Article: Rx Specialty Drugs – Out of control and what to do about it

Specialty Drugs are often Bio-Tech in nature and many times injectible in delivery and, regardless of the nature of administration, are expensive to purchase. Specialty drugs account for 10-15% of total drug spend and have been increasing in cost 3 times faster than regular drug inflation. Aggressive marketing by drug manufacturers has increased the “direct to consumer” advertising to nearly 5 billion dollars in 2008 and resulted in higher consumer demand along with increased prescribing by physicians.

While Specialty Drugs can be indentified and labeled on a drug-by-drug basis, managing specialty drug cost can best be approached by watching dollars and addressing drug cost that rises above a pre-determined level. Many groups are simply treating any prescription as a “specialty” item that reaches $500 or more for a 30-day supply.

Just a few years ago, drugs considered as “Specialty” were somewhat self-regulating in that they were appropriate only for specific medical conditions, often without lower cost alternatives and prescribed sparingly. Originally these were often drug treatments that previously may have required a hospital stay or were delivered in and physician office or outpatient setting. Transferring these items to retail as self injectibles or pill form resulted in cost savings by obtaining discounted drug pricing though a retail or specialty drug provider along with the elimination of in or outpatient facility or hospital charges.

Today, drugs like Humira and Embrel are regularly prescribed for Rheumatoid Arthritis, Psoriasis and even Crone’s Disease. While there is no question about the efficacy of these drugs, there are legitimate concerns with the process, if any, that leads up to the prescribing of these items. Many plans now require a documented attempt to utilize a lower cost alternative with an FDA tested therapeutically equivalent expected outcome. This is generally labeled as Step Therapy.

Every plan needs to determine the level of control and management desired. The plan sponsor at risk with Specialty items since, in most plans, the member pays the same co-pay for one drug as another and the physician has no vested interest in controlling the cost of the item prescribed. Plan design is often the only force that can impact the drug choice. Statistics show that the most common $20 co-pay difference between preferred and non-preferred brand items does little to influence usage and only closes the gap between the average cost of preferred and non-preferred options.

The best way to deliver this management is with tools and options within the plan design and this usually starts with Prior Authorizations. PA’s can be triggered by requirements on certain drugs as well as cost above a specified amount with protocols in place to determine the appropriateness of the prescribing and with information provided to the patient and/or physician for alternatives, where appropriate.

Co-pay structure within the plan design is also an effective tool to address costs and may be the most logical to use. It is becoming more and more common to go beyond the generic, preferred and non-preferred (formulary, non-formulary) co-pay structure into plan designs that provide immediate feedback tied to the cost of the item. Percentage co-pays are the best way to address this and plans are taking a new look at this old idea every day.

When the average drug cost for 30 days was $25, fixed co-pays of $2 to $5 were common and, perhaps, appropriate. With the average cost of a brand drug for 30 days now in excess of $100, the re-evaluation of the fixed co-pay structure is necessary. Many are now questioning the wisdom and fairness of having the same co-pay for a drug that cost $50, $250, $500 or more. By having percentage co-pays, the patient has a vested and direct interest and result in the cost of the medication utilized which, hopefully, will result in the utilization of more cost effective medications. Co-pays should be established with both minimums and maximums such that the co-pay would not be reduced for a lower cost medication (never to be more than the full cost of the medication) while the maximum is established to insure that the patient is not “priced out” of their medication. The co-pays can then “bounce” between these minimums and maximums providing feedback to the patient as to the cost of the medication involved. It is amazing how few patients know how much their medications cost but always seem to know their co-pay.

Lastly, proper discounts on high  cost items, when approved, should be a standard part of the PBM contract to insure that these items are obtained from the appropriate provider at the most advantageous price possible. Many PBM contracts have a lesser discount on specialty items sometimes even less than normal retail activity and may require filling at mail order. This is because the PBM owns the mail facility and wants to profit from the filling of these high cost medications at their facility at a lesser discount that other drugs filled at other locations. This should not be tolerated.

The high cost of Specialty Drugs is a significant threat to maintaining cost control in the cost of today’s health care benefit. However, plan design, prior authorization and proper contracting can go a long way to keeping a lid on this fastest growing area of Rx plan cost.

David Schermer, Pharmacy Benefit Consultant


Article from Self Funding Magazine, 2010