THE MANAGEMENT OF SPECIALTY DRUGS
THE MANAGEMENTOF SPECIALTY DRUGS
CONTENTSExecutive Summary.1Introduction .2Specialty Drugs.3What is a Specialty Drug?. 3Specialty Drug Pipeline. 4Biosimilars . 5Limited Distribution Drugs. 5Specialty Benefit Design and Management .7Specialty Pharmacies. 8Formulary Management. 9Access and Utilization Management. 10Adherence and Compliance. 10Site of Care Optimization. 11Improved Clinical Outcomes . 12Preferred Specialty Pharmacy Networks . 12Future Considerations .14Endnotes.15
EX E C UT I V E S U M M ARYComplex, innovative, and high-priced specialty drugs are entering the United States health care marketat a rapid rate. In many cases, these specialty drugs offer the most effective — and in some cases, theonly — treatment for illnesses and conditions that historically had few treatment options. Given theircomplexity, these drugs often require active clinical management, considerable patient education, andsophisticated logistical support for rigorous handling, administration, and monitoring requirements.Patients taking a specialty drug often rely on enhanced clinical services to ensure safe use of the drugand optimize therapeutic outcomes.The total costs and utilization of specialty drugs will havea substantial impact on overall health care costs duringthe next decade. To address these challenges, payersrely on pharmacy benefit managers (PBMs) to managethe use of, and payment for, specialty drugs. PBMs offera variety of tools to manage specialty drugs, includingthe use of specialty pharmacies. In doing so, the qualityand continuity of care patients receive is improved, whileensuring that they derive the greatest value from theirmedications.PBMs manage prescription drug plans that includespecialty drugs for more than 266 million Americanswho have health insurance through a variety of sponsors,including commercial health insurers, self-insuredemployers’ plans, union plans, Medicaid, and Medicareplans. As such, PBMs are an essential partner to thesepayers in the health care system.sPCMAOver the next ten years, PBMs and specialty pharmacieswill save payers and patients an estimated total of 250 billion on the cost of specialty medications andrelated non-drug medical costs when compared to whatexpenditures would be with limited use of PBMs andspecialty pharmacies.1 PBM tools that have been used foryears in the small-molecule drug categories to control costsare continuing to be successfully leveraged in the specialtydrug category. The continued use of these cost-savingtools will be essential as PBMs and payers work to manageexpenses and enable access to these innovative drugs.1
I NT R O D U C T I O NThe management of specialty drugs is receivingincreased attention from patients, providers, payers, andpolicymakers due to the high prices of new specialty drugsand their aggregate impact on health care costs.2 Specialtydrugs increasingly account for a significant proportion ofoverall health care spending. This growth continues tobe fueled by an expanding target population, increasedmedication complexity, and uncoordinated pricing anddelivery systems. These factors act to generate both highlaunch prices and substantial escalation in the price ofdrugs already on the market.3To reduce prescription drug costs and increaseaffordability, health plan sponsors and payers contract withPBMs to manage traditional and specialty drug benefitsand utilization. PBMs use a number of tools to managedrug benefits effectively and increase the affordability,quality, and continuity of care that patients receive.In the case of specialty drugs, PBMs manage patientaccess to these medications, while working with specialtypharmacies to provide advanced clinical managementprograms that ensure the value of therapy is beingoptimized at the lowest possible cost.Payers share the burden of rising costs with individualpatients and taxpayers. Due to growing patient utilizationrates, a pipeline of expensive new specialty drugs, andongoing drug manufacturer price increases specialtyexpenditures are expected to account for 50 percent ofall drug spending by 2018.4In 2014, prescription drug spending growth was higherthan that of total U.S. health care spending. In partthrough the use of PBM specialty drug managementtools, over the next ten years however, drug spending isprojected to closely track overall healthcare spending.52The Management of Specialty Drugs
SP E C I A LT Y D R U G SPharmaceutical research and discovery have undergonea dramatic shift in the last decade. Historically,manufacturers focused research efforts on small-moleculedrugs that treat common conditions like high bloodpressure, acid reflux, and pain. However, market forcesand developments in science, manufacturing processes,and biotechnology have led drug companies to focus oncreating more complex specialty drugs, many of which arebiologics, that treat diseases such as multiple sclerosis,rheumatoid arthritis, hepatitis C, and certain forms ofcancer. Recently, companies have begun developingspecialty drugs for more common conditions, such ashigh cholesterol.TARGET CONDITIONS FOR SPECIALTY DRUGTREATMENT6PatientpopulationEstimatedtreatment costsHepatitis C3.2 millionpatients 100,000 percourse of therapyAlzheimer’sdisease5.4 millionpatients 35,000 annuallyOncology14 millionpatients 100,000annuallyInflammatorydisorders24–50 millionpatients 50,000annuallyHigh cholesterol71 millionpatients 10,000 annuallyConditionsPCMAWhat is a Specialty Drug?The definition of a specialty drug continues to evolveas the specialty drug pipeline advances and expands.These drugs are best defined by the full range of eachproduct’s attributes, rather than solely by cost and routeof administration. A specialty drug possesses any numberof these common attributes: Prescribed for a person with a complex or chronicmedical condition, defined as a physical, behavioral,or developmental condition that may have no knowncure, is progressive, and/or is debilitating or fatal if leftuntreated or under-treated; Treats rare or orphan disease indications; Requires additional patient education, adherence, andsupport beyond traditional dispensing activities; Is an oral, injectable, inhalable, or infusible drugproduct; Has a high monthly cost; Has unique storage or shipment requirements, such asrefrigeration; and Is not stocked at a majority of retail pharmacies.3
Specialty drugs are often more targeted and effective thanthe broad-spectrum drugs they are replacing as first- orsecond-line treatments.7 When introduced to the market,these drugs typically have little or no competition, thereforeallowing manufacturers to set high prices.More than 500,000 Americans filled prescriptions witha value of at least 50,000 in 2014 — a 63 percentincrease from the prior year — and the number ofpatients estimated to be taking at least 100,000 worthof medications nearly tripled from 47,000 to 139,000.8Historically, specialty drugs treated a small subset ofdiseases, but with recent advances, these drugs are nowused for a wide range of conditions. In 2020, nine of theten best-selling drugs by revenue will be specialty drugs,compared with three drugs in 2010, and seven in 2014.9TOP SPECIALTY DRUG THERAPIES RANKED BY PERCENT OF SPECIALTY SPENDING10Method ofadministrationTherapy classHumira (adalimumab)Inflammatory conditions11.9%InjectionEnbrel (etanercept)Inflammatory conditions8.2%InjectionSovaldi (sofosbuvir)Hepatitis C7.8%OralCopaxone (glatiramer)Multiple sclerosis5.0%InjectionTecfidera (dimethyl fumarate)Multiple sclerosis3.4%OralAvonex (interferon beta-1a)Multiple sclerosis2.6%InjectionAtripla (efavirenz/ emtricitabine/ tenofovir)HIV2.4%OralGleevec (imatinib)Oncology2.2%OralRevlimid (lenalidomide)Oncology2.2%OralOlysio (simeprevir)Hepatitis C2.1%Oral Specialty Drug PipelineBy 2016, three out of every five new drugs approved bythe Food and Drug Administration (FDA) will be specialtydrugs.11 Future growth trajectories in specialty spendingwere estimated to quadruple by 2020, reaching 400billion, or 9.1 percent of national health spending.12However, the increasing prevalence of biosimilars in themarket is anticipated to curtail the overall biologic marketvalue growth, instead reaching 262 billion by 2019.13PBMs play an important role in monitoring the pipelineand planning ahead for the therapeutic benefits and costsof these drugs. In assessing the specialty drug pipeline,PBMs and specialty pharmacies consider each drug’stherapeutic use, anticipated launch date, expected costper patient per year, clinical benefits, and the landscapeof other related treatments already on the market. Thisprocess begins 18 to 24 months in advance of a drug’s4Percent ofspecialty spendingDrug nameanticipated launch date and often involves direct inputfrom pharmaceutical companies. PBMs and specialtypharmacies rely on the use of analytics, populationvariables, clinical study information, expert opinions,and medical societies to create a comprehensive launchplan for drug coverage.PBMs and specialty pharmacies analyze pharmacy andmedical benefit data to conduct pipeline reviews. Fromthis, they translate findings into a forecast that includesexpected costs for plan sponsors, the impact the drug willhave on patient care, and expected future trends. Clinicaltrial data and national treatment guidelines inform theprojected authorization algorithms and recommendedapproaches for contracting. Following a drug’s launch,patient medication adherence is monitored with the goalof maximizing the drug’s therapeutic value, and preventingadverse events, unnecessary hospitalizations, and needfor retreatment.The Management of Specialty Drugs
CASE STUDY: High blood cholesterolHigh blood cholesterol is often treated with low-cost generic drugs. An estimated 25 million people in the U.S. takestatin drugs to treat high blood cholesterol. On average, these drugs reduce “bad” (LDL) cholesterol by 20 to 45percent14 and can cost 4 for a 30-day supply.15 With the introduction of biologics in this therapeutic category, costsare expected to rise dramatically.A new class of biologic specialty drugs, PCSK9 inhibitors, aims to treat patients with a hereditary form of highcholesterol and those at high risk of heart problems who have not responded to aggressive statin therapy.16 In initialtrials, PCSK9 inhibitors reduced cholesterol levels up to 60 percent from baseline levels.17 However, cardiovascularoutcome trials are still underway, with results expected by late 2017/early 2018.18With an annual cost of almost 15,000 per patient,19 PCSK9 inhibitors were predicted to generate about 2.5 billionin annual sales by 2020.20 However, PBMs harnessed the competition in the marketplace to extract significant savingsfrom drug manufacturers through formulary placement negotiations and drug rebating. In the coming years, PBMsexpect to spend far less on PCSK9 inhibitors than initial industry forecasts.21Expensive specialty drugs like these will continue to enter therapeutic categories previously dominated by less costlysmall-molecule drugs. This dynamic is causing payers to heavily rely on PBM drug management tools to control costsand ensure patient care is not compromised.By monitoring the pipeline and working with all necessarystakeholders, both in advance and following the launchof specialty drugs, PBMs and specialty pharmacies helppatients achieve better clinical outcomes while improvingtotal health care value.BiosimilarsWith numerous specialty drug patents expiring in thenext five years,22 manufacturers are readying newbiosimilars for introduction into the market. By 2020,12 biologic products with global sales of more than 67billion could face biosimilar competition.23 A biosimilaris a biologic product that is approved and judged bythe FDA to be highly similar to another FDA-approvedbiologic product (known as a reference product) and hasno clinically meaningful differences in terms of safetyand effectiveness from the reference product. Only minordifferences in clinically inactive components are allowablein biosimilars.24Patient advocates and payers anticipate biosimilars willfoster competition and deliver increased savings fromnegotiated discounts. Competition between a biologic drugsPCMAand a biosimilar is much more likely to resemble brand-tobrand competition than it is to resemble the dynamics ofbrand-to-generic competition.25Savings estimates range from 44 billion to as high as 250 billion over the first ten years that biosimilars areavailable to patients.26 The Congressional Budget Officeestimated that biosimilars would initially be priced about25 percent below their brand-name counterparts and afterseveral years of competition would be priced as much as40 percent below the reference product, saving the federalgovernment nearly 6 billion over ten years.27 More recentanalyses estimate the cost of biosimilars to be around 20percent lower than that of branded biologic therapies.28Nevertheless, this remains a significant reduction sincemany biologics command hundreds of thousands of dollarsfor annual treatments.Limited Distribution DrugsSome specialty drugs are only available through selectspecialty pharmacies. The decision to limit the distributionof these drugs is made by the drug’s manufacturer. Suchrestrictions are often associated with the small population5
of patients who use the drug, and the unique monitoringparameters, high cost, and complex handling anddistribution requirements for each specialty drug.These limited distribution specialty drugs often treat smalland geographically diverse populations and cannot beproperly stocked, supported, and supplied through retailpharmacies, so they are made available through qualifiedpreferred specialty pharmacies.29 Limited distributionmodels enable manufacturers to:30 Meet additional FDA requirements imposed during thedrug approval process; Track drug inventory to prevent diversion andcounterfeiting; Maintain the integrity and quality of drugs as they movethrough the supply channel; andWhile retail pharmacies might hope to dispense limiteddistribution specialty drugs, few are equipped to deliverthe clinical management and logistical services suchproducts require. Manufacturers point to the obstacles andimpracticality of producing enough drug product to stockthe nation’s 64,000 retail pharmacies, while also efficientlymanaging the large scale of expired products.Some manufacturers maintain their own pharmacies,either wholly owned by themselves or through a thirdparty. These pharmacies are sometimes referred toas specialty pharmacies, but are actually standarddispensing pharmacies as they typically dispense onlyone manufacturer’s drug(s), lack recognized specialtypharmacy accreditation, do not offer the full suite ofservices typically found in a specialty pharmacy, andare not aligned to payer plan design. Ensure that special dosing and lab monitoringrequirements are followed.6The Management of Specialty Drugs
SP E C I A LT Y B E N E F IT DES IG N AN DM A NA G E M E N TPBMs employ a number of strategies and tools to supportthe needs of patients who are prescribed specialty drugs(as well as their health care providers) while controllingcosts for health plans. PBMs have developed key strategiesto maintain access to high-quality care while ensuringthat money spent on specialty drugs is not wasted. Thesestrategies include: Negotiating rebates from drug manufacturers:Rebates are a form of discount that are contractuallynegotiated between the manufacturer, who is primarilymotivated by the opportunity to gain market share,and the PBM, who requires the manufacturer to returnsome of the money paid for the product. These rebatesallow the PBM to provide savings to its payer clientsand patients. Negotiating discounts from drugstores: Pharmaciesagree to discounts in order to participate in a plan’sspecialty pharmacy network. The more selective thenetwork, the greater the discount since each pharmacywill benefit from increased business.sPCMA Offering more affordable pharmacy channels: PBMmanaged mail service and specialty pharmacy channelstypically give plan sponsors deeper discounts thanretail pharmacies. These channels also help encouragethe use of preferred, lowest-cost drug products foradditional savings. Optimizing site of care: PBMs manage where certainspecialty products can be administered, such as ina patient’s home instead of more expensive sites likeoutpatient facilities or physician offices. Encouraging use of lowest-cost drug option: PBMsuse several tools to encourage the use of the lowestcost drug option. These include formularies, tieredcost sharing, prior authorization, step therapy protocols,generic incentives, consumer education, and physicianoutreach. Reducing waste and improving adherence: PBMsuse drug utilization review (DUR) to reduce waste suchas poly-pharmacy and implement patient adherenceprograms to help patients adhere to their prescriptionregimens. Both programs improve clinical outcomes,as well as control prescription expenditures.7
CASE STUDY: Hepatitis CThe initial pricing controversy around hepatitis C drugs provides an example of the benefits of competition in the drugmarketplace. An estimated 3.2 million people in the U.S. have chronic hepatitis C, with an additional 30,000 newcases annually.31 When Gilead’s hepatitis C treatment Sovaldi was introduced to the market, the cost of treatmentrenewed a national debate on the high price of drugs.Offering a projected cure rate of 95 percent, Sovaldi entered the market at 1,000 per pill — over 84,000 fora typical 12-week course of treatment. Once associated medical costs were factored in, the total cost of treatmentneared 100,000.32When a competing drug entered the market several months later, PBMs were able to gain leverage on the pricingof the two hepatitis C drugs. After a year-long campaign advocating for more reasonable drug pricing, the PBMExpress Scripts announced an agreement with AbbVie, makers of the new hepatitis C medication Viekira Pak . Theunprecedented arrangement addressed affordability for payers and access for patients.33 In turn, this new marketplacecompetition prompted Gilead to begin offering an average discount of 46% on their drug.34Due to this competition, the cost to cure hepatitis C is now at a level that allows health plan sponsors to expandtreatment options to a broader range of patients, not just those with the most severe cases.35 These unexpectedly largeprice cuts provide more evidence that competition gives payers and PBMs enormous power, even when purchasingdifferentiated, highly valuable therapies.36Specialty PharmaciesSpecialty Pharmacy FunctionsSpecialty pharmacies were established in directresponse to the industry’s need to better procure, store,a
High blood cholesterol is often treated with low-cost generic drugs. An estimated 25 million people in the U.S. take statin drugs to treat high blood cholesterol. On average, these drugs reduce “bad” (LDL) cholesterol by 20 to 45 percent14 and can cost 4 for a 30-day supply.15 With the introduction of biologics in this therapeutic category .
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(e.g., cancer treatment drugs) These drugs usually have special shipping, storage or use instructions You pay less for these drugs than for Non-preferred specialty drugs Tier 5 Non-preferred specialty You'll pay more for these specialty drugs because there is a Preferred specialty available SO BO
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