patients and plan sponsors, with several medications topping out at over $1 million per year. Such trends underscore the importance of benefits advisors to adapt and find sustainable solutions for managing their clients' costs.

Breakthrough Therapies with Bank-Busting Price Tags

The market has recently welcomed a suite of new medications that promise better outcomes for patients with chronic and acute conditions. The biggest increases are in biosimilars and medications to treat smaller numbers of patients with rarer conditions (orphan drugs), with therapies for inflammatory conditions, cancer, HIV, and multiple sclerosis leading the pack.

A few notable specialty medications currently in the pipeline will impact large populations, including:

• Donanemab (Alzheimer's dementia): Alzheimer's affects an estimated 6.7 million Americans aged 65 and older.
• Ocrevus (Multiple Sclerosis): Multiple Sclerosis impacts nearly one million Americans.

• Nemolizumab (atopic dermatitis): Eczema affects 16.5 million adults in the U.S.

However, these advancements come with a steep price tag. Even as we anticipate future drug approvals, it's clear that a small group of individuals utilizing these specialty medications can disproportionately elevate a plan's overall pharmacy costs. This reality requires benefits advisors and employers to stay ahead of the curve, integrating cutting-edge strategies to counterbalance the financial implications. It's clear that a small group of individuals utilizing these specialty medications can disproportionately elevate a plan's overall pharmacy costs. This reality requires benefits advisors and employers to stay ahead of the curve, integrating cutting-edge strategies to counterbalance the financial implications.

Rising Costs, Stop-Loss, and Lasering, Oh My

Rising specialty drug costs contribute significantly to plan costs, making it challenging for benefits advisors and employers to plan appropriately. Additionally, stop-loss coverage, a safety net for high-cost claims, has become more critical than ever and premiums continue to rise. Finally, the practice of 'lasering'—excluding specific high-cost individuals from stop-loss coverage—presents moral and economic challenges. These dynamics necessitate that one be able to strategically navigate the marketplace to safeguard against unsustainable hikes in pharmacy plan costs.

Navigating the Costs from Negotiation to Implementation

Managing specialty drug costs demands a multi-faceted approach. Yet these need to be balanced with the associated financial risks, particularly those from expensive specialty drugs. Comprehensive strategies include:

• Negotiating Client-Aligned Terms: Benefits advisors can be essential in facilitating discussions between employers and providers to ensure fair and transparent pricing.

• Clinical Oversight: Implement clinical management practices to ensure that specialty drugs are used appropriately and maximize their value for those who need them most.

• Leveraging Biosimilars: A promising area of cost savings, biosimilars offer a more affordable alternative to expensive biologic drugs. With prices that are typically lower than their reference products, biosimilars represent a substantial opportunity for cost containment.
• Stop-loss Coverage: Just one catastrophic claim can severely impact your bottom line for years. It's crucial to limit financial risk with appropriate protections.

The surging cost of specialty drugs is an undeniable challenge and an impetus for innovation and reassessment of traditional plan models. By understanding the nuances of the current drug spending trends and employing comprehensive cost management strategies, benefits advisors and employers can protect their financial interests while ensuring access for their members to essential medications. The future of health care is inherently uncertain, but through proactive measures and a commitment to adaptation, stakeholders can navigate these turbulent waters with confidence and resilience.

For more information, visit our Benefit Advisor's Guide

¹Schilling, B. (2020) Specialty drug costs poised to skyrocket but many employers have yet to take note, Commonwealth Fund. Available at: https://www.commonwealthfund.org/publications/newsletter-article/specialty-drug-costs-poised-skyrocket-many-employers-have-yet-take

² PwC Health Research Institute (2023) Medical cost trend: Behind the numbers 2024, PwC. Available at: https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html