Specialty Drug Costs
Prescriptions to treat chronic, complex conditions are rising — and so are the related costs.
By: Andy Yost, Benefits Risk Advisor
Innovations in treating chronic and complex conditions have eased people’s pain and improved their quality of life, but as with anything involving health care, there are significant costs involved, and they keep rising. These innovations are known as specialty drugs. Capable of treating rare or complex conditions, such as cancer, Alzheimer's disease, multiple sclerosis, and rheumatoid arthritis, one specialty medication can cost an individual—and subsequently their employer—tens of thousands of dollars in one year.
In addition to the rise in costs, the number of specialty drugs has increased astronomically over the past several years. I think we can all agree this is a great development in terms of medical breakthroughs and worthy of celebration anytime a much needed medication comes to market that can vastly improve people’s lives.
To get to that point, however, specialty drugs have to go through a painstaking research and development process, with multiphase clinical trials, and approval by the U.S. Food and Drug Administration. This heavy cost involved in getting a specialty drug to market is passed down to consumers (and the employers who subsidize their health care costs), and the cost can be—to put it plainly—outrageous at times. It’s rising faster than inflation: the annual average cost for one specialty medication was $84,442 in 2021, according to an AARP report.
While the rise of prescription drug costs is widely known, employers generally do not realize the full extent of it when considering specialty drugs, why they are so expensive, and how some of the cost burden can be managed.
WHY ARE THE COSTS SO HIGH?
As it is, the rising cost of insuring the workforce is a constant concern, with a projected rise of 6.5% this year. Considering the $14,600-per-employee average that companies already put aside for employee benefits, it’s worth understanding how the increase in specialty drug prescriptions can affect your company.
For one thing, they are being prescribed more. Specialty drugs can make up half or more of an employer’s total drug cost. Employees who need them are having to pay high copays in addition to the premiums they pay for their health care coverage. For specialty prescriptions, these are not one-time costs but drugs people usually start taking over the long term, often for the duration of their life. In fact, these types of drugs are often life-changing for someone suffering from a condition that is complex to treat. This is where the additional and sometimes unrealized costs come in: thinking about specialty drug costs to your company, also consider the on-going treatments around such medications; employees who use them will need to return to the doctor on a regular basis to ensure they are still being prescribed the proper dosage and may need additional drugs to help off set any side effects.
At the same time, you will want to consider the benefits: employees who receive proper treatment for their ailments can stay on the job longer and be more productive. Gene therapies are a good example. They can minimize a cancer’s growth and can be a preferred method for treating certain cancers over chemotherapy. Recovery can be much quicker. But, of course, with such benefits come high price tags: gene therapies have been known to cost millions of dollars. Also consider that for rare diseases (those that affect fewer than 200,000) or orphan diseases, the cost of treating them can be disproportionately high; such drugs made up 1 out of every 15 private insurance dollars spent on children’s health care in 2018, according to a Michigan Medicine report.
HOW TO CONTAIN THE COST?
While we can value the innovation and progress being made in medicine, there is general agreement that the costs we are all paying have become challenging to manage. The annual cost of a specialty drug prescription for one year can be equivalent to a person’s salary and is astronomically more expensive than both generic and brand-name drugs.
While you cannot control the costs involved in the development and prescribing of such medications, you can minimize the risk of paying more than necessary. To help manage the cost, you could take the following steps:
BE INFORMED: When breaking down the reasons for the rise in health care costs, also understand the extent of costs going toward specialty drugs; it’s not just the cost employees see when they are at the pharmacy counter but the therapies they receive from their doctors as well.
EDUCATE YOUR WORKFORCE: Are employees fully aware of their benefits and the many details involved? Are they encouraged to stick with their medication schedules as outlined by their doctor to ensure their ongoing health? Are they informed about how they can manage their specialty drug costs, with a complete understanding of their out-of-pocket costs?
With access to information that they may not easily find on their own, employees can be made aware of options such as manufacturer assistance programs that cover the drug costs of some users when they are in between jobs or on Medicare, or their private insurance does not cover their medication. They could also be made aware of the possibility of being prescribed a biosimilar, the term for a drug that is almost the same as its brand-name equivalent yet manufactured by another company and often at a much lower cost. This is an option they would need to explore with their doctor.
REEVALUATE YOUR CURRENT PLAN: The health care benefits landscape changes often and so does a company’s needs. As your company evolves, whether it’s expanding or retracting, you will want to evaluate your benefits program and explore whether any changes are in order. An independent insurance brokerage that knows your business and understands its current needs can help you stay on top of the latest pricing trends and help you decide whether you have the best plan for your company’s current situation.
INCORPORATE POTENTIAL COST SAVINGS: With the help of your broker, you may determine that your current plan is still the best fi t. What could change? Talk to your broker about cost savings that could be realized, depending on how your health plan is funded and how prescription drugs are accessed by your workforce.
None of us can control the costs of health care, but being aware of the options available and the current landscape can help your company manage its overall health care costs.
Read the full Summer 2024 newsletter here.
Resources:
https://www.prnewswire.com/news-releases/employers-lack-awareness-and-understanding-of-specialty-drugs-and-costs-130770188.html
https://www.wsj.com/health/healthcare/health-insurance-cost-increase-5b35ead7
https://www.forbes.com./sites/brucejapsen/2023/08/17/cvs-retains-blue-plans-specialty-pharmacy-business-and-thats-where-the-money-and-costs-are/?sh=2129dec8193f
https://www.michiganmedicine.org/health-lab/big-costs-small-patients-rare-diseases-study-finds