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Specialty Drug Research

By October 29, 2014Commentary

Specialty drugs is an ambiguous category, but basically includes drugs which either have a non-oral route of administration, may require physician or other clinician administration, were developed as biotech products or some other characteristic which makes their development, manufacture and use more complex than traditional medications.  Under many health plans, including Medicare, having provider involvement means the drugs are paid for under a medical benefit as opposed to a pharmacy benefit, creating confusing utilization and cost control efforts.  For patients these drugs can be very beneficial but also have extremely high out-of-pocket costs associated with them.  Because the cost of a course of treatment is so high and because drug companies have increasingly looked to specialty drugs to boost profits, they will soon represent half of all medication spending, leading to intensive cost-control programs.  The current issue of Health Affairs has several articles relating to specialty drugs.  (Health Affairs Articles)

One of the articles dealt with the current nightmare drugs for payers, the new hepatitis C agents.  These drugs do a tremendous job for patients, ridding them of the disease, but a course of treatment can cost over $100,000 per patient.  A background study found that hospitalization costs alone for hepatitis C were $3.5 billion in 2010-11.  At least there is a chance that the new hepatitis C agents, as expensive as they are, may come close to offsetting their cost by reducing other health spending.   Another study suggested that when measured in terms of quality-adjusted life-years, specialty drugs delivered value equivalent to that from traditional medications, which may not be saying much.  Specialty drugs may deliver better outcomes, often because they treat diseases which did not have a therapeutic available, but they do so at an enormous cost due to drug company pricing tactics.

Another article described common cost control approaches for specialty drugs, including prior authorization, step therapy, steering to low-cost administration sites and tiered formularies.  It is critical that payers use a single point of focus for utilization management, whether the drug is paid for under the medical or pharmacy benefit.  And no matter what techniques are used, these drugs are going to cost a lot of money, so actuarial attention is necessary to ensure that premiums will adequately cover the costs.  Another study discusses one common drug company tactic used to fight utilization management; the issuing of drug coupons to cover patients’ copayments.  Almost two-thirds of annual out-of-pocket costs were covered by the coupons, which are beneficial in increasing adherence and lowering patient financial stress, but can discourage the use of the most cost-effective therapy and raise premiums.  The articles collectively effectively paint the picture of the value which can be delivered by specialty medications and the very serious cost implications of the rapidly-growing introduction and use of these compounds.

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