Higher drug costs among health care trends for 2015
Employers need to understand the specialty drug pipeline.
Look for pharmacy trends to be a hot topic of discussion for employers during 2015.
More than 200 people attended a recent health care summit put on by the Grand Rapids Area Chamber of Commerce and Blue Cross Blue Shield of Michigan during which changes to health care law and potential health insurance trends were discussed.
Hiral Patel, a clinical pharmacist and marketing liaison at BCBSM, said employers need to understand the specialty drug pipeline and form strategies for controlling costs.
“These drugs are expensive and you want to make sure you have a strategy in place and the appropriate benefit plan in place to bend the cost of these therapies,” said Patel. “I want to talk about some trends, projections, where we are today and where we are going for the future, as well as talk about the pipeline, what are the manufacturers focusing on today, and some of the strategies to control some of the costs.”
Patel said there is a dynamic shift in the field of pharmacy due to the number of brand-name medications losing their patent protection, which results in increased competition and lower costs for consumers.
“In the early ’90s, the Pfizers and the Mercks of the world were concentrating on therapies to treat chronic conditions like high cholesterol, blood pressure, diabetes and asthma,” said Patel. “Those therapy categories — the blockbuster drugs they created at that time — those are all either coming off patent or already off patent right now.”
With the increased competition in traditional medication, drug manufacturers have turned their attention to developing new therapies in the field of specialty drugs to treat complex, chronic conditions. The PricewaterhouseCoopers’ Health Research Institute released a Medical Cost Trend study in 2013, which noted although the “widespread adoption of generic medicines helped dampen overall medical inflation,” the increase of “expensive complex biologics will nudge spending trends upward.”
In 2005, only 21 percent of newly approved medications by the Federal Drug Administration were specialty drugs, but by 2012, those drugs outpaced traditional therapies, and that number is anticipated to reach 60 percent of approvals in 2014, according to the study.
“In terms of drug revenue, in 2010, seven out of the 10 medications were traditional drugs, with only three out of the top 10 as specialty medications,” said Patel. “When we fast-forward to 2016, probably seven out of the top 10 medications are going to be specialty drugs. That is what is driving the drug revenue today and that is what the manufacturers are focusing their dollars on.”
Defined with slight variations by different organizations, a specialty drug is often prescribed for complex or chronic conditions, including rheumatoid arthritis, HIV, cancer, or psoriasis. Known as biologics or biotech-type products, the specialty drug typically has a molecular structure 600 times larger than the makeup of aspirin, according to Patel.
“These are large molecular structures; they are hard to develop and that is why they are considered specialty medications. They also require special handling, administration and monitoring,” said Patel. “Specialty pharmacy is complex. It takes an average of 10 to 15 years for a drug to come to the market. The average R&D is $1 billion for each of these therapies.”
For a traditional medication, the average brand name cost is roughly $208 per month, while the generic version is as low as $32 per month. While the FDA implemented guidelines in 2010 to provide a licensure process for biological products demonstrated as interchangeable with a patented product, the new products are anticipated to only cut costs by 20 percent, according to Patel.
“When you take a look at the approval process of a biosimilar, it still costs a lot of money to develop a biosimilar compared to a traditional generic drug. If a company is going to produce a biosimilar type product, they are going to want to recoup some of that profit, as well,” said Patel.
To manage the costs of medications, Patel said there are several potential strategies that can be implemented in designing a health benefit plan. The strategies include tiered co-pays to promote generic and preferred brand drug use, utilization management through step therapy or prior authorization, mandatory generic policy, and quantity limit to prevent drug waste with specialty drugs.
“If you are in a three-tier benefit (system), we stagger it as generics at tier one, preferred brands at tier two, and then non-preferred brand name drugs at tier three,” said Patel. “When you stagger it like that, members have that behavioral change. They talk to their physicians if they are on a non-preferred brand name drug to have that conversation, because there is going to be a generic most likely for a traditional therapeutic category available because of that patent cliff.”
Another tier program includes five levels to include specialty drugs on tiers four and five with increased co-pays at a maximum of roughly $150 and $300, respectively, according to Patel. Both utilization management or prior authorization and mandatory generic policies promote the use of generic medications over brand name drugs to decrease costs for both the plan member and the company.
In terms of specialty drugs, there is an industry standard to limit supply to 30 days due to the high risk of side effects since the therapies are often treating complex conditions, according to Patel. Some health plans are even moving to a 15-day first fill plan for certain oncology drugs due to their side-effect profile, which allows members to try the medication for 15 days at a half co-pay price.
Other strategies discussed included using preferred specialty pharmacies with patient care coordinators, partnering with the right plan to manage drugs, and adding prescriptions to stop-loss insurance if an individual has a self-funded plan.
“If you are a self-funded plan on the medical side, you probably have stop-loss insurance. I think it is important to have a discussion going forward to see if you can add the prescription drugs on the pharmacy benefit on to the stop-loss plan,” said Patel. “These therapies are so expensive and you want to mitigate your risk in terms of providing coverage for these types of drugs.”