Employers aim to curb specialty drug costs

Employers must take immediate steps to control the rising cost of specialty pharmacy as it outpaces the rest of prescription drug spending, according to a new report from Towers Perrin.

The 20th Annual Towers Watson/NBGH Best Practices in Health Care Employer Survey of 487 large U.S. employers, shows that specialty pharmacy drugs are significantly driving up prescription drug spending. In particular, while pharmacy currently represents about 20% of employer-sponsored medical benefits costs, it is increasing at a rate that accounts for roughly half of medical cost inflation.

Currently, 26% of employers’ medical plans address specialty drug cost and utilization and that number is expected to triple in three years. In addition to what they are already doing, 53% of employers are adding new coverage and utilization restrictions for specialty pharmacy and another 32% of employers plan to add them by 2018. Such restrictions include requiring prior authorization and limiting quantities prescribed based on clinical evidence.

“Not managing specialty pharma means it will be more difficult to control rising healthcare costs overall,” says Eric Michael, U.S. central division pharmacy leader for Towers Watson. “Also, because specialty drugs are complicated to administer, the cost related to administration often come through the medical benefit rather than through the prescription drug benefit. This makes it harder to get a clear picture of how much is actually being spent.”

According to Michael, the top three findings from the report are:

• Pharmacy spending is increasing at a rate that accounts for roughly 50% of medical cost inflation.

• Fifty three percent of employers are adding new coverage and utilization restrictions for specialty pharmacy.

• Sixty three percent of employers either exclude or plan to exclude by 2018 inappropriate compounds from their benefit coverage.

Michael advises that executives should:

• Implement strategies to mitigate the rising cost of pharmaceuticals include maximizing use of generic drugs and developing clear policies on the use of specialty and compound drugs.

• Understand the full scope of specialty pharmacy cost by looking both at the medical and pharmacy spend. This gives a more realistic picture of a plan sponsor's financial exposure.

“As the cost of healthcare and particularly the cost of pharmacy continue to rise, employers will need to be proactive in managing their costs through the strategies described above,” Michael says. “Meanwhile, they will have to strike a balance and make sure they still give employees access to effective, affordable treatment.”