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Specialty Drugs' Impact On Your Self-Insured Plan

May 04, 2016 By: Bruce Roffé, President and CEO of HHC Group
Featured on The Employer's Guide to Self-Insuring Health Benefits

Like most businesses, self-insured employer groups are desperately seeking ways to reduce healthcare costs – and it's no secret prescription drugs make up a significant chunk of those costs. If you look more closely, specialty drugs emerge as a main culprit. These high-cost meds made up less than one-percent of all written prescriptions in 2014, but accounted for 32-percent of all drug expenditures, according to research by Express Scripts.

Fortunately, your self-insured plan can address the impact specialty drugs have on your healthcare costs, but it's important to first understand what they are and how they're being used by your employees and their families.

What Defines "Specialty Drugs?"

To put it simply, a specialty drug is any medication used to treat chronic, rare, or complex conditions like hepatitis C, multiple sclerosis, or certain types of cancers. They are novel drugs that typically don't have generic, low-cost, counterparts. These medications can provide remarkable therapeutic effects, but the costs can be steep. In fact, recent findings in Express Scripts' 2014 Drug Trend Report indicate new specialty drugs like PCSK9 inhibitors for high blood cholesterol could cost the health system as much as $100 billion per year.

Why The High Cost?

All medications are becoming expensive, however, these new and innovative therapies are much pricier to develop and approve. Pharmaceutical manufacturers rationalize they need to increase the cost in order to fund research and development. While that may be true, there is much to say about the ethics of their pricing. This issue has sparked nationwide debates about the need for greater transparency from pharmaceutical companies to avoid any price-gouging. However, such a move would require reform in the system, which doesn't appear to be happening anytime soon.

How Are The Employers Affected?

For self-funded plans, the costs of specialty drugs have a direct impact on their claims.

The AARP Public Policy Institute issued a report last year indicating that the average annual price for specialty drug therapy was nearly 20 times higher than brand name prescriptions. It was almost 190 times higher than the average annual cost for generic meds. In 2013, the average cost for specialty drugs was $53,000 a year, which outpaced the median U.S. household income of $52,250.

New hepatitis-C therapy alone accounted for more than half of the increase in overall specialty medication spending because it carries a hefty price tag of $84,000 for just a single course of treatment. However, even when the data is adjusted to remove pricey Hep-C drugs and compound medications, the year-over-year increase in per capita drug spending still exceeded six-percent.

The sheer number of people taking specialty drugs is increasing too, and that's likely true at your company as well. In the same study, the number of Americans taking at least $100,000 worth of meds tripled between 2013 and 2014. Since both usage and cost are increasing, it's crucial for self-insured employers to find ways to address both issues while ensuring their employees have access to the medications they need

Searching For A Healthy Middle Ground

The most direct way to control high medication costs is to educate your employees about specialty drugs and how other medications may save them money without sacrificing their wellbeing. Then, they can have a thoughtful conversation with their prescribing physician or pharmacist about the health value certain prescriptions offer, and whether other drugs should be considered based on cost, potential side effects, quality of life, and life expectancy. Keep in mind that just because a certain specialty medication is new to the market doesn't guarantee it's better than the standard of care.

Other "Steps" To Take

"Step therapy" can also prevent unnecessary expenditures on specialty drugs. This method allows a patient to start treatment with a lower cost drug to see if it provides therapeutic benefits before jumping to higher-cost meds.

Another form of step therapy uses dosage management, where the patient buys\takes a small amount of a medication instead of the full course. If, for any reason, the treatment is ineffective, the full, more expensive treatment doesn't go to waste.

Embrace Technology

Technology gives employers an upper hand in the fight against inflating prescription costs. While specialty drugs are unique and difficult to replace with alternatives, prices fluctuate depending on where you live and which pharmacy you shop at. Apps like "Prescription Saver" and "GoodRx" allow patients to track down reasonable prices for their meds by simply using their mobile devices. It also gives users unfettered access to statistical information related to prescription use and general health which can then be leveraged to bring down costs. Self-insured employers should encourage their employees to use these applications by making these technologies available to them.

Be Kind To Your PBM

Take an active role with your pharmacy benefits manager (PBM). The PBM is a vital player in the process of price control and cost reduction because they set the formulary – the medications in a certain category that will be stocked and accessible to your employees. The PBM is in a position to customize the formulary, and employers can play an active role in controlling their prescription drug cost risk.

PBM's also have contracts in place with national retail pharmacies, which allow them to negotiate for discounts on medications. In addition, they can shave costs by encouraging your employees to take advantage of mail order prescriptions, which typically offer added discounts and improve medication adherence.

The Gist

Medical breakthroughs provide patients with better treatment options than ever before, and specialty drugs stand out as some of the most promising. However, employers can take a proactive role in more closely managing their use, while also offering insight and education to their employees about potentially low-cost alternatives that may provide near-identical health results.

In doing all of this, self-insured plans can achieve greater cost control while keeping employees happy and healthy.

About The Author

Dr. Bruce Roffé is a Pharmacist and President and CEO of H.H.C. Group, a medical claims, cost-reduction company that works on behalf of self‐insured employers throughout the United States. At one time, he was Assistant Director of Hospital Pharmacy at Detroit Receiving Hospital and University Health Center and was also an Adjunct Assistant Professor of Hospital Pharmacy at Wayne State University, College of Pharmacy and Health Sciences, Detroit, Michigan. He may be reached at broffe@hhcgroup.com.