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Employment Resources


By April 1, 2010No Comments

Overall spending on prescription drugs has increased an average of about 10% a year since 2000, with a “small but growing subset”� of drugs having “extraordinary price increases,”� according to a report from the General Accounting Office (GAO). In particular, specialty drugs drive especially high costs. Specialty drugs are generally defined as high-cost drugs that typically target a smaller group of patients with a narrow indication or complex medical condition; they also might have special shipping and/or handling requirements and require close supervision and/or monitoring during drug therapy. Cost data on these types of drugs emphasizes how important it can be for employers to develop specific cost control strategies aimed at specialty drugs. According to the GAO report, between 2000 and 2008, 416 brand-name drugs had price increases that ranged from 100% to 499%, but in a few cases were 1,000% or more. In most cases, the products sustained the new price: 87% of these products remained at the increased price or rose even further, while only 13% had a price decrease.

Specialty drug prices are especially acute. A report from pharmacy benefit manager (PBM) Prime Therapeutics LLC shows, though specialty drugs represented 1.1% of prescriptions filled for its members, they accounted for 15.4% of overall drug costs. An article in the Journal of Managed Care Pharmacy lists 10 specialty drug therapeutic classes, with the average annual cost of therapy ranging from a low of $5,000 to as high as $150,000 or more. Drugs in these classes treat rheumatoid arthritis, HIV/AIDS, multiple sclerosis, cancers, growth disorders, hepatitis, hemophilia, infertility, osteoporosis, and other conditions.

When developing strategies to manage specialty drug costs, it is important to remember that, unlike non-specialty prescription drugs, some specialty drugs require administration by a health care professional in a doctor’s office, infusion center, or outpatient hospital department. When a specialty drug is administered by a health care professional, it might be paid through the medical benefit rather than through the prescription drug benefit. This can have the effect of hiding the actual expense of specialty drugs from the plan sponsor. According to the Prime Therapeutics report, more than half of specialty drug costs may be paid as a medical benefit. Separate payments through the medical benefit also make implementation of cost management strategies more difficult, since different billing codes may be used for drugs under the medical benefit than are used in the prescription drug plan, with the pharmacy benefit coding more specific. More specific coding enables better identification and analysis of prescription drug use.

For specialty drugs covered by the pharmacy benefit, many plan sponsors have adopted a four-tier copayment/coinsurance structure, in which the first, lowest-pay tier is for generics, the second for preferred brand-name drugs, the third for nonpreferred brand-name drugs, and the fourth tier-requiring the highest cost for specialty drugs. Given the potential high annual cost for specialty drug therapies, plans with a fourth tier typically set a maximum out-of-pocket cost per prescription or for the plan year. If cost-sharing results in a financial burden for the patient, noncompliance with the therapeutic regimen is more likely to occur, which can result in a worsening of the medical condition and the need for hospitalization or other treatments that are more costly. Consider whether it is appropriate to include some specialty drugs in the lower-cost tiers, in an effort to drive compliance.

The Prime Therapeutics report notes that growth in the number of specialty drugs presents the opportunity to establish formularies and preferred drug lists that encourage use of those specialty drugs that are identified for their clinical safety, effectiveness, and value. Thus, though costs for all specialty drugs might be high, formularies can be used to optimize use of those medications that best combine therapeutic and cost value. This report also suggests use of efficient drug delivery channels; a pharmacy program that offers streamlined processes, detailed utilization reporting, integrated care management, and the opportunity for aggressive discounts on specialty drugs; and controls on “buy and bill” arrangements by health care providers administering specialty drugs.

The Journal of Managed Care Pharmacy article notes that another possible cost management strategy is to move all specialty drugs into the pharmacy benefit, with the goal of having more uniform application of patient cost sharing and clinical and utilization management. Implementation of this strategy might pose its own challenges, however, due to specific plan provisions, vendor contracts, and contractual arrangements with health care providers.
Though specialty drugs offer innovative therapeutic opportunities for patients, their price tags pose cost management concerns. Consultation with a benefit consultant, PBM or health plan is a good starting point for developing strategies for optimizing the value of specialty drugs for your employees.