It is widely recognized and accepted that specialty drugs are not only the primary driver of increased medication spending for payers, they are probably the most significant overall cost problem facing health plans and government programs for at least the near term. Specialty drugs are those which typically require some special handling and administration, for example, injectables or infusion drugs. While many may be patient administered, a large number require provider involvement in use. The price of these drugs can be very high, tens or even hundreds of thousands of dollars a year or treatment course and the price is driven by the nature of the drugs, which often are hard to develop and test biotech products. Exacerbating the situation is the difficulty of creating generics when these specialty drugs go off patent. A report from Magellan division iCore gives some trend and other data on specialty drugs that are injected and typically paid under the medical benefit. (iCore Report)
The report was based on a survey of 50 commercial health plans covering 157 million people. For the top 25 used injectable specialty drugs, the cost trend was 16%. Cancer drugs were responsible for much of the growth. Coinsurance increased from 20% to an average of 26% and average copays went up from $46 to $75, indicating that health plans are passing more of the costs of these products on to members. Almost all covered lives also have some form of utilization management, like prior authorization or step therapy. Specific concerns for payers include the acquisition of physician practices by hospitals, which often changes site of administration billing and the pipeline of new drugs, which is largely specialty drugs, indicating that specialty costs as a percent of total drug spend will continue to grow.