Specialty Drug Spend – Cost Drivers and Impacts

Specialty medications are biology-based medications, administered either orally or through injection, and are used to treat chronic, complex conditions 1. Why does this class of medication matter? Specialty drug spending drives considerable healthcare costs for individuals and employers.

While working for a specialty pharmacy, it was not uncommon to receive multiple price increases for a specific medication over the course of a year. One year, I received four separate price increases, in less than 12 months, on one medication!  These price increases are supplied by the manufacturer on specific specialty (biologic) medications but multiple price hikes in one year… how is that possible?

Several factors contribute to the price increases 2:

  1. Lack of Competition – The U.S patent system for brand name drugs limits competition for a given period of time thus resulting in manufacturers’ ability to raise prices without competition.
  2. Seriousness of the disease – Patients who require specialty medications do not have a choice to purchase if they want to improve quality of life. Therefore, specialty medications are treated not as luxury items, but rather as necessities.
  3. Cost of development – Development of specialty medications takes years and only a small percentage of researched medications make it to market. Though the cost of development on the part of manufactures has been challenged. Public funding often contributes to the science behind drug development. Therefore, manufacturers have a responsibility to fairly reflect these public contributions into the price.
  4. Powerful Lobbies – The United States lacks legislation around pharmaceutical pricing. This is largely the result of a powerful pharmaceutical lobby.

What happens when specialty medication prices increase? Unfortunately, the rising cost of such medication directly impacts the compliance of patients in need of these quality of life sustaining medications. Patients may skip doses, fail to fill scripts, miss follow-up doctor appointments, decline tests and refuse procedures3.  The cycle continues to ratchet up as non-compliant patients’ chronic conditions worsen, thus increasing the treatment needed and subsequently driving increased overall medical costs. It becomes a vicious cycle. Taken together, and as discussed in my Health Care Considerations blog post from July 28, 2020, (https://paulamhyatt.com/2020/07/28/health-care-considerations/) drug cost and chronic conditions comprise two primary drivers for the overall inflation of health care costs.

Such cost trends impact Ashland in the form of increasing health insurance premiums and prescription drug spend. Though as a municipality we cannot hasten the presence of biosimilars (generic specialty medications) to the market, we can provide Heath Savings Account (HSA) options to employees to address deductibles and out of pocket drug spend. 

HSA’s allow employees to save up to $3,550 for an individual or $7,100 for a family, of pre-tax salary dollars. These funds can then be used by the employee to pay qualified healthcare expenses, including prescriptions. Funds not used in a given year then rollover to the next subsequent year4. An employee is not obligated to leverage an HSA account. It is simply meant to act as a tax advantaged option to aid in addressing the ever-increasing cost of health care.

Though Ashland by itself cannot compel change to healthcare cost drivers we can make plan changes that benefit employees and the City of Ashland as an employer.

  1. Specialty Pharmacy Drug List – Magellan Rx Management
  2. Vincent Rajkumar, S. The high cost of prescription drugs: causes and solutions. Blood Cancer J. 10, 71 (2020). https://doi.org/10.1038/s41408-020-0338-x
  3. https://www.consumerreports.org/drug-prices/the-shocking-rise-of-prescription-drug-prices/
  4. https://paulamhyatt.com/2020/07/28/health-care-considerations/

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