Specialty Drug Trends
Complex, innovative, and high-priced specialty drugs are entering the United States health care market at a rapid rate. In many cases, these specialty drugs offer the most effective — and in some cases, the only — treatment for illnesses and conditions that historically had few treatment options.
The total costs and utilization of specialty drugs will have a substantial impact on overall health care costs during the next decade. To address these challenges, payers rely on pharmacy benefit managers (PBMs) to manage the use of, and payment for, specialty drugs. PBMs offer a variety of tools to manage specialty drugs, including the use of specialty pharmacies. In doing so, the quality and continuity of care patients receive is improved, while ensuring that they derive the greatest value from their medications.
Over the next ten years, PBMs and specialty pharmacies will save payers and patients an estimated total of $250 billion on the cost of specialty medications and related non-drug medical costs when compared to what expenditures would be with limited use of PBMs and specialty pharmacies.
Increasing Drug Approvals
The management of specialty drugs is receiving increased attention from patients, providers, payers, and policymakers due to the high prices of new specialty drugs and their aggregate impact on health care costs. Specialty drugs increasingly account for a significant proportion of overall health care spending. This growth continues to be fueled by an expanding target population, increased medication complexity, and uncoordinated pricing and delivery systems. These factors act to generate both high launch prices and substantial escalation in the price of drugs already on the market.
Payers share the burden of rising costs with individual patients and taxpayers. Due to growing patient utilization rates, a pipeline of expensive new specialty drugs, and ongoing drug manufacturer price increases specialty expenditures are expected to account for 50 percent of all drug spending by 2018.
By 2016, 3 out of every 5 new drugs approved by the Food and Drug Administration (FDA) will be specialty drugs. Future growth trajectories in specialty spending were estimated to quadruple by 2020, reaching $400 billion, or 9.1 percent of national health spending. However, the increasing prevalence of biosimilars in the market is anticipated to curtail the overall biologic market value growth, instead reaching $262 billion by 2019.
More than 500,000 Americans filled prescriptions with a value of at least $50,000 in 2014 — a 63 percent increase from the prior year — and the number of patients estimated to be taking at least $100,000 worth of medications nearly tripled from 47,000 to 139,000.
Historically, specialty drugs treated a small subset of diseases, but with recent advances, these drugs are now used for a wide range of conditions. In 2020, nine of the ten best-selling drugs by revenue will be specialty drugs, compared with three drugs in 2010, and seven in 2014.
Specialty Drug Pipeline
PBMs play an important role in monitoring the pipeline and planning ahead for the therapeutic benefits and costs of these drugs. In assessing the specialty drug pipeline, PBMs and specialty pharmacies consider each drug’s therapeutic use, anticipated launch date, expected cost per patient per year, clinical benefits, and the landscape of other related treatments already on the market.
This process begins 18 to 24 months in advance of a drug’s anticipated launch date. PBMs and specialty pharmacies rely on the use of analytics, population variables, clinical study information, expert opinions, and medical societies to create a comprehensive launch plan for drug coverage.
PBMs and specialty pharmacies analyze pharmacy and medical benefit data to conduct pipeline reviews. From this, they translate findings into a forecast that includes expected costs for plan sponsors, the impact the drug will have on patient care, and expected future trends. Clinical trial data and national treatment guidelines inform the projected authorization algorithms and recommended approaches for contracting.
Following a drug’s launch, patient medication adherence is monitored with the goal of maximizing the drug’s therapeutic value, and preventing adverse events, unnecessary hospitalizations, and need for retreatment.
With numerous specialty drug patents expiring in the next five years, manufacturers are readying new biosimilars for introduction into the market. By 2020, 12 biologic products with global sales of more than $67 billion could face biosimilar competition.
Patient advocates and payers anticipate biosimilars will foster competition and deliver increased savings from negotiated discounts. Competition between a biologic drug and a biosimilar is much more likely to resemble brand-to-brand competition than it is to resemble the dynamics of brand-to-generic competition.
Savings estimates range from $44 billion to as high as $250 billion over the first ten years that biosimilars are available to patients. The Congressional Budget Office estimated that biosimilars would initially be priced about 25 percent below their brand-name counterparts and after several years of competition would be priced as much as 40 percent below the reference product, saving the federal government nearly $6 billion over ten years.
More recent analyses estimate the cost of biosimilars to be around 20 percent lower than that of branded biologic therapies. Nevertheless, this remains a significant reduction since many biologics command hundreds of thousands of dollars for annual treatments.
Resources & References
- Overview of the Specialty Drug Trend: Succeeding In the Rapidly Changing U.S. Specialty Market. IMS Health. 2014.
- The Growth of Specialty Pharmacy: Current trends and future opportunities. UnitedHealth Center for Health Reform & Modernization. April 2014.
- Looking back, Moving forward: 2014 Report on prescription drug costs. Prime Therapeutics. 2014.
- Drug Trend Report. Express Scripts.
- Report on prescription drug costs. Prime Therapeutics.
- Magellan Rx Management: Medical Pharmacy Trend Report. Magellan.
- Super spending: U.S. trends in high-cost medication use. Express Scripts. 2015.
- The growth of specialty pharmacy: Current trends and future opportunities. UnitedHealth Group Center. 2014.
- Biologic Medicines in Development. Pharmaceutical Research and Manufacturers of America. 2013.
- Specialty Drugs are Forecasted to be 50 Percent of All Drug Expenditures in 2018. Prime Therapeutics LLC. 2013.
- White Paper: The Management of Specialty Drugs. sPCMA. February 2016.