How Much Is Too Much? The Rising Cost of Specialty Products

We are wrapping up this historic and “challenging” presidential election season. The cost of pharmaceuticals has always, and will continue to be, a political focal point in our society. At the top of the pricing pyramid are specialty products.

Specialty products can alter or eradicate diseases that have long plagued mankind, thereby increasing both the quality of life and length of lifespan overall. However, progress and innovation comes with a price tag. Traditional research and development for common chronic diseases has shifted more toward the specialty drug market, and that market’s potential for profit is currently an area of focus for many pharmaceutical companies.

The cost of development of these compounds, and their corresponding approval ratio, has tremendous financial risk to the tune of hundreds of millions of dollars. The typical size of the population for these diseases is relatively low; therefore, the cost cannot be spread over a large enough base of treatments, resulting in a much higher cost per treatment. This is just simple economics.

As these new therapies become available, patients want, and need, access to them. Generally speaking, patients were buffered from seeing the full cost of these therapies through public and private payer subsidies. As budget-buster therapies continue to hit the market, those payers are forced to spread the costs and deploy tactics that help manage costs. In turn, there is greater visibility to payers and patients.

This visibility only fuels the political landscape well beyond the current elections. But perception is reality in the political and financial arena. Optics dictate that the “number” is the “number,” and in our world, that is the wholesale acquisition cost (WAC). In our media-driven society, perceptions are created by snapshots of headlines, and rarely does the public go deeper. Unfortunately, the focus lately has been on a very few bad players that dominate the headlines, and much of that attention falls on the magnitude of price increases.

The Presidential Plans: Hope or Reality?

Hillary Clinton has stated that the United States needs to “move beyond talking about these price hikes to acting to address them.”

Her stated plan, laid out in a recent press release, would establish dedicated consumer oversight at public health and competition agencies. They will determine unjustified, outlier price increases based on specific criteria, including:

1) the trajectory of the price increase

2) the cost of production

3) the relative value to patients, among other factors that pose a threat to public health

In essence, price controls based on the data of the US market versus the rest of the world provide plenty of data to support these tactics. Donald Trump’s health care plan so far has been vague. His early debates focused on the amount of waste in the system, calling on the federal government to carry a bigger stick in the price negotiation arena as the largest purchaser of products.

This could leverage 40 million enrollees to negotiate and drive down drug and biologic prices for seniors and others in the programs. On the big debate stage, he emphasized that more can be done by Medicare to beat down pricing and that the Affordable Care Act (ACA) has done little to support the reduction in drug costs.

If anything, he argues that the ACA expanded those costs through greater access, resulting in larger premiums. His plan essentially is to let the free markets determine the price based on competition.

Disproportionate Price and Price Increases: True or False

A study published in JAMA in August 2016 notes that US per capita spending on prescription drugs is the highest in the world and is mostly a result of the cost increases for brand name drugs at rates that greatly exceed the consumer price index. In 2013, prescription drug per capita spending was $858, which more than doubles the rate of $400 among 19 other industrialized nations, according to the study.

Although the significant price of research and development is frequently the stated culprit for high drug costs, the researchers noted that evidence actually points to prescription drug pricing in the United States being based primarily on what the market bears. A recent study in the Journal of Managed Care and Specialty Pharmacy (JMCP) suggests there is steady growth occurring in annual WAC fluctuations, as adjustments are made for shifts in the general inflation rate.

The findings indicate that price changes for specialty drugs are growing faster than the economy. Furthermore, the study noted that nearly 23% of large employers saw the average annual cost per employee for specialty medications rise at the last renewal. In fact, the average jumped to 22% from 15% in 2013.

Market Reaction and Taking Control

Specialty pharmacies are able to help control costs by providing patient support and education to boost adherence and manage side effects. Additionally, they offer specialized handling and distribution of specialty medications directly to the patient or provider. The study in JMCP found that 42% of large US employers encourage plan members to fill specialty prescriptions through a specialty pharmacy.

This is commonly done via excluding some or all specialty drugs from the retail drug plan or medical benefit (22%) or through lower cost-sharing (11%) if the plan member uses the specialty pharmacy, according to the study results. Additionally, improved patient outcomes offer payers savings through avoiding the long-term costs that accompany unnecessary hospitalizations or worsening disease symptoms.

Expanding Opportunities for Specialty Pharmacy

The relative high cost of specialty products is not likely to come down in price; however, the specialty pharmacy patient care model should include outreach to the patient that bolsters administration, side-effect management, and adherence challenges. Pharmacists and other clinicians should be dedicated to one or more disease states, which fosters the development of in-depth understanding and experience to dispense these medications or care for these patients.

Cost-effective pharmacotherapy and disease state management offer targeted interventions and patient education. As a result, health outcomes can be improved, which reduces the total cost of care on an outbound basis. Patients are educated on the proper preparation and use of products through various communication channels, including video and print, to complement the multiple home visits a nurse may perform to ensure that complex medical conditions and therapies are properly addressed.

Studies have shown that poor compliance often results from the difficult administration procedures and challenging side effects that accompany some products. Reimbursement for specialty drugs can be extremely challenging, mainly due to product costs and duration of therapy. Specialty pharmacies can take on the assignment of benefits or the burden of obtaining reimbursement through billing the payer directly.

Specialty pharmacies can also provide hotlines for reimbursement-related questions, staffed by product-area experts to ensure better customer support. One cornerstone of specialty pharmacy is supporting proper medication adherence. This may include factors such as the timing and dosing of the drug. Persistence is defined by the patient remaining on the prescribed therapy over time.

There are a host of causes for poor compliance and persistence rates among patients on specialty drug regimens, including cost, side effects, and/or comorbidities, which often result in higher cost treatments on an inpatient basis. By far, the top reason specialty pharmacy is chosen to administer high cost drugs is due to the proven fact that their practices lead to patients properly and consistently taking prescribed therapies.

This is our opportunity in specialty, to make sure value is created, and there is a return in the health care investment dollar. Whatever the outcome of the elections is, fasten your professional seatbelt. We are in for quite a ride.

We welcome your feedback on this topic and on any topics you would like us to cover in future editions of Specialty Pharmacy Times®. Please reach out to me at dsteiber@pharmacytimes.com. We also encourage you and your colleagues to subscribe to this unique journal by visiting www.specialtypharmacytimes.com. 

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About the Author

MR. STEIBER operates a consulting practice and is responsible for commercial operations, trade-supply chain strategy development including 3PL selection, regulatory oversight, and “operationalizing”organizations. Mr. Steiber has served in several senior positions in pharmacy, distribution, and industry over the course of his 40-year career. Mr. Steiber is a licensed pharmacist in Texas, Washington, California, and Pennsylvania. He is affiliated with several professional associations and publications and a frequent speaker on behalf of many professional organizations. Mr. Steiber graduated from Washington State University College of Pharmacy. He has participated in a variety of postgraduate programs in law and business development/marketing at Harvard University and Northwestern University. Mr. Steiber currently resides in Highland Village, Texas.