Employers Seek to Halt Rising Specialty Drug Costs

Aggressive new approaches considered to curb financial hit from prescription drugs.

With increasing costs for specialty drugs, employers are taking a more aggressive approach to diminish the impact of prescription medication spending, according to a recent report by global professional services company Towers Watson.

As a result of high cost specialty drugs and the growing use of compound drugs, prescription drug spending has become a hurdle for employers seeking to keep health care expenditures under control. Employers are responding with specific plans that control spending into the immediate future.

“Although pharmacy represents approximately 20% of employer-sponsored medical benefits costs, it is increasing at a rate that accounts for roughly half of medical cost inflation and should be a top priority for employers,” said Eric Michael, US central division pharmacy leader for Towers Watson. “The price, utilization and delivery of specialty prescription drugs, many of which require special handling or delivery, are a top pain point for employers. Frustrated by their lack of success in controlling these growing costs, employers are beginning to consider new aggressive approaches.”

In a survey evaluating best practices in health care among 487 large US employers, Towers Watson found 26% of employer-sponsored plans specifically address specialty drug cost and utilization. Furthermore, employers are taking action with several tactics that directly address the pharmacy benefit.

The survey found 53% of employers added tighter restrictions on coverage and utilization for specialty pharmacy, including prior authorization requirements and by limiting quantities based on clinical evidence. An additional 32% of employers are projected to add these restrictions by 2018.

“Because of the complexity involved in delivering specialty drugs, related costs are often paid through the medical benefit, rather than the pharmacy benefit,” Michael said. “When this is the case, employers look for data and reporting from the health plan to determine usage patterns to help them estimate their financial exposure.”

A growing number of employers are expected to exclude inappropriate compounds from benefit coverage, as 39% have taken this action already with an additional 24% expected to follow by 2018.

“[C]ompounds are prescribed by physicians, but prepared by pharmacists who mix or adjust drug ingredients to customize a medication for a specific patient. Given that the compounding process results in higher cost and their use may not be FDA-approved in compound form, health insurers increasingly will not cover them,” said Carmelina Rivera, US west division pharmacy leader for Towers Watson. “Left unchecked, pharmacy costs will continue to soar, creating an urgent need for employers to reevaluate their pharmacy plans and benefits to include maximizing use of generic drugs, and develop clear policies on the use of specialty and compound drugs. The challenge is to prudently manage pharmacy costs while enabling employees to access effective and affordable treatment.”