Specialty Drugs Power Growth in Pharmacy Benefit Spend

New specialty drugs will continue to power pharmacy benefit spending, but the overall growth of pharmacy benefit costs is expected to slow over the next 2 years, according to a new report by Magellan Rx Management, the pharmacy benefit management (PBM) division of Magellan Health, Inc.
As employers grow increasingly concerned with prescription drug costs, specialty pharmacy remains among the fastest growing drivers of health care costs, according to the PBM. Although careful management of specialty spending on the pharmacy benefit is crucial, the authors note that management of specialty spending on the medical benefit is limited, leaving this category as the largest current cost driver.
“Today’s dynamic and complex health care environment has led to new developments in drug therapies that are both exciting and challenging. This is especially true for employers who are increasingly concerned about rising prescription costs,” Mostafa Kamal, chief executive officer of Magellan Rx Management, said in a press release.

Click here for more coverage on the implications of high drug costs on payers.

Specialty drugs currently represent 39% of the overall pharmacy benefit spend, but the authors project that specialty drug costs will grow to 48% by 2020. Meanwhile, overall pharmacy benefit cost growth is expected to slow in 2019 and 2020.
Within the next 2 years, the report projects that the specialty cost per claim will reach $6300, approximately 4 times the cost per claim of $1661 in 2008. The report further notes that by 2020, specialty drugs in the pipeline will comprise 25% of projected overall pharmacy benefit growth.
The report found that 56% of employer groups had an official and structured PBM program managing drug costs and 78% had a prior authorization program that managed medical benefit drug use. These programs were found to be primarily managed by PBMs or consultants.
While coinsurance is the most common employee contribution, 26% of employer groups required a co-pay and 28% required both co-pay and coinsurance for employees who utilized medical benefit drugs. Fifty-five percent of employer groups reported employee out-of-pocket co-pays and coinsurance remained stable regardless of benefit. Of the employer groups queried, 71% were interested in a plan that would move high-cost specialty drugs to a lower cost benefit through a PBM vendor, while only 30% were actually approached about such a plan.
From 2016 to 2017, overall costs grew 3.6%, with traditional drug spend dropping by 1.8% while specialty drug costs grew by 13.1%. Of this growth in specialty spend, the report indicated that 9.2% was driven by higher specialty drug use and 3.9% was driven by pricing changes. Magellan projects that double-digit specialty drug cost growth will continue through 2020 but will be slower than the growth seen in 2018 and 2019. The projected slowdown in specialty drug cost growth is attributed to a decrease in the amount and frequency of cost increases for current specialty drugs.
“For example, in 2016, the average wholesale price (AWP) per day for a specialty drug increased 7.6%, while in 2017 AWP increased 5.6%,” the authors wrote. “The contracting hepatitis C market also has put downward pressure on the specialty market.”
The report predicts that few top specialty drugs will face a significant challenge by the loss of patent protection or biosimilars over the next 3 years. By 2020, drugs for anti-inflammatory, oncology, and HIV/AIDS will comprise 65% of specialty cost, according to the report.
In the auto-inflammatory category, Humira will account for 50% condition growth while oral formulations, such as Xeljanz XR will comprise approximately 10% of cost by 2020, according to the report. During the forecast period, the impact of auto-inflammatory biosimilars for this condition will be restrained as a result of continued litigation, the authors noted. Between 6% and 12% of specialty drug cost in this category is projected to be driven by pipeline anti-inflammatory drugs.
In the HIV category, Biktarvy will account for 12% of HIV drug cost powered by promising efficacy results and a reduced adverse effect profile, according to the report. As the only treatment indicated for preexposure prophylaxis, Truvada will still be the top HIV drug by 2019.

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