Limited options to manage specialty drug spending

Spending on specialty drugs--typically high-cost biologic medications to treat complex medical conditions--is growing at a high rate and represents an increasing share of U.S. pharmaceutical spending and overall health spending. Absence of generic substitutes, or even brand-name therapeutic equivalents in many cases, gives drug manufacturers near-monopoly pricing power and makes conventional tools of benefit design and utilization management less effective, according to a new qualitative study from the Center for Studying Health System Change (HSC). Despite the dearth of substitutes, cost pressures have prompted some employers to increase patient cost sharing for specialty drugs. Some believe this is counter-productive, since it can expose patients to large financial obligations and may reduce patient adherence, which in turn may lead to higher costs. Utilization management has focused on prior authorization and quantity limits, rather than step-therapy approaches--where lower-cost options must first be tried--that are prevalent with conventional drugs. Unlike conventional drugs, a substantial share of specialty drugs--typically clinician-administered drugs--are covered under the medical benefit rather than the pharmacy benefit. The challenges of such coverage--high drug mark-ups by physicians, less utilization data, less control for health plans and employers--have led to attempts to integrate medical and pharmacy benefits, but such efforts are still in early development. Health plans are experimenting with a range of innovations to control spending, but the most meaningful, wide-ranging innovations may not be feasible until substitutes, such as biosimilars, become widely available, which for many specialty drugs will not occur for many years.