How can stakeholders save money on the skyrocketing cost of specialty drugs?
How can stakeholders save money on the skyrocketing cost of specialty drugs?
As we prepare to turn the page from 2014 to 2015, the rise of specialty drugs is expected to continue well into the future.
Specialty drug spending is projected to account for nearly half of all pharmacy spending within the next 2 years as a result of the combined impact from the Affordable Care Act (ACA) and a robust drug pipeline, according to the Catamaran Corporation. Spending on prescription drugs is estimated to increase in the retail space by $227 billion between 2010 and 2020, as the average cost of a specialty prescription grew 17% last year as a result of increased utilization and more expensive products.
Truveris Inc, a leading pharmacy benefit pricing and analytics company, publishes a National Drug Index each month, which is an indicator of pricing changes taking place for brand, generic, and specialty drugs in the United States.
In an interview with Specialty Pharmacy Times, Truveris CEO Bryan Birch discussed the latest pricing trends in this exploding area of health care, and suggested some possible solutions to the escalating cost of specialty drugs to allow greater patient access.
SPT: What are some of the most significant current trends in specialty drug pricing?
Birch: I was a little surprised to see WAC (Wholesale Acquisition Cost) prices have not increased as much over the 8.3% that we have in our National Drug Index, which is good in a way. But then you have the large volume of NDCs coming into the specialty market. The PBMs are putting more drugs on their specialty list, which are a lower discount, so for the most part normal pills, capsules, and small molecular structure on branded products. What Truveris does, our sole focus is to save money on prescription drugs all the way down to the member level, so we are really hyper-focused on the issue. As we see a breadth of specialty products moving on to that specialty list, we know there is less and less discount to be garnered by the payer, so we’re really focused on making sure those lists are as fair as possible. But there are more and more drugs coming out into the specialty category. Some of those are absolutely warranted, such as for cancer treatment and for opaque diseases, but some potentially are not. So the definition of specialty drugs, some people look at how CMS looks at a specialty drug by cost administration or by special handling, but not everybody adheres to those definitions.
SPT: How do you think the Affordable Care Act will ultimately impact specialty drug pricing?
Birch: I think payers will continue to use prior authorization and step therapy procedures on specialty drugs, unless it’s a pure brand innovator drug where there is no alternative therapy. That’s where the member will end up paying more and more out of pocket. But there is an alternative, that’s where you will have more and more step therapy. So as drugs are released that goes through not only at the PBM level but at the payer level, and quite frankly the payers end up paying for this and ultimately the consumer. So from an ACA perspective, there’s more and more member liability at the point of care and at the point of sale. Some of these plans you have to spend $5000 before you get a benefit, and then the benefit kicks in and it’s coinsurance on high cost specialty drugs, so the member will end up paying for this. I do believe the patent laws have a lot to do with this.
Patents are often issued in the clinical trial phase or even before, and those patents basically don’t allow pharma companies to get a lot of their research and development back because the tail may only be 5 years of marketability, or even less. So with specialty drugs, there’s not necessarily a generic pathway. Manufacturers have an incentive to make drugs that are specialty without a generic pathway because the actual patent itself isn’t giving them enough runway. I think if the patent laws were changed to give, say a guaranteed marketability of 10 years, I think you’d see a few things happen. First, you would see lower WAC prices at the time of introduction to the public, so it will lessen the blow for those that have coinsurance. You would also have potentially more and more drugs, instead of going the specialty route, they would go the pill and capsule route because they would have a guaranteed offering to the public and make back some of the R&D. If that happens you get bigger discounts for a longer period of time.
SPT: How do you think the introduction of biosimilars in the United States will affect drug pricing?
Birch: There is really not a pathway for biosimilars that is really clear and defined. If there is a clearly defined biosimilar pathway, there is still going to be a lot of scrutiny around whether it’s the same drug coming out versus the brand innovator drug. That is definitely a challenge, but if you’re a pharma company you have an incentive to try and create a regimen with a biologic in there because the generic pathway still has a long way to go.
SPT: What specialty condition treatment areas are poised for significant growth in the coming years?
Birch: Obviously hepatitis C virus had one of the biggest drug launches in history. Any type of actual innovator drug that comes out in any of those classes, so you have a lot of drugs in the cancer treatment area, Alzheimer’s, hepatitis C, and those are ones that are going to be brand innovator drugs without necessarily having an alternative treatment pattern. So they will not necessarily be prior authorization or have step therapy on them, and then the payer has to decide if they’re going to cover them or not.
SPT: Sovaldi has garnered a large amount of attention in hepatitis C treatment, but what are some other developing trends in HCV treatment?
Birch: There are drugs with different administration and different handling. So if they’re treating the same disease then the question is what are the side effects of the different drugs, as well as the preparation, handling, and administration of them? So obviously the easier to administer, the more accepting the drug will be to the public, like a pill capsule or small injection once a month rather than other things. The beauty about capitalism in the US is if someone is making a margin, there will be new entrants to reduce that margin to zero. We have a lot of issues as it relates to that. You have the patents, you have the FDA that has to make sure they’re expediting some of the reviews, because you and I are going to be paying for all these regimens ultimately.
SPT: Will increased competition eventually bring down the high cost of these HCV drugs?
Birch: This is where I go back to the patent laws. I don’t know personally how many years left of patent life they have on (Sovaldi). But if there was an extension of patent life, I truly believe the WAC prices would be different. I also believe that in exchange for the increased patent life on some of these very expensive drugs, the US government should be looking at equality among civilized nations. Why is it that we’re paying $100 a dose for something, while the UK and Canada pay $60 a dose? Because we can afford it. If we have a 5-year global equalization among civilized nations in order to look at the patent marketability of the United States regulations, then our entire drug costs can go down because the rest of the world’s costs are going up. Now I’m not talking about uncivilized nations. It’s certainly a very complex issue, but I think it can be tackled by the right people, and the industry should support it.
SPT: Are there any drug pricing trends coming down the road that specialty pharmacies need to be aware of?
Birch: The pipeline, keep an eye on the pipeline. Everyone is keeping an eye on it, because there could be additional drugs coming in over the next 5 years, but are payers going to put them on the approved list? That’s ultimately the issue and that’s going to be a very interesting dynamic. Cancer treatments, Alzheimer’s treatments, whatever it may be, if it’s costing $200,000 per year does the payer say yes?