This article was last updated Sept. 9, 2022.
It’s no secret health care costs are rising — and specialty drug costs are a major factor driving the increase. Specialty drugs treat complex or chronic conditions, including multiple sclerosis, cancer, hemophilia, rheumatoid arthritis, psoriasis, Crohn’s disease, ulcerative colitis, hepatitis C and HIV/AIDs. These innovative treatments can help improve your employees’ quality of life, extend their life expectancies, and even cure disease, but they come at a high cost and create a huge pain point when it comes to managing your pharmacy benefits.
Though the average annual cost External Link for a specialty drug is $84,000 (more than 10 times the cost of regular prescription medications), many patients are paying significantly more per year. For example, one pill of Harvoni® — which treats Hepatitis C — averages $1,125 per month, leading to $94,500 for the typical 12-week treatment course. Then there’s Zolgensma®, a gene therapy for spinal muscular atrophy in infants and toddlers that carries a price tag of more than $2 million for a one-time dose.
In 2020, the U.S. Food and Drug Administration approved 34 new specialty treatments, which accounted for 64 percent of all approvals. For the first time ever, specialty drug spending reached 52 percent External Link of overall prescription drug spending in 2020, despite only being used by 2.5 percent of all patients. Specialty drug spend will total approximately $311 billion by 2023 External Link, and three-quarters of the nearly 7,000 medications currently in development are specialty drugs.
Even with the rapid increase in specialty drug innovation and approvals, your budget likely isn’t keeping up from year to year. Your employees are feeling pinched, too. Approximately 1 in 5 U.S. adults can’t afford their prescription medications External Link, so shifting more of the cost may not be feasible. Besides, asking your employees to pay an extra $1,000 in increased copays or deductibles will hardly touch the total pharmaceutical cost External Link, and it may discourage them from taking these medications altogether — ultimately costing you more in the long run.
With the sudden explosion of growth in specialty drug spending and the current economic climate, you’re likely considering all options to keep costs in check while continuing to offer dependable prescription drug coverage to your employees.
Why are specialty drugs so expensive?
The rising cost of specialty drugs is partially due to innovation and creating brand-new treatments, but that’s not the only factor in the equation. The Commonwealth Fund External Link reports drug manufacturers often look to specialty treatments to make up for lost revenue as patents expire and generics become available for previous money-makers. In addition, specialty drugs — particularly brand-new treatments — don’t often face competition from other manufacturers, which means there’s nothing holding back annual price hikes.
The high cost of specialty drugs can also be attributed to the special handling they often require: prescription from a specialist, administration by a medical professional in a clinical setting, and significant patient management to make sure the drugs are being used correctly and safely.
While specialty drugs are incredibly expensive, understanding how they impact your bottom line — and how to contain their costs — is crucial. There are a number of strategies available to you for keeping costs in check, but they aren’t all created equal.
Cost-management strategies to avoid
With new treatments being approved at a rapid pace, it’s likely you’ll encounter specialty drug utilization from your employees or their covered dependents at some point in the near future if you haven’t already. And, common pharmacy cost management techniques External Link for conventional drugs you may already have in place, including prior authorization and step therapy can help ensure appropriate use, specialty pharmaceuticals require even more aggressive strategies to manage their high costs.
Here are two cost-management strategies that could hurt you more than they would help:
Excluding specialty drugs from pharmacy benefit management
Unfortunately, you can’t just ignore specialty drugs and their sky-high prices. When you exclude some or all specialty drugs from your covered benefits, your employees are completely on their own to cover the cost. Your pharmacy benefit manager (PBM) will automatically reject any claims for specialty drugs, not apply discounts or offer savings programs, and doesn’t provide the ability for exceptions — even if you approve the treatment and ask for it to be covered for a specific employee.
This not only significantly impacts your employees’ access to much-needed medications, but also brings about potential legal issues if you’re choosing to exclude specific drugs based on cost or the diseases they treat. Plus, excluding drugs will be incredibly difficult External Link if they have been approved by the FDA, are covered under Medicare, or are deemed medically necessary.
Carving-out specialty pharmacy entirely
A carve-out arrangement is one in which you break out your pharmacy from your medical benefits plan. When you separate some or all elements of specialty pharmacy management from your pharmacy benefits manager (PBM), you may see some short-term savings — but these come at the cost External Link of disrupting your employees’ experience and undermining crucial clinical care that specialty medications often require. Carving out specialty pharmacy often results in External Link:
- Aggressive utilization management that unnecessarily denies medication coverage to inflate perceived cost savings. Often, these denials get overturned by appeals and rarely live up to the cost savings expectations associated with the strategy.
- A limited formulary that doesn’t cover all specialty medications
- Loss of negotiated discounts or rebates from your PBM, leaving you and your employees on the hook for the higher price tag
- Higher administrative costs from using more than one vendor to manage your pharmacy benefits
- A fragmented care approach External Link that can put your employees’ health outcomes at risk
Your best bet: Integrated pharmacy and medical benefits
By managing your medical and pharmacy benefits External Link together, you get better coordination of care, insights into utilization, promotion of safe, high-performing and cost-effective drugs for efficient care, and a holistic look at your total cost of care that gives you a greater understanding of your health care usage. With thorough oversight and interventions that ensure appropriate utilization, avoid waste, and treat the whole patient, you can keep specialty drug spending in check. Here’s a look into how these strategies work together to give you the most savings on specialty spending:
Ensuring appropriate utilization
The key to lowering specialty drug spending is ensuring the right therapies are being used at the right time for the right person. Approximately 11 percent of pharmacy spend External Link happens when someone is first diagnosed with a complex medical condition and prescribed a specialty therapy — which means you want to be certain that the prescribed treatment is what they actually need.
Delivering your lowest net-spend
The Wellmark Pharmacy Program allows you to customize four components of your pharmacy benefits program to fit the needs of your business and your employees: formulary, network, specialty drug management and clinical programs. Download the flyer (P-2019211) from the Marketing Toolkit and share with decision makers.
While we mentioned earlier that traditional utilization management strategies by themselves don’t typically make a dent in specialty drug spend, they can when paired with insights from your medical benefits. When you manage your pharmacy and medical benefits together, your PBM can use data from electronic health records to confirm the diagnosis before approving the treatment. This ensures appropriate use of high-cost therapies that ultimately leads to savings for both you and your employees.
Avoiding waste
While new utilization accounts for a small part of the picture, the majority of specialty pharmacy spend External Link occurs during ongoing treatment for current employees, not the ones starting new treatments. Your PBM should be able to help eliminate waste and lower spending by carefully tracking whether prescribed treatments are the right medication at the right dosage, that they’re working as intended, and that your employees don’t have more supply than they actually need. This approach eliminates wasteful spending without compromising your employees’ treatment and care.
Treating the whole patient
When it comes to treating conditions with specialty medications, your employees need more than just a pharmacy to dispense them. It is critical to offer an integrated approach that engages them with their treatment, keeps their providers up-to-date on their care, provides disease-specific education and resources, and offers ongoing support to help them manage their health. When your employees are fully engaged with their treatment, you can avoid additional medical costs that result from complications or further disease progression due to medication non-adherence.
The importance of managing specialty drug spending
You care about your employees and their well-being, but you also have a business to run. Thankfully, you can do both — give your employees access to life-changing specialty treatments without breaking the bank. By managing your medical and pharmacy benefits together, you’ll see cost savings like a 4 percent reduction in emergency room visits, a 9 percent reduction in hospital stays, and an 11 percent reduction in per-member, per-year (PMPY) medical costs.
And, with a carefully designed and well-managed specialty pharmaceutical program that leverages integrated data, you can achieve lower overall costs without compromising the quality of care your employees receive.
Let us do the heavy lifting
By combining innovation, transparency, cost-management strategies, and a full range of clinical programs, we can encourage the use of lower-cost drugs without limiting access — or performance — for your employees and their families.
Enlist Wellmark Blue Cross and Blue Shield to handle the back-end negotiations, compliance, pharmacy management strategy and independent PBM oversight, and your organization will be free to focus on the details that matter to you.
We know that pharmacy — and the costs associated with it — continues to be top of mind. Stay up to date on the latest insights, resources and more from our pharmacy experts. You can also email us at blueatwork@wellmark.com Send Email, and we'll connect you with an authorized Wellmark representative to learn more.
