The headlines are scary: The prices of specialty drugs are projected to continue their unrelenting rise for the foreseeable future. Even though they’re used by just 1 to 3 percent of the U.S. population, these drugs constituted 36 percent of the $425 billion spent on prescription drugs in 2015.1 And a PricewaterhouseCoopers report projects that total industry specialty drug spend will more than double between now and 2020.2 That stomach-churning loss-of-control feeling sets in as you consider the impact on your company’s health care benefits budget.

If you haven’t spent much time on understanding how your medical and pharmacy administrators manage these drugs, now’s a great time to get educated. It’s a complex system, even by health care standards. You may learn options for controlling costs while increasing support for your employees (and their dependents) whose health and quality of life depend on these drugs.

What’s So Special?

When you hear “specialty drugs,” you may automatically think “high-cost” and “high-touch,” since they’re used for difficult-to-treat conditions such as cancer or multiple sclerosis. These drugs have been posing an increasing economic challenge for members, employers and insurers.

A recent study prepared by the AARP Public Policy Institute looked at more than 100 drugs and concluded that, on average, the retail price of a year’s worth of treatment with a single drug was more than $58,000 per year in 2013. That’s more than the median U.S. household income ($52,250) over the same time period.3 You may have heard that new drugs for hepatitis C cost more than $100,000 for the course of treatment that’s sufficient to cure the disease.4

The process in which the member receives the drug can vary widely. Many are self-administered, so the user can give the medication to themselves. Others, though, may require more expertise and must be administered by a trained medical professional. The location where the drug is administered can also vary and may result in significant cost differences, as well as differences in the type of care the member receives.

There’s also a difference in how the drug may be covered by your company’s benefits: by the medical portion or the pharmacy portion. While it may seem logical that specialty drugs would be managed under the pharmacy benefit, that’s not always the case, and it can make a difference in the cost the plan (or the employer) pays and the amount the member pays.

Typically, self-administered versions are covered under the pharmacy benefit, and those requiring clinician administration are covered under the medical benefit. These two scenarios are very different, and there’s no universal approach to covering them — both benefit options are needed.

With the high cost of these drugs and the possible complications that can occur, it’s important to provide coverage that makes clinical sense while being as simple as possible. Specialty drug therapy coverage for a particular condition should be seamless and not fragmented across benefits. The provider-patient relationship should be the focus, and your pharmacy and medical benefit coverage should be in sync.

With this understanding, you can start digging into how to ensure your company is covering the drugs so that any employees and dependents who need them are getting them for the lowest cost, through the most appropriate benefit and at the site which provides the level of care they need. Your specialty pharmacy providers should also offer the intensive, high-touch care management and support services that these patients require.

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Specialty drugs treat some of the most complex and costly medical conditions. They may require frequent dosing adjustments, special handling requirements and extensive care management. While it can be challenging to understand all the variables, the focus should be on providing coverage that ensures the most clinically appropriate and cost-effective drug for the patient. That’s the purpose of a clinical review program and requiring prior authorization or precertification for these drugs — to support consistent use of effective medications based on FDA-approved indications and treatment guidelines.

With a pipeline that is robust in specialty drugs, current and future costs are a definite concern. More drugs are entering the market at unsustainable prices, so it’s vital to ensure aggressive contractual rates and to focus on the drugs that produce the best outcomes. A drug won’t work if a patient can’t afford to take it.

To make sure your plan and those who it covers get the best therapy and the best price, ask the following questions of your medical and pharmacy plan administrators:

  • What clinical review is in place to assure that the most appropriate drug is being used?
  • What is being done from a contracting standpoint? Is an open network required, or would a narrow network offer the necessary options and bring cost savings?
  • How are providers reimbursed or rewarded for cutting costs and selecting the best therapy for the patient?
  • Are contractual pricing rates locked in or limited in how much they can increase through a cap?
  • Are there any programs in place to prevent waste of these high-cost drugs?
  • What are you doing to be aware of new drugs and prepare for their potential impact prior to market launch?

Site-of-Care Considerations

For certain drugs, there may be several options in terms of where the patient can get the drug administered. The cost can vary widely and may not necessarily be based on the level of medical support they need.

Under the pharmacy benefit, a contract with an exclusive specialty pharmacy provides clinical support, distribution services and clinician expertise that are not available at retail pharmacies.

Under the medical benefit, there are multiple site-of-care options: a physician’s office, a home infusion provider, an infusion suite or an outpatient hospital. The outpatient hospital setting is usually the most costly due to the way contracts are structured, and most members don’t often require that level of care. This drives higher claim costs and promotes insufficient use of health care resources, which can increase overall health system costs.

To help you better understand the site-of-care options and how you can help those who your plan covers get to the appropriate place, ask these questions:

  • What safeguards are in place to help steer members to the most appropriate site of care if the pharmacy benefit manager is providing clinician-infused drugs?
  • What site-of-care programs does your medical benefits provider offer? Are they voluntary or mandatory? Discuss the possible levels of member and provider abrasion and how they address them.
  • How is the certificate language written? Are there any loopholes that would lead a patient to choose care in a higher-cost setting?
  • What can your pharmacy and medical benefits providers do to help educate members on the importance of choosing the site and how their choice can affect costs?
  • Can you build a benefit to encourage members to choose lower-cost sites?
  • What is done to ensure that members who require the higher level of services offered by an outpatient setting actually receive those services?
  • Since your medical benefits provider owns the provider relationship and contracts, what are they doing to educate providers about lower-cost settings?

Finally, you should also ask your medical and pharmacy administrators what strategies they’re developing for the future. Specialty pharmacy market dynamics are changing rapidly, so what’s working today may not be effective in a few years. Progressive administrators should have a plan in place to respond as the market evolves.

With a well-planned, comprehensive specialty pharmacy benefits strategy and an eye toward the future, you have the opportunity to mitigate the rising costs of this segment of your health care spending while still supporting the care that your employees and their dependents need.

Becki Rupp joined the health care industry 11 years ago and uses her writing skills to help translate complex topics to be better understood by all who interact with health care and insurance. She currently works for Anthem, Inc., and specializes in marketing to large multistate companies and their employees.


  1. “Medicines Use and Spending in the U.S.: A Review of 2015 and Outlook to 2020.” IMS Institute for Healthcare Informatics. 2016 April.
  2. PricewaterhouseCoopers. “Medical Cost Trend: Behind the Numbers 2015.” PwC. June 2014.
  3. Purvis, Leigh and Dr. Stephen Schondelmeyer. “Rx Price Watch Report: Trends in Retail Prices of Specialty Drugs.” AARP Public Policy Institute. 29 February 2016.
  4. Kodjak, Alison. “Hepatitis Drug Among the Most Costly for Medicaid.” NPR. 15 December 2015.