Something Has to Give: Balancing Specialty Drug Cost With Value

The Growing Cost of Specialty
A few years ago, discussions were had regarding how patients and payers were going to afford specialty medications such as adalimumab (Humira), which has an annual cost of approximately $40,000 before rebates, according to the Institute of Cost Effectiveness Report (ICER). Currently, it is not unusual for newly launched specialty medications to have even higher prices.
For example, ledipasvir/sofosbuvir (Harvoni), which launched in October 2014 for the treatment of hepatitis C, has a wholesale price of approximately $95,000 for a twelve week course of therapy. Tezacaftor/ivacaftor and ivacaftor (Symdeko), which was FDA-approved in 2018 for the treatment of cystic fibrosis, launched with an annual price tag of approximately $290,000.
Recently, a gene therapy named voretigene neparvovec-rzyl (Luxturna) was approved for the treatment of an inherited retinal disease with a price tag of nearly $850,000. Although all of these specialty medications have changed the treatment paradigm in their respective disease states, the cost of these medications is certainly pushing the boundaries of the US health care system.
Despite only 2% of the population using specialty medications, it is estimated that these drugs will represent nearly 50% of payer costs by 2020. With the research and development pipeline of many pharmaceutical manufacturers being focused on specialty drugs, patients and payers are faced with a harsh reality of how they are going to balance cost and true clinical value.
Patients and payers will not be able to continue to pay these high costs. Will patients simply stop filling their specialty medication because they must remortgage their home to afford their chemotherapy? Will the health care sector be forced to realign incentives and de-link administrative fees from the list price of a medication?
Will pharmacy benefit managers (PBMs) and insurance companies continue to leverage utilization management tools while creating more aggressive plan designs to help manage costs for payers? Will the regulations change so that manufacturers can no longer charge a high launch price for a medication without demonstrating incremental clinical value compared to its competitors?
All of these questions are valid but there is certainly not one answer to this conundrum. In order for specialty medications to continue to be utilized, something will have to give but what?
Considerations for Further Management of Specialty Medications
Improved Utilization Management
PBMs and insurance companies have certainly employed various utilization management tools, such as prior authorization, quantity limits, step therapy, and formulary strategies, to ensure appropriate access to specialty medications while still managing costs; however, this is no longer enough. Additional innovation and an increased appetite for more aggressive plan designs may be needed in order to keep up with the trend of specialty.
We have started to see more aggressive plan design strategies come to the market, such as CVS Health’s recent collaboration with ICER, whereby medications will not be covered unless they meet a certain quality adjusted life threshold. Although this is certainly a shift in the right direction, the question is whether or not payers are willing to push the envelope and take a stance to exclude medications through plan design that have not demonstrated true clinical value based on their cost.
Although plan designs such as these are intended to focus on therapeutic classes that have several treatment options available, some payers may see this as somewhat of an ethical dilemma since these medications are FDA-approved. Regardless of the current appetite for these and other plan designs, this is certainly a lever that many payers will need to weigh moving forward as specialty costs rise and total spend grows.
Incentivizing Value-Based Care
Although some pharmaceutical manufacturers complete head-to-head clinical trials as part of the FDA approval process in order to demonstrate clinical superiority compared with other medications in the same class, this is not a requirement. Instead, a manufacturer must demonstrate that their medication is both safe and effective.
However, as we continue down this path of unsustainable health care costs, the requirement to demonstrate true incremental value may be something that should be considered as part of the approval process. This would not only encourage innovation towards medications that are clinically better than existing therapies, but it would also keep new “me too” medications from launching with higher list prices, ultimately driving up the cost of an entire therapeutic class.
Another concept that PBMs and insurance companies are beginning to leverage is value-based contracting, are agreements between manufacturers and payers in which coverage and reimbursement are tied to a drug’s efficacy.
There are many benefits to this approach, including reduced payer risk and the ability to generate real-world medical evidence. However, there are also many challenges that exist with this type of set up, including technology limitations and establishing outcomes that are both “meaningful and measurable within a reasonable timeframe.”  
Still, some value-based contracting has already been established in the marketplace today, including an agreement between Spark Therapeutics and payers for Luxturna. Spark will actually pay rebates if a patient fails to meet certain clinical thresholds in both the short term (30 to 90 days) and long term (30 months). Despite the challenges associated with value-based contracting, I believe these types of arrangements will be necessary to continue to drive incremental value into the system, not just cost. 

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