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With at least five new high impact specialty pharmaceuticals and four gene therapies expected to receive Food and Drug Administration (FDA) approval this year — some with price tags over $1 million a dose or treatment — it is time for employers to consider reviewing their specialty pharmacy benefits.
Specialty drugs are high-cost prescription medications used to treat complex and often chronic conditions like cancer, rheumatoid arthritis and multiple sclerosis. These medications sometimes require special handling and administration (typically injection or infusion). Patients using a specialty drug may need careful oversight from a health care provider who can watch for side effects and ensure that the medication is working as intended. This article explains what makes specialty drugs so ‘special’ and tactics employers can use to manage this growing class of expensive treatments.
According to the FDA, biologics represent the fastest growing class of therapeutic products in the United States.
Nearly two-thirds of all new drug approvals over the past three years have been for specialty drugs, and many of them are biologics. These drugs mimic natural products in the body. They work better than small molecule drugs (i.e., tablets or capsules) for certain diseases and have foundationally changed how a number of illnesses are treated. Through their unique mechanism of action, biologics can provide life-sustaining treatments for previously untreatable disease or slow the progression of disease where symptom management was the only option historically. They improve the lives of people living with certain conditions and sustain life for some.
Biologics are more complicated to develop and produce as well as administer to patients, factors that can influence the high cost to payers. And while not all specialty drugs are biologics, the costs are usually similar, whether the drug is an injectable biologic or an ingestible tablet, for example. This includes oral drugs for treating what are generally considered “specialty conditions” such as cancer, rheumatoid arthritis and multiple sclerosis as noted previously. We see in the market that 1% to 2% of prescriptions are for specialty drugs, yet this often accounts for greater than 50% of pharmacy spending. It is imperative to design a benefit that provides judicious access to these important treatments.
According to the RX Collaborative, Willis Towers Watson’s pharmacy benefit purchasing coalition, the top five specialty classes ranked by cost are:
- Inflammatory conditions
- Cancer
- Multiple sclerosis
- Cystic fibrosis
- Growth deficiency
It’s essential to understand the factors affecting current trends and expectations of trends in the next one to three years. This information can help employers develop their benefit offerings as new drugs enter the market, impacting their budgets and their employees’ lives.
Increases in pharmacy spending are typically due to a combination of an increase in use of higher-cost medications and drug price inflation. The many tools available to manage specialty drugs generally fall into one of two major buckets: financial and clinical.
| Types of service | Typical providers | Components overview |
|---|---|---|
| Financial | ||
| Price discounts (rebates, contract negotiation) | Pharmacy benefit managers (PBMs), Health plans, group purchasing organizations (GPOs) | Organizations negotiate for individual payers or groups of payers in a purchasing coalition |
| Formulary | PBMs, health plans | Preferred drug list designed to include medications with best financial value and remove comparable products with higher costs and no additional clinical value |
| Maximize manufacturer copay assistance | PBMs, health plans, third-party vendors | Maximize copay coupons from drug manufacturers to cover drug costs and remove coupon from accumulators |
| Accumulator adjustment | PBMs, health plans | Plan design that allows only member’s actual out-of-pocket cost to apply toward deductible and out-of-pocket maximum accumulations; e.g., no credit received for manufacturer or other third-party copay assistance toward accumulators |
| Specialty claim carve-out | Third-party vendors operating separately or incorporated into an existing benefit program | Vendors carve specialty pharmaceutical claims out of the benefit, and/or replace them with non-manufacturer, needs-based (charity) funding, or import drugs from outside the U.S. |
| Site of care redirection | PBMs, health plans | Steer pharmaceutical claims from processing through high-cost sites of care under the medical benefit (e.g., outpatient hospital) to lower-cost sites of care (e.g., physician office, home infusion) and/or redirect to the pharmacy benefit to potentially improve discounts/rebates |
| Stop loss/Financial protection | PBMs, health plans, third-party vendors | Effectively spread the risk of incurring the high-cost therapies across large number of payors |
| Clinical | ||
| Expert opinion service | Third-party vendors operating separately or incorporated into an existing benefit program | Use team(s) of specialists to review appropriateness of approving high-cost therapies either during initial treatment or upon renewal confirming the drugs’ impact |
| Center of excellence (COE) steerage | PBMs, health plans | Ensure member receives rare disease or cancer treatment from center of excellence |
| Utilization management | PBMs, health plans or third-party vendors operating separately or incorporated into an existing benefit program | Prior authorization, quantity limits and step therapy criteria may be more or less stringently developed resulting in varied levels of claim approvals |
| Pharmacogenomics/ Precision medicine | Third-party vendors operating separately or incorporated into an existing benefit program | Use a member’s genetic information to personalize treatment; predicting effectiveness before therapy starts |
| Advanced Care/Case management | PBMs, health plans | Specialized care/case management support for rare and specialty conditions |
Health plans and PBMs typically offer core services, including many of those noted above with third parties offering specialized components that may be built into the benefit. The financially focused strategies often address the pricing of pharmaceuticals while the clinical services often impact utilization. Services can overlap, and a financial strategy may impact clinical outcomes and vice versa.
For example, a financial program that maximizes manufacturer or needs-based assistance can save employers money but also include a component that results in zero out-of-pocket costs for members taking certain specialty drugs. In theory, paying less for a medication may make a member more likely to take it, improving adherence and clinical outcomes. And naturally, an expert opinion service that terminates payment for a drug proven to be ineffective for a member can result in long-term cost savings.
A variety of specialty vendors have emerged offering niche to comprehensive service and fulfillment offerings.
| Financial program category | Vendors | Clinical program category | Vendors |
|---|---|---|---|
| Price discounts (rebates, contract negotiation) and formulary management | Health plans, PBMs, AllianceRX Walgreens Prime, Gateway Health Partners | Expert opinion service | Grand Rounds, Managed Markets Insight & Technology, LLC |
| Maximize manufacturer copay assistance + accumulator adjust | PBMs | Center of excellence (COE) steerage | Health plans, PBMs |
| Specialty claim carve-out | Archimedes, NirvanaSpecialty, PaydHealth, Payer Matrix, PriceMDs, Sharx, Vivio Health | Utilization management | Health plans, PBMs, Nexus, NirvanaSpecialty |
| Medical channel management | PBMs, Archimedes | Pharmacogenomics/ precision medicine | CureMatch, NantHealth, Premier Genomics, Coriell Life Sciences |
| Stop loss/ Financial protection | Anthem Blue Cross Blue Shield, CVS, Express Scripts, Optum Rx, Prime Therapeutics, RxBenefits | Advanced Care/Case management | Health plans, PBMs |
What types of specialty drugs are in the pipeline and what are the implications for employers?
| Treatment | Condition | Estimated cost (AWP) | Expected approval | Estimated treatment population or incidence |
|---|---|---|---|---|
| Specialty pipeline | ||||
| Ponesimod | Multiple sclerosis | $60k – $80k/yr | 3/18/21 | 1M in the U.S. |
| Abrocitinib | Atopic dermatitis | $55k/yr | 4/25/21 | 3.8M children and 2M adults |
| Aducanumab | Alzheimer’s disease | $50k – 100k/yr | 3/7/21 | 1.4M Americans may be treatment candidates |
| Arimoclomol | Niemann-Pick disease | $300k+/yr | 6/17/21 | 1 case per 120,000 live births |
| Sotorasib | Lung cancer | $200k/yr | 8/16/21 | 25k patients/yr in the U.S. |
| Cell and gene therapy pipeline | ||||
| Idecabtagene vicleucel | Refractory multiple myeloma | $475k one-time infusion | 2021 | 32k patients/yr diagnosed in the U.S.; not all refractory |
| Nadofaragene firadenovec | Bladder cancer | $300k per year | 2021 | 80,000 men in the U.S. |
| Eladocagene exuparvovec | Aromatic I-amino decarboxylase deficiency (AADC) | $4M one-time infusion | 2021 | 100 patients identified in the U.S. |
| SRP-9001 | Duchenne muscular dystrophy | $2M+ one-time infusion | 2021 | Affects 10,000 boys and young men in the U.S. |
| Lenti-D (elivaldogene tavalentivec) | Adrenoleukodystrophy (ALD) | $2M+ one-time infusion | 2022 | 1 in 15,000 births in the U.S. |
New types of specialty biologics are entering the market, which presents new challenges to payors and plan sponsors. For example, some gene therapies can cost over $2 million for a one-time treatment. For such expensive treatments, employers should understand the innovative contracting models that are available in the marketplace such as annuity-based payments that extend over a number of years, or pooled-funding strategies to which employers contribute in order to provide a buffer to cover a potential claim. Employers can consider non-financial opportunities as well, such as second opinion service providers or genetic sequencing companies that help predict the effectiveness of a treatment before the first dose is ever given.
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