The High Price of Specialty Drugs: The Self-Insured burden and a cause for concern for HR managers

A new CVS Caremark report projects that specialty drug spend is expected to quadruple in 2020, reaching approximately $418 billion a year. Currently, specialty drug spend accounts for 30% of the total drug spend and by 2018, it will account for half of a companies drug spend. This article will discuss current challenges faced by self-insured companies when it comes to their specialty pharmacy concerns. The TesserRx white paper gives a detailed account on how its services will reduce specialty drug spend.

Medical or Pharmacy Benefit? Currently, specialty drugs can fall under the medical, pharmacy benefit, or both. In fact, 47% of specialty medications are billed through the medical plan. This fragmented benefit structure makes it difficult to manage cost, as it becomes a challenge for pharmacy benefit managers to control utilization and aggregate claims data on these medications.

Price Transparency of Facility? Many specialty drugs for the treatment of conditions like cancer, rheumatoid arthritis and multiple sclerosis are administered via infusion that can take place in a hospital, physician’s office, infusion center or even the patient’s home. The variance in price between facilities can be thousands of dollars, making access to pricing information and quality extremely important.

Compliance versus Spend? An Express Scripts study claims medication non-compliance accounts for $269 billion dollars of wasteful spending. With the average cost of a specialty drug being $10,000 per month for a patient, according to Randy Vogenberg, principal of the Institute for Integrated Healthcare, compliance becomes a major issue. Two polar strategies exists today, value-based benefit and four tier formulary designs, one increases cost to the patient to drive down expenses and the other reduces cost to drive up compliance.

Alternative Therapies? A biosimilar drug is a generic substitute for a previously approved biologic drug however it is estimated that the cost of these “generic” drugs will be 65%-85% of the name brand version.

Now more than ever, HR managers and CFOs of Self-Funded companies need to create strategies around curbing the rising cost of medications. Ten percent of patients account for 80% of the drug spend and helping these patients understand their coverage and address their needs can be critical to lowering costs. Digital Rx tools that bring transparency to drug pricing as well as shed light on alternative treatments can significantly reduce a company’s drug spend.

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