Specialty Costs: Can They be Contained?

For many years, generic drugs have been the most talked-about segment of the pharmaceutical industry, but that is rapidly changing. Thanks to a slowdown in the flood of generics entering the market and an increase in the number of specialty medications available for both rare and common diseases, more patients than ever have access to specialty drugs, driving utilization and costs. In fact, spending on specialty medications in the United States is increasing at a rate of 15 percent annually, with the potential to account for approximately half ($235 billion) of total annual pharmacy spending by 2018.

But these dramatic increases don’t have to be a given, asserts an article co-authored by experts at CVS Health and Brigham and Women’s Hospital. In the piece published in the October 2014 issue of Health Affairs, the authors suggest that there are a number of traditional and novel strategies that can be applied to specialty drug management to help slow cost trends, reduce waste and promote value.

CVS Health Research Institute Examines Tools to Slow Dramatic Cost Growth of Specialty Drugs 

Understanding the Cost Drivers

In order to develop strategies that will effectively control spending, it’s important to understand the reasons why costs and utilization are increasing in the first place. The paper’s authors point to a number of factors that impact the specialty market, including:

  • An Aging Population – Americans are getting older, with 10,000 people turning 65 every day. On average, older people use more specialty medications than younger people do.

  • Scientific Advances – Our understanding of disease has increased, along with the technology needed to develop specialty medications. Producing these medications is both complex and costly.

  • Target Population – Traditionally, specialty medications were developed to treat rare and life-threatening diseases. Today, they are targeting more common conditions, significantly increasing the potential pool of patients.

  • Payments and Claims – Specialty medications can be billed under a patient’s medical or pharmacy benefit, making it challenging to apply consistent cost-management strategies across a population.

  • Biologics – Legislation that facilitates bringing generic versions of traditional drugs to market does not apply to biologics, the most costly segment of the specialty market. As a result, branded specialty drug makers have little to no competition from generics, allowing prices to remain elevated.

No Simple Solution

While the task of containing specialty costs may seem daunting, payers and providers are already making progress through the use of both established and novel strategies. For example, traditional utilization management requires prior authorization and/or step therapy, a process in which less expensive medications are tried as first-line therapies based on accepted clinical guidelines, before authorization is given for treatment with a more expensive specialty medication.

Tiered formularies can also be effective, requiring higher patient cost sharing for more expensive specialty drugs and encouraging a shift in therapy (when clinically appropriate) toward cheaper generic options. Savings opportunities also exist based on site of care – hospital outpatient centers tend to be the most expensive sites, while drugs dispensed by specialty pharmacies for patient self-injection or home infusion are generally the lowest. Finally, changes in the payment landscape, such as plans that reward quality instead of quantity, will encourage physicians to consider the overall value of a treatment before prescribing it.

Ultimately, according to the authors, there is no “magic bullet” solution for containing costs. Instead, they say, it will take the concerted, collaborative efforts of everyone involved in the specialty process – prescribers, payers, dispensers, and patients – to achieve success and realize the full potential of the growing array of specialty treatments.