Specialty drugs, also known as biologics, are high-cost prescriptions used to treat complex, severe conditions such as multiple sclerosis, rheumatoid arthritis, or cancer. These drugs usually require special handling and often must be administered by a clinician. They represent the fastest growing sector of pharmacy spending today.
As the use and cost of specialty drugs increase, health care plans must adapt to provide access to more specialty drugs while managing their rapid rise in price and controlling costs that are passed along to consumers.
The 2017 PERACare Program includes changes to the pharmacy drug benefits for both the Anthem and the Kaiser Permanente plans. Each plan includes new tiered levels of prescription drugs and different coinsurance rates. All plans include four different tiers, and each tier has different coinsurance minimum and maximum costs. The tiers include generic, preferred and non-preferred (Anthem) or formulary and non-formulary (Kaiser Permanente), and specialty prescription drugs.
Each PERACare plan’s pharmacy benefits manager or website has more specific information about specialty drugs and their coinsurance costs.
Advances in research and technology led to the development of specialty drugs to improve the health of people with diseases and conditions that were previously life-threatening, untreatable, or both. Specialty drugs are more complex to develop and deliver than traditional drugs and are typically made using human or animal proteins. They may come in many different forms, from gene therapies and insulin to vaccines and pills. As a result of their complexity, both in development and in treatment, they tend to cost much more than traditional drugs, upwards of $600 per month or more.
The value of specialty drugs is significant. They can lessen the negative effects of certain diseases where traditional treatments have not been effective, and they provide treatment options for patients where none were previously available. While specialty drugs first were used to treat challenging or chronic conditions such as multiple sclerosis, rheumatoid arthritis, and some cancers, their use has expanded recently to include a wider range of diseases, including asthma, COPD, cystic fibrosis, HIV/AIDS, immune deficiency, and seizure disorders. For less common diseases like hemophilia, a very small number of people need treatment from a specialty drug, which tends to drive the cost higher to these individuals. In 1990, 10 specialty drugs were on the market. By 2012, over 900 were in development.
Specialty drugs come from specialty pharmacies (such as Accredo, the specialty pharmacy for Express Scripts) with trained pharmacists, nurses, and physicians on staff who can support the complexities involved in providing patients with specialty drugs. Special storage, shipping, and administration are often required, such as temperature control and refrigeration throughout the handling and shipping process.
The cost of specialty drugs is significantly higher than traditional drugs. They are often difficult to research and develop, with many taking six to 10 years before they are even ready for the lengthy approval process under the Food and Drug Administration (FDA). Generic drugs have brought down the cost of many traditional brand drugs, but generic-type alternatives are not commonly available for specialty drugs. It is expected that, over time, specialty drug alternatives (known as biosimilars) will become more common. In 2011 specialty drugs accounted for about 17 percent of an average employer’s overall pharmacy costs, but that is expected to grow to up to 40 percent of an average employer’s total pharmacy spending by 2020.
To help control costs, individuals who require specialty drugs should review the list of drugs covered by their health and prescription drug plans to make sure that a specific drug is covered by the plan. Most plans require pre-authorization from a health care provider in order to cover all or part of the cost of specialty drugs. This helps control costs for both health care plans and individual patients, while helping patients receive the right care for their individual needs at the best cost.
Sources include the Midwest Business Group on Health (www.specialtyrxtoolkit.com) and the National Business Coalition on Health.
PERA on the Issues posts are written and compiled by the staff of Colorado PERA under the direction of Executive Director Greg Smith and the PERA Board of Trustees.
We encourage you to comment with your thoughts and feedback.
AlternativesA broad category of investments that don’t fit into traditional categories like stocks and bonds.
Thank you for your piece on specialty drugs. The enormous expense of my prescription puts a financial strain on our family budget every year; my husband and I have both taken part-time jobs to recover from meeting our annual deductible very shortly after each new insurance year begins. We hold out hope that the cost will come down in the very near future.
With the availability of a biosimilar of Infliximab and other biologics coming in at ~15% discount ASP to payers without demonstrated interchangeability and possibility of risks of immunogenicity, what is PERA-Care’s position on specialty drug coverage? Must one demonstrate failure to respond and thus a delay of biologic treatment with resulting disease progression before approval of appropriate biologic?
Thank you for your questions, Nancy. PERA supports the development and use of biosimilar specialty drugs as a way to lower the overall cost of specialty medications for our members and our plans. However, the clinical rules about which drugs should be covered for certain conditions and patients are determined by the member’s physician, the health plans, and pharmacy benefit managers – not by PERA.