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Specialty pharmaceuticals are becoming more common in the treatment of rare and complicated illnesses, making up approximately 40 percent of the $450 billion pharmaceutical industry market in 2016. These specialty drugs are considered “high-cost, high-complexity, and high-touch,” and are primarily prescribed for patients diagnosed with rare or complex cancers, HIV, hepatitis C, rheumatoid arthritis and other rare genetic illnesses.
The Academy of Managed Care Pharmacy (AMCP) designates the label “specialty drug” to pharmaceuticals that require difficult or unusual delivery (including administration, preparation, storage, etc) or require patient management around the time of administration (such as extra monitoring or support). Some biologics, genetic- and cell-based pharmaceuticals are included under the specialty drug umbrella. As of December 2017, more than 30 specialty pharmaceuticals were approved by the FDA, making up 80 percent of the new drugs approved in 2017.
Epzicom Prescriptions by State
|State||Drug Cost (M)||Days of Supply|
Fig 1 Epzicom is a specialty pharmaceutical prescribed to treat Human Immunodeficiency Virus (HIV). Prescription patterns data from Definitive Healthcare based on most recent CMS data available. Medicare Part D data released every fall.
One of the trademarks of a specialty drug is the high out-of-pocket costs for patients. Prescriptions are typically priced at around $1,000 per month, and only a portion of the costs are covered by insurers. Medicare Part D classifies any medication costing more than $600 per month as a “specialty drug.” Of the $181 billion spent on specialty drugs in 2016, $45 billion was for oncology and $37 billion was for autoimmune issues such as multiple sclerosis. Specialty pharmaceutical prices are expected to increase another 7 percent between July 2018 and June 2019.
Part of the reasoning behind these exorbitant prices is due to the manufacturing process. Specialty drugs are more complex than lower-tier medications and are often generated from living cells that mimic natural compounds that are found in the human body. Because these drugs contain or are derived from living cells, they are more sensitive to temperature fluctuations and are more susceptible to contamination. These drugs are also considered “high-touch,” meaning that most are only administered by a medical professional as an injection or infusion. Though there are oral and self-administered specialty drugs available, the “high-touch” approach ensures that the medications are being administered properly and are not subject to conditions that could compromise patient safety or nullify the effects of the drugs. Professional administration also makes it easier to manage or avoid potential side effects.
Because of the high costs for specialty drugs, insurance plans had to implement an additional tier for these complex medications. Medicare Part D was the first plan to add a “specialty” tier for high-cost drugs in 2011. After the implementation of the Affordable Care Act (ACA) in 2014, most health plans began including specialty drugs at the top of their tier systems. According to a report from Sun Life Financial, the average price of specialty drug claims in 2012 was $10,753, while non-specialty drug claims averaged about $185. Specialty drug claims made up about 20 percent of total claim costs in 2012, simply because of their high prices.
Rituxan Prescriptions by State
|State||Drug Cost (M)||Days of Supply|
Fig 2 Rituxan is a specialty pharmaceutical prescribed to treat certain autoimmune diseases, such as rheumatoid arthritis, and types of cancer, including non-Hodgkin's lymphoma. Prescription patterns data from Definitive Healthcare based on most recent CMS data available. Medicare Part D data released every fall.
Larger pharmaceutical manufacturers are creating biosimilars, alternative versions of specialty drugs already on the market. These are often less expensive than the original drugs, increasing accessibility and lowering out-of-pocket payments for patients. By the end of 2017, three biosimilar drugs were being marketed to patients. Five more have been approved, but are not yet available to the public.
Despite their high costs, the demand for specialty pharmaceuticals is expected to grow exponentially in the coming years, as personalized medicine and biologics see mainstream use and less-expensive alternatives hit the market. Specialty drug sales rose 11 percent between 2015 and 2016 alone, and the creation of biosimilars suggests that demand is not slowing down.
If you’d like to learn more about how specialty pharmaceuticals are affecting the healthcare supply chain, register for the HLTH Conference, May 6-9 in Las Vegas. Use the code "definitive_150" for $150 off your registration, and be sure to visit us at booth #12042. Other topics of discussion include: how to transform health data into meaningful solutions, the shifting roles of healthcare leaders, strategies to improve ROI, and much more.