Third-party administrators (TPAs), employers and employees are increasingly concerned about the growing cost of specialty drugs. Relief, WellDyneRx believes, will come to those employers and TPAs that (1) encourage specific public policy changes and (2) partner with pharmacy benefit managers (PBMs) that own best-of-breed specialty pharmacies.
Public Policy, Best-of-Breed Specialty Pharmacies Can Help TPAs and Employers Control Spend
Nicole Hancy, PharmD Director of Clinical Services WellDyneRx
Specialty Medication Costs Will Rise Dramatically
Specialty drug spend is predicted to increase 63% between 2014 and 2016.Specialty medications constitute a growing share of the prescription drug spend in America. Overall drug costs in 2012 totaled $262.3 billion. Specialty drugs comprised 25 percent of the total, and their slice of the pie is poised to grow dramatically.1 While the cost of traditional medications will grow modestly with the entry of generics, specialty drug spend will rise 63 percent between 2014 and 2016. Some say it will top $400 billion by 2020. If this forecast holds, specialty medications that year will claim half of all prescription drug spending.2
Specialty drugs are prescription medications that require special handling, administration and monitoring. These drugs treat complex, chronic and often costly conditions, such as multiple sclerosis (MS), rheumatoid arthritis, hepatitis C and hemophilia.
An especially costly category of specialty medications is orphan drugs. These drugs treat diseases such as cystic fibrosis that afflict a small portion of the population, up to 30 million Americans.3
Though small in size, the orphan-drug market packs a big financial punch. Five recently approved orphan medications each cost $150,000 per patient per year, with three costing $300,000 or more.4 One-third of the new molecular entities and new therapeutic biological products approved by the FDA in 2013 were orphan drugs,5 and nearly 1,800 orphan designations fill the drug pipeline.6
Shortened exclusivity would save $3.3 billion over 10 years.Public policy presents one path to controlling the growing cost of specialty drugs. Together, the employer and TPA communities can advocate a number of health care policy changes.
They can urge Congress to shorten the exclusivity period for biologics. Brand name biologic drugs enjoy a 12-year exclusivity following FDA approval, which precludes free-market competition. When a specialty drug attains approval, it is not possible to moderate its price point through competition from competitor brands or a generic equivalent. By shortening the exclusivity period, policymakers would enable lower-cost, generic biologic drugs to enter the market sooner, bringing economic relief to employers and employees alike. The Obama Administration has projected that shortened exclusivity would save $3.3 billion over 10 years.7
Combination therapies
contribute to the rising cost of
specialty drugs.
LESS THAN
1% OF PATIENTS USE
SPECIALTY DRUGS AND REPRESENT GREATER THAN
30% OF DRUG SPEND
$14.1 Billion Specialty Generic Opportunity
Building on the Affordable Care Act (ACA), TPAs and employers should advocate the adoption of value-based insurance designs (VBIDs) throughout the self-funded and fully insured markets. The ACA acknowledged the important role of VBID in optimizing both cost and patient outcomes in pharmaceutical treatments and medical services generally. Section 1001 of the law created a new section 2713 of the Public Health Service Act that supported the VBID approach. The Administration continues to support VBID. In the spring of 2012, the Department of Health and Human Services recognized the value and benefits of VBID in the Actuarial Value and Cost-Sharing Reductions Bulletin, which read: “We also recognize the need to accommodate innovative plan design features that are meaningful to consumers, such as value-based insurance designs that vary the copayment or coinsurance for items and services based on expected value.’’8
In short, VBID works. Washington State’s evidence-based prescription drug program has saved $20-$30 million per year, a 5 percent reduction in medication costs across state programs for state workers, as well as Medicaid.9
Best-of-Breed Specialty Pharmacies Manage Spend and Optimize OutcomesIn addition to policy advocacy, TPAs and employers should revisit their PBM relationships. Specifically, they should look to partner with a PBM that owns a best-of-breed specialty pharmacy. These entities employ a range of proven approaches to providing measurable cost-management solutions and optimized therapeutic outcomes.
A best-of-breed specialty pharmacy fields a team of patient care coordinators. These coordinators deliver personalized care, guiding patients through benefits, educating them about cost-effective choices, providing ongoing clinical support and monitoring compliance.
TPAs and self-funded employers should choose a specialty pharmacy that practices “personalized medicine.” Personalized medicine takes a systematic, person-centered approach to providing each patient with the right drug at the right dose at the right time. It does this through the highly consultative tailoring of treatment to the characteristics, needs and preferences of the patient during all stages of therapy.
The best specialty pharmacies employ a multi-pronged approach to managing costs, including:
Additionally, best-of-breed specialty pharmacies go beyond the core business of dispensing medications to track key industry developments. They leverage such developments to help TPAs and employers contain costs. Drug trends provide a good example. While there were just four drugs that treated MS in 2004, today there are 11 products, providing an opportunity to tier the medications by relative cost and effectiveness.10 The best specialty pharmacies are consistently the first to leverage the opportunity presented by MS and other maturing therapy classes to the benefit of TPAs and self-funded businesses.
In conclusion, while the cost of traditional medications is expected to rise modestly, today’s significant specialty drug spend is projected to rise dramatically. A two-pronged approach – advocating policy changes and partnering with a PBM that owns a best-of-breed specialty pharmacy – will enable TPAs and their employer customers to manage and moderate their specialty medication spend.
Footnotes
1. “Specialty Drugs – Issues and Challenges,” Issue Brief, America’s Health Insurance Plans, June 2014.
2. Ibid.
3. U.S. Food and Drug Administration, http://www.fda.gov/Drugs/ResourcesForYou/Consumers/ucm143563.htm, March 15, 2012.
4. Silverman, Ed, “Tiger in the Fiscal Room: Beware the Increasing Cost and Number of Orphan Drugs,” Managed Care, March 2013.
7. National Health Expenditure Projections, 2012-2022, U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services, www.cms.gov.
8. Actuarial Value and Cost-Sharing Reductions Bulletin, U.S. Department of Health and Human Services, spring 2012.
9. “Washington State: A Integrated Approach to Evidence-Based Drug Purchasing,” The Commonwealth Fund, http://www.commonwealthfund.org/publications/newsletters/states-in-action/2006/mar/march-2006/profiles--in-depth-looks-at-initiatives-that-are-making-a-difference/washington-state--an-integrated-approach-to-evidence-based-drug-purchasing, March 29, 2006.
10. Multiple Sclerosis Association of America, http://www.mymsaa.org/about-ms/treatments/, last updated Aug. 19, 2014.
Prior authorizationThis can effectively help avoid inappropriate drug use and promote the use of evidence-based drug therapy. The efficient and effective use of health care resources can minimize costs, improve member access to more affordable medications and improve clinical outcomes.
Step edits This therapy approach ensures the patient uses a lower-cost, equally efficacious drug before authorizing a more complex and often more expensive medication.
Quantity level limits Such limits include duration of therapy, quantity over a period of time and maximum daily dose edits. Drug benefit coverage limits are based on FDA-approved durations and dosing.
ReportingEffective specialty drug management is informed by timely information about utilization, intervention, coordination and outcomes. TPAs and employers should partner with a specialty pharmacy that provides comprehensive, in-depth reporting and access to all aspects of data.
Trend analysisThe best specialty pharmacies meet with TPAs and self-funded employers to review how their plans are running and address opportunities for cost containment, improved utilization and member education about medical conditions and drug therapies.
