© 2009 Smart Business Network Inc. Reprinted from the March issue of Smart Business Pittsburgh

Insights Health Care

Insights Health Care is brought to you by UPMC Health Plan

In the past decade, specialty drugs have helped bring about advances in medicine that have greatly improved the quality of

health care. However, at the same time, thesedrugs have been a factor in the rising cost ofhealth care and, as a result, become a matterof concern for many employers.

According to the America’s HealthInsurance Plans (AHIP), only 1 percent ofpatients use specialty drugs, yet this usageaccounts for 20 percent of drug spending($54 billion annually). The annual cost perpatient ranges from $10,000 to more than $1 million. By 2010, the U.S. specialty pre-scription spending is expected to reach $99 billion as the volume of new specialtyproducts continues to pour into the market.

“Taking control of specialty drug costs isnot easy,” says Chronis Manolis, vice presi-dent of pharmacy services for UPMC HealthPlan. “There is not one method that is rightfor all employers. But, an approach thatincorporates evidence-based best clinicalpractices with sound cost-containment meth-ods ensures the most sensible way toapproach the problem.”

Smart Business spoke with Manolis aboutspecialty drugs and what employers can doto control the costs connected to them.

What is a specialty drug?

A specialty drug requires a complex deliv-ery system and has a cost that exceeds $5,000per patient, per year. The average cost of aspecialty drug is more than $1,500 per month.They are typically prescribed to treat rare,complex or chronic diseases.

Specialty drugs are high-cost injectable ororal drugs that typically involve intensiveclinical monitoring and patient training. Theyoften require specialized handling and/or fre-quent dosing adjustments to ensure propertreatment. Specialty drugs are sometimeslimited or restricted to certain distributionchannels, specifically specialty pharmacies.

Are employers taking a more active interestin managing specialty drugs?

According to a recent survey, 45 percent ofemployers from large companies say theyrecently reviewed their plan benefits or theirlimits for specialty or biotech drugs. This is

an increase from the 34 percent that did so in2005. Certainly, given the cost of these drugsand the number of new specialty drugs hit-ting the market in the next few years, there isdefinitely a sense of urgency and heightenedinterest with respect to the management ofthis class of drugs.

What are some of the factors driving up costsof specialty drugs?

First, a growing number of specialty drugsare in development and each year more ofthem enter the market. More than 600 spe-cialty drugs are currently in the biotechnolo-gy ‘pipeline,’ including many oral formula-tions. In recent years, about one-third of allnew drugs introduced were specialty drugsand specialty products are projected to behalf of all U.S. Food and Drug Administration(FDA) approvals by 2010. Also, an increasingnumber of common chronic conditions, suchas diabetes, osteoporosis and rheumatoidarthritis, are now being treated with this classof drugs. Specialty drugs already on the mar-ket continue to gain approvals for new uses.

An additional reason for the rise in costs isthe increase in diagnoses of people withchronic conditions. An estimated 105 million

Americans have chronic conditions, and inthe first decade of the 21st century, the num-ber is expected to increase by 16 million. Inmany cases, some diseases, such as manyforms of cancer, have become chronic condi-tions that patients can live with, thanks toregular, sometimes lifelong, treatment withspecialty drugs.

Are there generic versions of specialty drugsthat can be utilized to help reduce the cost?

Specialty drugs are biologics so there is lessof a chance that generic alternativesapproved by the FDA can be developed.Biologics are genetically engineered proteinsand are more difficult to manufacture. TheFDA does not currently have a regulatoryframework to quickly approve biologicgenerics, although this is expected to changein the next few years. Even when genericsare created, they too can be expensive; some-times the difference in price is only 30 per-cent, compared to nonspecialty generics,which are typically 60 to 90 percent less thantheir brand-name counterparts. However,there is still a huge savings opportunity forgeneric biologics as many specialty drugscurrently on the market have already lostpatent protection.

What are some strategies to effectively man-age specialty drugs?

Effective pharmacy management requiresa holistic approach to provide cost contain-ment and management of this class of med-ications. Employers should take advantageof utilization management strategies, such asprior authorization and quantity limits toensure safe, appropriate use of these med-ications in accordance with FDA guidelines.

Limiting supplies to 30 days per co-pay canreduce waste due to changes in dosing orside effects. Using specialty pharmacieshelps to control the distribution of specialtydrugs to provide high-touch clinical manage-ment of the patient, including counseling andtraining on the use of the medication, as wellas better pricing and enhanced reporting. <<

Chronis ManolisVice president of pharmacy services UPMC Health Plan

CHRONIS MANOLIS is the vice president of pharmacy services for UPMC Health Plan. Reach him at manolisch@upmc.edu or

(412) 454-7642.

How to manage the growing expenses associated with specialty drugs Interviewed by Amy Borghese

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