Specialty Drug Wave Hitting Medical and Pharmacy Plans Harder: Trends versus reliable benefit strategy to handle the impact through 2020?

The Changing Roles of P&T Committees: Dr. Randy Vogenberg

Specialty Drug Wave Hitting Medical and Pharmacy Plans Harder: Trends versus reliable benefit strategy to handle the impact through 2020?The U.S. now has two different markets resulting from implementation of the Affordable Care Act (ACA) and resultant trends. Related to specialty or biological drugs, public sector CMS’s forecast of drug spending is somewhat counterintuitive, given ACA’s expansion of the total population eligible for drug benefits. Its forecast also seems to neglect the introduction of expensive, effective specialty medicines, especially on the potential spending for the care of Medicaid beneficiaries whose population includes large numbers of people especially at risk for illnesses these medications treat.

Private commercial insurance is just awakening to the new market landscape. The structure and scope of traditional prescription benefit management promises are not well suited to accommodate the emerging clinical capabilities – let alone the daunting cost – of specialty drugs. For example, drugs for treatment of hepatitis C have gotten attention for their breathtaking prices, and their potentially backbreaking costs for employers with larger but still limited covered populations susceptible to the diagnostic condition.  The clinical ramifications have gotten less attention both because few health benefits executives have clinical training and while the condition is much more prevalent than, say, Hemophilia it is not particularly common across large working populations in which medical benefits coverage is the rule rather than the exception.


Yes, the specialty drug tsunami as a trend has ramped up and ready to come crashing down on both public and private plans through 2020—the same timeframe as concerns over managing the ACA mandated Excise Tax (Cadillac Tax) hits. Pharmacy benefits experts have been cautioning employers about the looming impact of specialty Rx since 2001 and with more alarm for the past few years now so there is plenty of blame to go around. Employers to-date have mostly responded by turning to conventional financial tools used in benefits management; an additional copay tier for their prescription drug plan, and in some instances prior authorization rules and step therapy protocols that specifically anticipate specialty drug therapy regimens.

Just recently, there is an employer trend of engagement on driving towards plan performance or outcomes inclusive of specialty drugs. Still, few employers have amended plans in ways that indicate they realize that new specialty drug therapies represent a structural change in the nature of Rx’s role in their health benefits strategy. This has been noted in an annual National Benefit Survey of employer sponsored insurance trends for specialty drug coverages by the National Employer Initiative on Specialty Drugs led by the Midwest Business Group on Health and The Institute for Integrated Healthcare.

CMS generally mandates coverage for biologicals based upon FDA approval, but what happens as the pricey specialty medications newly available to covered commercial insurance members are fashioned to treat a condition more prevalent among working age covered populations, such as high cholesterol, and do so with unprecedented effectiveness? In fact that trend is happening today in 2105 with the expected launch of products in the new class PCSK9 inhibitor drugs, one of which has already received FDA approval to market in the U.S.


Employers should not pretend that doing nothing intentional regarding specialty drugs is the same as having a plan of action or real benefit strategy. Benefit plan decision-makers are held to a crucial fiduciary responsibility – to deploy plan assets for the exclusive benefit of the plan participants. There is not particular accounting timeframe governing that responsibility.

That is, a ‘sensible’ though short-term decision to save plan resources by deciding not to cover costs or increased cost sharing by inadvertent design for a particular remedy may not be adjudged sensible if the remedy would help the plan avoid some cases of much more costly ‘rescue care’ for afflicted patients a year, or years, in the future. Decision-makers do need to make careful decisions about when being penny wise may be pound-foolish. The value of cost savings relates to unit or product cost representing an estimated 10-20% savings, but does not generally impact the overall cost trend for treating the condition. This new product availability also heightens the need for more transparency by PBMs on the true cost of a drug being reimbursed on behalf of a member. (see Harvard Business Review article)


Benefits decision-makers will be making harder decisions about pennies and pound in the very near future – about drugs in the new class of PCSK9 inhibitors, as well as about remedies such as Sovaldi or Viekira Pak along with many more new specialty drugs moving through the development pipeline of manufacturers.

Today, conventional pharmacy benefits managers are making those decisions in conventional ways – basically cutting volume deals (contracts and/or rebates) predicated on exclusivity, putting employers in the potentially troublesome position of choosing, via its choice of PBM, one medication over another for its covered population. Some employers are giving closer attention to value-based contracting initiatives like those EMD Serono (maker of multiple sclerosis drug Rebif®) has forged with CIGNA and Prime Therapeutics, which puts their revenues at risk if patients’ total cost of care is higher than alternatives. And it may also help assure the C-suite that a segment of the health benefits budget that is almost certain to expand rapidly during the next few years is being astutely managed.