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Cholesterol-reducing drugs have, in the past, been the largest driver of overall drug spending growth, given that they treat an extremely widespread condition, but specialty drugs--relatively expensive medications that treat much rarer diseases and require a high level of patient services--have recently taken over as the prime driver.

According to the 2006 Drug Trend Report from Medco Health Solutions Inc., a pharmacy benefits manager, specialty medications accounted for 25.1 percent of the increase in spending on pharmaceuticals in 2005. Cholesterol-lowering drugs represented 22.7 percent of the spending growth that year. While overall drug spending increased 5.4 percent during 2005, specialty drugs grew more than three times that rate at 16.9 percent.

In 2005, 11 new specialty drugs were approved and brought to market. Growth in the specialty category is not likely to abate in the near future. The pharmaceutical industry says its pipeline is now filled with more than 400 biotechnology medicines in clinical trials for more than 100 conditions.

These innovative specialty therapies are expensive, with prices running from $6,000 to more than $350,000 annually. That's a stark contrast to the price range for a year's supply of statins to treat high cholesterol: from $630 to $1,700. Part of the issue is that generic versions of some of these blockbuster cholesterol fighters now help mitigate spending. The same cannot be said for specialty drugs. It is no wonder that last year's spending on specialty drugs to treat rheumatoid arthritis grew by 36 percent, osteoporosis by 68 percent and cancer by 26 percent.

The challenge for plan sponsors is to ensure specialty drugs reach patients who will gain a therapeutic benefit, while eliminating the potential overuse, underuse and waste. Specialty benefits managers can assist plan sponsors in balancing patient access with the need to manage cost by applying utilization, therapy and channel management tools. They also can provide specialized care required for patients with complex conditions. In addition, the specialty benefits manager can reduce costs by providing the plan with preferred specialty product opportunities.

UNIQUE COVERAGE CHARACTERISTICS

With traditional drugs, coverage falls exclusively under pharmacy benefits, and prescriptions are filled at retail or mail-order pharmacies. Specialty drugs, on the other hand, may be covered either under the medical plan, pharmacy benefits or both.

Another difference between specialty and traditional drugs is that specialty medications are often provided directly by the prescribing physician in what is known in the industry as the "buy and bill" model. The physician bills for the office visit plus the drug at a marked-up price. These unique characteristics, in combination with a robust pipeline, continue to fuel the growth of specialty pharmacy as a percentage of total pharmaceutical spending.

To manage this trend, plan sponsors must first analyze specialty drug utilization and cost within both pharmacy and medical claims. They need to answer such questions as: What is the unit-cost difference between distribution channels? Is there overuse in therapies where traditional medications are effective? What is the impact of the current plan design? Do current cost-sharing structures, such as copayments and deductibles, encourage patients to use products and distribution channels that are more costly to the plan?

In some cases, a patient might pay nothing when obtaining a specialty drug from their physician, but that option might be the most costly for the health plan. Medical claims for specialty drugs generally do not receive the same level of management as those managed under pharmacy benefits.

When plan sponsors complete their analysis, benefits need to be realigned to encourage the use of the most cost-effective and clinically appropriate products, services and delivery channels.

Prescription benefits managers have successfully limited traditional drug spending to single-digit growth during the past few years. A specialty benefits manager combines many of the same strategies and tools employed by their prescription benefits peers, with the addition of therapy management and the patient services of a specialty pharmacy to assist health plans in managing their specialty drug spending.

THE MORE IMPORTANT ROLE

The value of an effective specialty benefits management program is to reduce unnecessary health-care costs, including overuse and waste of expensive drugs and preventable hospital and emergency-room visits.

Their management tools include coverage rules for therapies where there is a potential for misuse, such as when growth hormones are used to fight aging, or when biologics are employed as first-line therapy for mild psoriasis when traditional medications may be equally effective.

In addition, a plan might avoid unnecessary drugs and medical costs by applying clinical treatment guidelines.

For instance, assisting hepatitis-C patients to remain compliant with therapy duration avoids wasting doses of their specialty medication and the costs associated with disease progression.

Another example is found with chemotherapy-related anemia treatments. Collaboration with a patient's physician presents opportunities to adjust dosing based on the patient's hemoglobin level. This results in lower therapy costs and reduced patient health risks associated with high hemoglobin levels.

Specialty benefits managers can also provide the plan with performance and outcome measurements and benchmarks. The specialty pharmacy should have systems in place that guide and document the application of standards of practice, patient interventions and physician consultations.

A specialty pharmacy treating patients with hemophilia, for instance, might avoid unnecessary hospital trips by counseling and assisting patients with infusion at home.

Nurses and pharmacists at a specialty pharmacy also can intervene when a bleeding event occurs by instructing patients how to treat it and, as a result, prevent emergency-room visits.

The specialty benefits manager needs to employ systems that capture, quantify and report to plan sponsors the intervention activities and document the value of the specialty service, irrespective of if the specialty claim is processed as a medical or pharmacy claim.

MANAGING THE BOTTOM LINE

Industry projections describe continuing explosive growth in the use of specialty drugs at 16 percent to 20 percent annually over the next several years. Growth in specialty drug utilization and cost will be the prime driver of a pharmacy benefits plan's drug trend in the foreseeable future.

There are steps a plan can take today to manage the cost and use of specialty drugs and to cut associated total health-care costs. The factors driving growth--patient demand, the number of new drugs in the pipeline and new indications for current drugs--require specialty benefits managers to navigate programs across both their pharmacy and medical benefits.

A specialty benefits manager can work with the plan sponsor to develop and execute an integrated strategy across their medical and pharmacy benefits, which can be cost-efficient and supportive of optimum clinical outcomes, while reducing the potential for waste, overuse and underuse that compounds health-care expenses.

STEVEN B. RUSSEK is vice president of clinical management and services for Accredo Health Group, a Medco company.

April 1, 2007

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