Blog 7: What Can Be Done About the Cost of Specialty Drugs?
As the supply, complexity and cost of specialty drugs grows, health benefits leaders and other payers are adopting strategies to better manage the use of the drugs, increase their cost-effectiveness and improve outcomes.
Specialty pharmacy is the fastest growing cost segment in healthcare. According to the CVS Caremark annual Drug Trend Report, specialty medications accounted for 52 percent of total drug spend in 2020. Ninety-eight percent of the increased specialty drug use was driven by health problems for which new specialty drug therapies and indications were developed.
For more background on characteristics, trends and the impact of specialty drugs, see the first blog in this two-part series here and listen to Veritas Healthcare Management Podcast 6 with pharmacy drugs expert Jay Weaver, Chief Pharmacy Officer for Blue Cross Blue Shield of Kansas, here.
Weaver cautions that, while the growth of spending on specialty drugs may be a source of concern for benefits leaders, it is also a reflection of medical advancement. Weaver describes it as a “shift in share of wallet” for the health plan dollar.
“At one time, we either had nothing for you or had to surgically intervene or we had other sorts of more arcane, draconian interventions (for serious conditions),” said Weaver. “Now we have a pill, or an injection,” he said, which can be viewed as progress in solving medical problems. It is important, said Weaver, to think in terms of the value the drugs bring, enriching and prolonging lives, keeping workers productive on the job. It is not just a matter of their cost.
Clearly understanding that cost is a problem, however, Weaver discussed several responses to the growing concern over specialty drugs. This blog briefly identifies some of these approaches.
Use of Specialty Pharmacies
Specialty pharmacies developed along with advances in biotechnology that produced more complex, high-cost prescription medicines to treat more complex, chronic and rare diseases.
Traditional pharmacies were ill-equipped to handle or administer the new drugs, which can require special care. In response, pharmacies with expertise in complex drug therapies were established to help patients with serious and complex medical needs receive the drugs and related support services they need. Support services include patient education, monitoring and training in the use and handling of prescribed specialty drugs. Specialty pharmacies also help facilitate patient access to financial assistance in the purchase of these expensive drugs.
Some specialty pharmacies are stand-alone entities, but the top four specialty pharmacies are owned by big pharmacy benefit managers (PBMs), which help research, select, negotiate discounts, purchase and manage the distribution of prescription drugs according to benefit plan designs. The top four companies accounted for more than 70% of prescription revenues from pharmacy-dispensed specialty drugs, according to Drug Channels institute
Better Supply Chain Principles
Adoption of smart supply chain strategies will help purchasers of specialty drugs control their costs. For example, selecting preferred partners and providers—using a specific pharmacy as the soul source of a specialty drug—can result in a lower cost for the purchaser. Working directly with preferred manufacturers can also earn more favorable financial terms and pricing, lowering the specialty drug spend.
Controls on Specialty Drug Use
Prior authorization requirements on outpatient specialty drugs serve as a check against providers’ selection of specific drugs not included in the health plan’s formulary or prescribed with neither clear reasons for choosing them nor reasonable certainty that the selected drug will be effective. For specialty drugs that are covered, though, plans can consider approaches to promote more sensible use of specific specialty drugs.
Clinical trials can give the pharmaceutical and medical industries evidence that an otherwise unproven medication will work. The challenge, though, is most payers don’t typically cover unproven, experimental drugs. Weaver suggests moving clinical trials more into the mainstream, where benefit plans would be more willing to provide some coverage, as a way to make such exercises more helpful to patients and providers.
Waste reduction is another worthwhile pursuit in reducing specialty drug spending. Sometimes providers will prescribe, and pharmacies will dispense, a large supply of a new medicine, only to discover afterward that the patient cannot tolerate the drug. Dispensing a partial prescription, such as two weeks’ worth for someone starting on a new drug, would provide time for the patient and provider to determine the drug is tolerable and having the desired effect. In the event the drug is not tolerated by the patient or is ineffective, that particular course of therapy can be stopped, before a big investment is made.
Similarly, dispensing a 30-day supply of a drug instead of 60 or 90 days’ worth reduces exposure to risk, waste and cost. It enables the provider to confirm a prescribed therapy is working and the patient is taking it appropriately—again, before a big financial investment is made. Decisions about pill limits, however, need to be balanced against the potential for disruption in the patient’s course of treatment if there are obstacles to the patient’s accessing the drugs in a timely way.
Applying a value-based purchasing principle to the dispensing of specialty drugs, benefits leaders can consider what should happen when a prescribed drug does not deliver on its promise. The value and price assigned to a drug assumes it will work as intended. When it fails to deliver, should both the patient and purchaser receive a rebate or be made whole on the purchase? Should the parties who bore responsibility for making the drug available, promoting it and delivering it to the patient—i.e., the manufacturer, provider, insurer and pharmacy—pay something back?
Manage Channel Opportunities
The site of patient care—where the specialty drug is provided or administered—can result in additional costs. A larger, multi-faceted facility such as a hospital will have more and varied overhead costs it wants to recover than those of a physician’s clinic. Home infusion therapy, an alternative to both the hospital and clinic, may be the more cost-effective approach for some patients.
According to Weaver, a top trend in specialty drug use is the treatment of rheumatoid arthritis and other autoimmune conditions. Humira and Enbrel are top brand biologic drugs here, each costing thousands of dollars per dose. For some patients, the drugs are effective remedies; however, there is a subset of patients who will not respond to these drugs. Genetic testing can help ensure better cost-effective use of the drugs in these cases.
One use of genetic testing—pharmacogenomics—is to identify markers in a patient that indicate the patient will respond to a specific specialty drug. Another is testing to determine the effective rate of a particular drug. Such testing in advance can guide providers in the selection and proper dosing of prescription drugs and prevent the waste of time and money on ineffective therapies. Sometimes, the better alternative is a more traditional, non-specialty therapy that still offers the patient positive effects, and at a lower cost.
Pharmacogenomics can also enable prescription drug scientists and providers to engage in smarter drug studies. Instead of testing a drug with a large, broad group of people, including some who may not be responsive to the drug, studies can focus specifically on populations for which a therapy is likely to work and be more efficient. The improved efficiency in drug studies would lower the cost of investigating the drug and bringing it to market, which would lower the cost to the purchaser and patient.
Many benefits leaders are concerned about gene therapies, which can involve taking a person’s genetic material and rewriting their DNA to fix a genetic anomaly. These therapies are highly complex—Weaver equates a single use of gene therapy with administering 20 years of medical care in one therapeutic event. And their expense can exceed $1 million.
Gene therapies may offer patients relief from a problem for which there is otherwise no remedy. But the impact of these therapies for a specific patient may not be fully understood—the resulting change, for example, could manifest sometime later in the patient’s life, creating problems based on the earlier genetic change.
Evaluating the pros and cons of genetic therapies is a lot for any health plan leader to manage. As this and other developments in the use of specialty drugs continue, Weaver recommends consideration of new, more accommodative approaches to healthcare delivery and financing.
To listen to Veritas Healthcare Management Podcast 6 with pharmacy drugs expert Jay Weaver, Chief Pharmacy Officer for Blue Cross Blue Shield of Kansas, and read the first blog in this two-part series on specialty drugs, visit the Veritas Healthcare Management Resources page here.