The Centers for Medicare & Medicaid Services predicted that spending on prescription drugs would rise by 6.8 percent in 2014.
Their estimate was a bit off.
Instead, spending on prescription medications leaped by 13 percent to $374 billion, according to a recent paper from the IMS Institute for Healthcare Informatics. It was the biggest surge since 2001.
Specialty medications appear to be a major driver behind this trend. In the past five years, these medications accounted for 73 percent of the overall growth in spending on medicines, according to the IMS Institute paper.
Express Scripts, a pharmacy benefit manager (PBM), recently published an analysis on drug costs, with a focus on patients with particularly high expenses. More than a half million Americans needed more than $50,000 worth of medications in 2014 – which is roughly the median US household income. Nine out of 10 of these patients were using specialty drugs.
Given that one role of PBMs is to help contain the cost of medications, these organizations are taking a particular interest in specialty drugs.
What are specialty drugs, and why will we be seeing more of them?
The Pharmacy Benefit Management Institute recently wrote that specialty medications “took center stage in 2014 – ironically because they represent both a promise and a threat to health care benefits today.”
These drugs tend to require “special handling, administration, or monitoring.” Manufacturing these drugs – which are often used for serious diseases that elude other treatments – is often a complicated process.
Much of the public’s awareness of the costs of specialty drugs has been due to media coverage of expensive recent hepatitis C treatments. But these merely heralded an “explosion in spending on specialty drugs,” wrote the authors of a recent paper in Harvard Business Review.
Specialty drugs account for 42 percent of drugs in the late-stage pipeline, according to the IMS Institute. So-called PCSK9 drugs for high cholesterol – which users take indefinitely, unlike the limited course of hepatitis C drugs – appear to be a new source of concern for PBMs
Insurers and PBMs are countering the cost of specialty meds
One way insurance companies and PBMs are attempting to manage drug costs, according to the Harvard Business Review paper, is by tightening their specialty drug formularies. However, the authors write, formulary development lacks an “evidence-based, systematic, transparent, and customizable approach.”
PBMs are also negotiating with pharmaceutical companies. According to a recent JAMA paper, Express Scripts elected to cover a particular hepatitis C treatment after its maker “agreed to a significantly lower price, in line with the types of discounts pharmacy benefit managers and large insurers have negotiated for other drugs.”
CareFirst, which works with the pharmacy benefit manager CVS Health, uses a number of approaches with patients using specialty medications. It maintains a care team with nurses and pharmacists to work with these patients, and it analyzes data to educate physicians about the kinds of outcomes their patients are achieving.
Independent review organizations can help PBMs rein in costs
Advanced Medical Reviews (AMR), an independent review organization, plays multiple roles in helping health insurers handle issues related to specialty medications, such as:
- Helping to determine exceptions for specialty drugs for customers during the external review process. Our reviewers must match the needs of the patients with the benefit language of the health plan, which requires careful consideration.
- Making sure that customers’ medication regimens reflect medical criteria, guidelines and research, and that they’re being used optimally, in terms of factors such as dosage.
- Helping insurers incorporate medical based guidelines into their formularies.
One of the advantages that AMR can offer health insurers in specialty medication decisions is that “we can run the case by specialty matched physician reviewers who will always have access to the most recent guidelines and research,” notes Lousine Alpern, MD, AMR’s vice president of clinical services.