Magellan Report on Specialty Drug Trend

Specialty drugs, those which typically are not taken orally and which usually require some assistance in administration in a doctor’s office or other provider setting, have been the major cause of significant drug spending increases.  Most of these drugs are covered as a medical, not pharmacy, benefit.  Magellan releases a regular report following trends in the area of medical benefit specialty drugs and the latest has data through 2017. (Magellan Report)   The per member per month spend on medical benefit specialty drugs was $29.97 for commercial plans, compared to $25.49 in 2016, an 18% increase; for Medicare the figures were $52.19 versus $46.56, a 12% rise and Medicaid actually managed a 2% decline, at $8.29 versus $8.46.  For all these payers, over 90% of medical benefit drug spending comes from a small set of patients, around 15%.  The average annual cost per patient for the top ten drugs in commercial insurance rose to $45,111 from $39,603.  Some low volume drugs had total per patient annual costs of several hundred thousand dollars.   Oncology accounted for 43% of commercial spending, 58% of Medicare spending and 46% of Medicaid spending.  Several oncology drugs experienced year-over-year spending increases of 200% or more.  Other top disease categories for commercial payers included autoimmune disorder medications, and hemophilia.

Looking ahead to 2022, Magellan sees oncology spending rising by 44%, autoimmune disorder by 90%, asthma/COPD by 33%, and hemophilia by 13%.  A particular problem for commercial payers is that much of the volume is administered in hospital outpatient settings, where the cost difference averages over 100% compared to a physician office.  Medicaid had a similar issue, with costs 34% to 60% higher in hospital settings, while the differential for Medicare is a smaller 5% to 7%.  For commercial and Medicare most the of the spending increase was due to higher volumes, with prices actually declining.  The cost pressure is not likely to let up; in 2017 there were 34 medical benefit specialty drugs with a billion dollars in spending; in 2022 there are forecast to be 43.  Biosimilars are gradually making an appearance; but they also tend to be expensive and the brand companies are doing everything they can to hinder commercialization of these products.  Payers continue to lean heavily on prior authorization to manage spending, in addition they use some product preferencing and some clinical pathway restrictions.  They are going to need all the help they can get in regard to this service category.