Alex Jung: It’s time to Think Differently about Specialty Drugs

It’s time to abandon the term “specialty drugs,” argues Alex Jung, founder of Alex Jung Consulting at a forum sponsored by the Midwest Business Group on Health. When 53% of drug spend is considered specialty and new drugs launch at high prices, specialty drugs have become the norm. "When it’s more than half of spend, is it really special,” she asks. I don’t think specialty pharmacy exists anymore.”

Alex Jung

The term specialty drugs, she pointed out, was coined 15 years to isolate that 2% to 3% of spend. Now most of the newer drugs are not oral solids. They are injectables or infusions and require special handling, storage and administration.

The average cost of specialty drugs on the pharmacy benefit have increased from $3,604 in 2016 to $4,562 in 2021. Growth in specialty drug per member per month (PMPM) was 14.2% in 2021, and PMPM specialty drug cost has doubled from $615 in 2016 to $1,295 in 2021.

Jung challenged employers to talk differently and think differently about how they pay for the more complicated and costly specialty medications. “We need to start calling these drugs what they are: patent-protected brands.”

Jung suggested that employers develop plan designs that consider affordability, with new tier categories: cash-pay generics, covered generics, and branded. Many generic drugs available today cost less than a patient’s copay. “This is a category where there is a significant amount of spread being made by PBMs,” she said. “This also contributes to DIR ‘clawbacks’ for the pharmacy where the difference between the price and the copay are clawed back by the PBM.”

Biosimilars were expected to help address the high costs of some drug but plans and employers are prioritizing rebates and not price reduction. Biosimilars may not be the lowest new costs therapy if the innovator brand is willing to offer rebates or price concessions.

This, she said, is a short-term strategy that will not result in long-term savings. “You are still taking rebates and you are killing the biosimilar market,” she said to the employer audience. “Why are we taking a rebate on a generic drug. In Europe, the biosimilars have been successful and have lowered costs. Even though utilization has gone up in the United States, market access has not.”

June cautioned employers about making decisions based on price instead of clinical efficacy. She suggested that decisions around step therapy and prior authorizations based on price are likely to result in a short-term savings but have significant long-term costs.

This, she said, is especially true with autoimmune disorders such as inflammatory bowel disease, rheumatoid arthritis and plaque psoriasis. When they are not controlled, they can create irreversible damage to the body, which results in higher morbidity and higher mortality. “I implore you not to make the financial choice over the clinical efficacy. The reason your costs are going up is that is what you have been doing. And you have created a group of patients [with higher cost medical care] who have come back to haunt you.”

The issue, Jung said, is not likely to be solved when higher-cost employees leave a company. The odds are that those who replace them will have a similar health profile. From an actuarial perspective that assesses risk score, they are likely to be identical. “You are not doing anything for your costs; you are just rotating risk,” she said. “If you are messing around with employees’ medications, guess what happens to that risk score? You have savings, you think. But your employees could be a ticking time bomb because they are no longer on their meds.”

And as a result, self-insured employers will likely face higher reserves because of the high risk scores of their employees.

Jung also suggested that employers should not be trying to cover and pay for gene therapies and other one-time cures — such as hemophilia A treatments Altuviio, which was approved in February 2023 and Roctavian, with a PDUFA date of June 30, 2023. Payers and society are grappling with how to pay for gene therapies that have with million price tags.

“Hemophilia gene therapy should not be covered by employers; you should be pushing for a national risk pool. We need a public option for patients like these,” Jung said. “You don’t have absorb all these costs. You just have to think differently about the risk for them.”

She said a public option for funding high-cost specialty therapeutics is inevitable. There are two trends colliding here. This is the result of an aging population and more such precision therapies are expected to be approved.