Trend Report Predicts Specialty Spending to Quadruple by 2020

A CVS Caremark report predicts further increases in specialty drug spending but suggests strategies for payers to manage costs.

Specialty drug spend is expected to increase substantially over the next 3 to 7 years, reaching anticipated highs of $192.2 billion in 2016 and $401.7 billion in 2020, a CVS Caremark report predicts.

The Insights 2013 Specialty Trend Management report, released November 20, 2013, noted that the double-digit increases in specialty trends are driving overall pharmacy trends. Specialty per member per year drug trend increased by double digits in 2012—and the report predicts similar double-digit increases in 2013 and 2014.

The report predicts a 13% to 24% per member per year trend increase in 2013, and a 14% to 25% increase in 2014.

Like traditional pharmaceuticals, a combination of price, mix, and utilization drives specialty drug trend; however, the nature of the therapies makes managing trend more complicated. According to the report, price contributes 49% to the overall trend, whereas drug mix and utilization contributed 31% and 20% to the trend, respectively.

Price influencers include network size, site of care, and inflation. Drug mix influencers include presence of generics or biosimilars, new agents, and lack of product competition. Utilization influencers include new drug approvals or new drug indications, changes in treatment guidelines, and demographic or economic changes.

The lack of specialty products that can be substituted for one another, as well as complex medication regimens and diverse dosage forms, contributes to the drug trends’ complexity, the report noted.

The report identified areas for potential insurance plan savings within the trend drivers.

Within the drug price arena, the report recommends finding the drug source with the lowest cost, and, where appropriate, the lowest-cost site of care. In addition, use of an exclusive specialty pharmacy can lower plan cost, as can narrowing infusion networks, the report noted.

Meanwhile, insurance plans can save money in the drug mix area by using formulary exclusions and step therapy programs in areas with multiple specialty drug options.

Utilization management programs serve a dual purpose in ensuring therapies are used safely and effectively, thereby reducing waste.

“Importantly, when new science suggests that older, often generic drugs are equal in efficacy to newer biologics, specialty pharmacies and PBMs are critical to driving adoption of these new guidelines,” the report notes.

Specialty drug coverage through the medical or pharmacy benefit continues to play a prominent role in payer cost, although the report also noted strategies to introduce more intense management of specialty drugs.

Within high-use categories with multiple therapy options, expanding drug coverage can benefit payers by increasing market competition and allowing payers to designate injectable rather than infused drugs or to select preferred infused therapies. In addition, payers can review the placement of certain therapies in their formulary, moving self-administered drugs or drugs infused at home from the medical benefit to the pharmacy benefit to better track therapy management and costs. Utilization management techniques, such as prior authorizations, can also contribute to use of cost-effective and appropriate therapies for various drug categories.

Another recommendation involves moving therapy administration to more cost-effective administration sites, via a stepped approach. Noting the higher costs associated with hospital-based therapy administration, the report suggests ensuring that home-infused drugs are covered under the pharmacy benefit, aligning member cost-sharing strategies with site-of-care choices, offering outreach or incentives to encourage patients to cost-effective administration sites, and narrowing infusion networks.

The full report can be accessed at http://cvscaremarkfyi.com/insights-2013/.