Catalyst for Payment Reform

Specialty Pharmacy


Specialty Pharmacy

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What Is Specialty Pharmacy?

Specialty pharmacy medications are high-cost injectable, infused, oral, or inhaled medications that generally require some supervision and monitoring of the patient’s therapy by a clinician. While there is no standard definition, specialty drugs generally treat chronic, complex, and/or rare conditions, are high cost (usually more than $600 per month), require special storage, handling, and administration sites, and involve a great deal of patient and provider education, monitoring, and management.


Why Should Employers and Other Health Care Purchasers Care About It?

Specialty pharmacy is the fastest growing sector of pharmacy spending today with a projected growth rate of 17 percent[1] and spending is expected to double in the next five years.[2]  In the last 20 years, the number of specialty pharmaceuticals available has increased from 10 to more than 900.[3] Although only 1-2 percent of prescriptions are for specialty drugs, they account for approximately 20 percent of total pharmacy spending.[4]  In 2012 alone, employers paid $87 billion for specialty pharmaceuticals, comprising 25 percent of total drug spending.[5] These costs are anticipated to grow and account for at least 50 percent of drug spending nationwide by 2019.[6] The development of many new specialty drugs are underway, mostly in the area of oncology.

This looming challenge will be difficult to overcome due to several factors including intricate drug pricing and contract negotiation, a multi-level specialty pharmacy supply chain, and complexities surrounding attributing a specialty drug to either the medical or pharmacy benefit.


What Are the Latest Trends in Specialty Pharmacy?

 Recent pharmacy trends in the media focus on relatively “old” inexpensive drugs that are increasing in price by exorbitant amounts.  However, specialty drugs are different in that there are often few, if any, alternatives—allowing manufacturers to command high prices.  Additionally, there are insidious incentives and other practices that get in the way of free market dynamics.  These practices include: patent exclusivity, lack of options for “tiering” (there are few if any therapeutic alternatives), “evergreening” (making slight modifications to the drug to keep a patent exclusive), adding indications, high prices, and lack of price regulation.

Employers and other purchasers can use a variety of strategies to address specialty pharmacy issues, such as: data analysis, strategic formularies, medical carve-outs, prior authorization, step therapy, and appropriate site-of-care administration.


How Can Purchasers Apply a High Value Specialty Pharmacy Strategy?

 Purchasers can work with their health plan, third party administrator or pharmacy benefit manager (PBM) to implement a variety of payment methods to align incentives and allow access to life-saving drugs while improving health outcomes and ensuring they are administered appropriately.  In addition to the strategies listed above, purchasers should work with their pharmacy partners to adopt specialty pharmacy-specific payment reform strategies such as: bundled payments, bundled payments paired with reference pricing, capitation payments that include pharmacy, shared savings and shared risk payments that include pharmacy, incentive payments, non-payment policies, and outcomes-based contracting with the provider and/or manufacturer.


Want to learn more? Check out these additional resources!




[2] 2015 Willis Towers Watson/NBGH Best Practices in Health Care Employer Survey


[4] 2015 Willis Towers Watson/NBGH Best Practices in Health Care Employer Survey



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