We can’t say enough about how the pharmaceutical benefit can become a black hole of costs for companies, and how transparency, adequate access to generics and advocacy can turn the tide against the seemingly endless price increases.
While we’ve talked before about pharmaceuticals and their high prices in general, we’re going to look at how specialty drugs in particular are dangerous to health plans and the overall bottom lines of companies.
Note: This isn’t just for companies who are still participating in standard health insurance systems; even self-insured, self-paid health systems are at risk of bankrupting their plans with these drugs.
The RiskManagers.us blog, in fact, used a self-funded plan sponsor’s experience to illustrate this problem. A company with 950 employees received a claim for kidney medication that would cost just less than $17,000 a month, for an indeterminate amount of time. That cost would drain the company’s plan more than $200,000 a year, and would affect the PEPM by nearly $18–just for that prescription.
And apparently that was in addition to another couple of ongoing high-cost medications that cost the company more than $500,000 a year.
The blog writer said it best: “Small groups like this one cannot afford to continue to cover specialty drugs… If any more like these crop up the plan will go bankrupt in a hurry.”
RiskManagers.us said that the company’s plan is “over reserved and contributions exceed claims and expenses.” So much for the self-funded benefits!
An article in the National Institutes of Health’s National Library of Medicine echoed that health insurance premiums are sensitive to the payments they must make for prescription drug costs.
“Drug costs are a significant part of premiums,” states Lori McLaughlin, a WellPoint spokeswoman. “Oncology drugs are the largest piece of the oncology treatment pie—at 25% and the fastest growing.”
Indeed, according to a 2012 article in the medical journal Blood, “Of the 12 drugs approved by the FDA for various cancer indications in 2012, 11 were priced above $100,000 per year. Cancer drug prices have almost doubled from a decade ago, from an average of $5,000 per month to more than $10,000 per month.”
The shockingly high-priced medication isn’t just limited to cancer, either; treatments for arthritis, MS and Hepatitis C also have made their way into the price stratosphere. PBM Express Scripts reported that specialty medications accounted for more than a quarter of total prescription drug spending the U.S., with projections at the time pointing to an increase to 50 percent in 2017.
That’s astounding when you realize that less than 1 percent of all prescriptions are for specialty medications.
The implications are massive. Just as a few specialty prescriptions had a massive effect on the aforementioned company, the “tsunami of expensive medicines… could literally bankrupt the healthcare system,” according to John Rother, President and CEO of the National Coalition on Health Care.
What’s the solution?
“[W]e are seeing growing numbers of employers, along with their health plans and pharmacy benefit managers, implementing many [cost-control] techniques,” said Steve Wojcik, NBGH’s vice president of public policy.
Those techniques include implementation of more aggressive use-management protocols for specialty drugs, requiring that specialty medications be obtained through a freestanding specialty pharmacy, having a specialty drug tier in the plan design for greater cost-sharing, more intentional case management for high-cost pharma patients, implementing a preapproval rule for specialty medications billed to the benefit, and requiring site-of-care management to ensure proper administration of the drugs.
There’s no question the topic of specialty drugs is a complex one, balancing legitimate treatment needs with financial sustainability (for both patients and plan managers) and cost advocacy. Let Captiva Benefit Solutions come alongside your company to sift through the complexities to arrive at a best-case strategy.