Despite price dip, specialty Rx still huge cost driver

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Although prescription drug benefit cost trends are expected to dip slightly next year, the 2018 Segal Health Plan Cost Trend Survey cautions that they remain in the double-digits and are much higher than medical trend.

For example, specialty drugs and biologics are projected to decline to 17.7% from 18.7% in 2017, while outpatient Rx coverage for actives and retirees under age 65 will fall to 10.3% from 11.6%. The lowest numbers actually involve outpatient Rx coverage for retirees age 65 and older, which are projected to decline to 7.5% from the current 9.9%.

While this last stat may seem counter intuitive, one possible explanation is an influx of baby boomers who are healthier than older Medicare recipients, says Edward Kaplan, Segal’s national health practice leader. This development could extend the longevity of Medicare funding, he adds, suggesting the survey results could be used to support 2018 rate renewal negotiations.

Perhaps not surprisingly, survey respondents cited specialty pharmacy management as their top cost-containment strategy in 2017. It was followed by: intensifying pharmacy management programs, contracting with value-based providers, increasing financial incentives in wellness design and adopting a high deductible health plan.

This marks the 21st year of Segal’s cost trend survey, which includes managed care organizations, health insurers, pharmacy benefit managers and third-party administrators.

While greater use of generic drugs as alternatives to costly non-specialty drugs have helped mitigate annual increases in recent years, the survey noted that it’s still not enough to quell concern. High-cost specialty drugs, while admittedly a fraction of all prescriptions, represent a growing share of total drug spending.

Segal cited as examples Epipen, an allergy-reaction injector, dermatological drugs such as Alcortin A, Aloquin and Novacort, as well as scripts to treat rheumatoid arthritis, cancer, Hepatitis C and multiple sclerosis.

“The market is now beginning to see increased competition from specialty generics and biosimilars,” according to Eileen Pincay, VP and senior pharmacy consultant at Segal, “but those typically do not offer the same level of savings opportunities as generic drug versions.” Her suggestions: modify participant cost-sharing to encourage generics, use formularies with exclusions and tighten controls on Rx prior authorization, quantity limits and step therapy.

Under the microscope
Kaplan hopes public policy makers pay more attention to pharmaceutical companies “increasing prices 8% or 9% for brand drugs that have been on the market for a dozen years” to support sales and revenue, as well as increase stock price and protect market share.

Benefits including career development programs and paid parental leave are giving these companies the edge, according to a ranking from job reviewing platform Fairygodboss.
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While understanding “some arguments to defend manufacturers” for steep prices on life-saving specialty brand drugs, he says paying what the market will bear is driving this practice. For example, erectile dysfunction drugs that have been around for decades and cost $8 a pill are now $72 before discounts. He also noted that under Food and Drug Administration guidelines, group health plans are locked into covering a $1,900 drug like Truvada that’s required for life for patients in a high-risk group (i.e., preventing the infection rate of HIV).

“Employers and their brokers and advisers have very little control or leverage over how a manufacturer sets their price for a brand drug,” Kaplan explains, “and so it has to come from someplace else.”

One winning strategy involves partnering with a pharmacy consulting expert “to tease out as much transparency as you can,” he says. Segal is now holding every pharmacy benefits manager “up to the light” when helping very large clients determine the net cost before and after rebates for their preferred formulary.

“It’s not good enough to have this overall aggregate number,” according to Kaplan. “We want therapy-specific guarantees. We want drug-by-drug rebates. We want performance guarantees.”

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Prescription drugs Healthcare costs Employee benefits Generic drugs Medications and drugs