by Dianne Kiehl

Definition of Specialty Drugs
While the definition of specialty drug can vary, most agree that specialty drugs:

  • Are complex and expensive (CMS puts the threshold at $600/month, while some health plans use a $1,200/month threshold)
  • Often are used to treat chronic conditions, such as chronic cancer treatment, rheumatoid arthritis, multiple sclerosis, immune disorders, hepatitis and anemia
  • Require special storage, handling, administration and patient monitoring
  • Usually are biologically derived, rather than chemically
Specialty drugs driving pharmacy benefit costs skyward
From the Executive Director

I recently had the opportunity to attend the 6th Annual Pharmacy Benefits Academy sponsored by the Midwest Business Group on Health in Chicago. The two-day Academy focused on the issue of rapidly increasing pharmacy benefit costs, driven primarily by a wave of new high cost specialty drugs hitting the market, and employers' strategies to deal with them. The Academy reinforced my belief that the BHCG and its employer members must focus on managing pharmacy benefits and their skyrocketing costs.

Pharmacy costs – a disturbing trend
Pharmacy costs are going to continue to rise faster than the general medical inflation, primarily due to the rapid increase in the utilization of specialty drugs. The table below shows that the forecasted cost trend growth for specialty drugs far surpasses the cost trend for traditional medications over the next few years. These trends are unlikely to abate since there are presently more than 800 specialty drugs in the U.S. Food and Drug Administration (FDA) approval pipeline, which will only increase the costs and the pressure on employers to address them.

Forecasted Growth in Spending Cost Trend
for Traditional and Specialty Drugs


Specialty Drugs

Traditional Medications










Publication Source: Managed Care, June 2012
Data Source: 2011 Drug Trend Report, Express Scripts, April 2012

In addition, consider the following statistics:

  • In 2003 the specialty pharmacy industry had $40 billion in overall drug spending, which rose to $78 billion in 2008.1 That is a 95 percent growth rate in just five years. It is expected to rise to $123 billion by 2014.2
  • Currently, approximately 50 percent of all drugs approved by the FDA fall into the specialty category3
  • On a local level, BHCG employers’ pharmacy costs continue to rise faster than the rate of general medical inflation. According to Humana’s PlanCompass Report for 2011, BHCG employers saw a 12.8 percent increase in pharmacy net paid per member per month when compared to 2010.

What employers are doing
Many employers have begun to aggressively manage their pharmacy costs using a variety of techniques and strategies. While too numerous to mention in this space, here is a sampling of some of the strategies employed:

  • Using clinical effectiveness criteria to decide what to cover rather than relying simply on what the FDA approves
  • Using specialized case management firms to manage patients on certain drug regimens
  • Using specialized pharmacy consulting firms, pharmacy committees and/or employing a pharmacist
  • Engaging in extensive communications efforts to get employees to understand and effectively use their pharmacy benefits
  • Utilizing audits of their PBM to try to eradicate the growing problem of fraud and abuse

Adding to the BHCG value proposition
In the coming year, the BHCG plans to make the effective management of pharmacy benefits an educational priority. The first step will involve meeting with Humana's pharmacy team (RightSource) to discuss what they are doing concerning the rising costs of pharmaceuticals.  In addition, BHCG is considering a variety of activities to assist employers in understanding and addressing the exploding costs of pharmacy benefits, including:

  • Planning a full day educational event for members
  • Retaining a pharmaceutical consultant to provide ongoing strategic recommendations to member companies
  • Providing recommendations about how to design pharmacy benefits to incentivize their most cost effective use while supporting positive health outcomes

We are also considering conducting an audit of RightSource for contract compliance and will be assessing how they monitor for fraud and abuse. Even those of you who do not use RightSource as your PBM will benefit from BHCG’s focus on managing pharmacy benefits, since we will continue to update best practices as identified.

The BHCG is committed to helping our member employers effectively manage their pharmacy benefits. If you have ideas on how the BHCG can assist you, please feel free to reach out to me.  I would love to hear your ideas.

1 Hawes J. The specialty pharmacy revolution. Employee Benefit News; June 15, 2008.

2 Express Scripts Inc. 2010 Drug Trend Report. 2011; 5.

3 Hawes J. The specialty pharmacy revolution. Employee Benefit News; June 15, 2008.

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