Specialty Drugs Driving Increases in Employer Health Care Costs

Specialty drugs are a new category of treatment that is driving big increases in health care costs across the US. A recent report found that 73% of the increase in drug spending in the US from 2010 - 2014 was a result of specialty drugs.

Although there is no exact definition of what is considered a specialty drug, generally these drugs:

1. Treat complex chronic and/or life threatening conditions - Express Script’s top specialty drugs treat rheumatoid arthritis, multiple sclerosis, cancer and hepatitis C.

2. Have a high cost per unit - Medicare defines specialty as any drug costing more than $600/month.

3. Require special storage, handling and administration - This could mean that drugs must be injected or stored in a refrigerator.  

4. Involve a significant degree of patient education, monitoring and management

At the bargaining table, employers have begun implementing new programs to control the cost of these new medications:

• Specialty Drug Formulary - Formularies limit the number of specialty drugs covered for each condition.

• Prior Authorization - Plans can require that prescribing doctors show that specialty drugs are medically necessary before the cost of the drug will be covered.

• Limited refills - Plans can cover refills for a 1 or 2 week regimen instead of the standard 30 day supply.

• Step Therapy - Plans can require the doctors prescribe less expensive alternatives before high cost specialty drugs.

• Increase cost sharing - New “specialty drug tiers” put higher copays on specialty to discourage over use.

Links:

Medicines Use and Spending Shifts (IMS Institute, April 2015)

No Single Definition for Specialty Drugs (Midwestern Business Group on Health)

Drug Trend Report (Express Scripts, March 2016)

Soaring Specialty Drug Costs Require HR Response (Society for Human Resource Management, March 1. 2014)