Specialty Pharmacy: A Five-Pronged Approach to Managing Cost


Specialty pharmacy is beginning to implement its own set of strategies in order to manage the cost of one of the most expensive sectors of the pharmaceutical industry.

Whether we like it or not, we all have to be an accountant at some point in our lives. We will inevitably have to create a budget, pay our bills, allocate part of our paycheck to a savings or retirement account, and manage our spending on the those shiny shoes or expensive meal that we may not need but we certainly desire.

There are effective strategies to use when considering the cost and spending of the things we need to maintain the lifestyle that we want for ourselves and to which have become accustom. Specialty pharmacy, although slightly more complicated than managing the cost of an electric bill, is beginning to implement its own set of strategies in order to manage the cost of one of the most expensive sectors of the pharmaceutical industry.

What is Specialty Pharmacy?

Well friends, that is the $218 billion question. According to IQVIA (a health information technology and clinical research company), that was the amount of the 2018 specialty drug spend. This accounted for more than 48% of the total drug spend for the entire pharmaceutical industry for that year. Although costs have been an indicator of what qualifies as a specialty drug in the past, clinicians would argue that a drug should be defined by its medical efficacy and not its cost. Specialty drugs can have several characteristics including but not limited to:

  • Medication designed for a person with a complex or chronic medical condition.
  • Treats rare or orphan disease indications.
  • Requires additional patient education, adherence, and support services.
  • Has a high monthly cost.
  • Has unique storage or shipment requirements, such as refrigeration.

Cost is still conspicuous attribute of defining what is considered a specialty drug. With this in mind, managed care organizations have begun to implement strategies in order to effectively manage the exorbitant amount of spending and cost that surrounds this important but expensive sector of pharmacy. These strategies are contract clarity, adjudication, utilization management, clinical management programs, and patient counseling.

Due to the fact that cost is used a determining factor for defining a specialty drug, it is important that the contracting designed to address the specialty drug spend be specifically outlined within a payer contract. Pharmacy benefit mangers (PBMs) draft contracts with organizations that outline pricing models and rebate structures for plan sponsors or payers that include a specialty drug formulary. According to Managed Care Magazine, contracts should contain the following elements:

  • Define a specialty drug as all drugs on an exhibit list, including every specialty drug available, and drug-by-drug minimum discount guarantees.
  • Should include an amendment clause for the exhibit list as new drugs enter the market.
  • Should solidify pricing terms to prevent manipulation.
  • Require PBMs to provide pass-through pricing for every drug that is dispensed, with invoicing that shows the PBM’s actual drug cost and other possible cost-saving measures.

The next strategy is adjudication, or the process of paying pharmaceutical claims. Adjudication for specialty drugs is usually processed through PBMs in either a carved-in or carved-out model of the pharmacy benefit plan. There is tremendous potential in managing costs with specialty drug spend based on how PBMs use the adjudication process.

But how do PBMs do this? One way is via National Drug Codes (NDCs).

PBMs rely on NDCs for specialty drugs to adjudicate claims. The precise numbering system that NDCs provide allow PBMs (and payers for that matter) to effectively track and control the dosage level, quantity dispensed, and utilization frequency of all drugs that they have defined as specialty within the plan’s formulary.

Followed closely by adjudication is utilization management. As mentioned above in regards to managing spending spend via NDC identification, formulary management as a whole is becoming a fundamental and necessary strategy for specialty drug spend. Being able to track the dispensing and dosage levels of all specialty drugs is paramount in managing specialty drug costs and spending.

Utilization management is crucial if PBMs are to efficiently manage drug spending because of the tools built in to the management system.

PBMs and payers employ utilization management tools, such as prior authorization and step therapy, to ensure the appropriate use of medications and manage total drug spending. Other tools such as quantity limits and partial fills have also shown to be effective.

This is especially true with oncology drugs due to the fact that patients may have adverse effects and/or go into remission after a regime has commenced. Utilization management limits the dispensing and consumption of specialty drugs inappropriately and excessively, which consequently, lowers treatment costs.

Clinical management programs are another spending tool centered around the actions and behaviors of the patient. Clinical management programs focus on achieving the optimal therapeutic result via the monitoring of a patient’s specialty drug therapy.

Adherence programs are an excellent example of this.

Adherence programs aim to maintain a patient’s high level of fidelity to their specialty drug therapy by communicating, encouraging, and engaging with patients (and their providers) about their specialty drug therapy.

By increasing the level of interaction with the patient, (whether by text, email, or phone call), clinical programs can offer valuable levels of communication via patient education, refill reminders, and outreach and consultation services. These programs can help patients manage their adherence to these high-cost medications and provide the tools to build-up a supportive system of trust between patient and provider.

Lastly, is the idea of patient counseling. This is somewhat inclusive of adherence programs but with a greater focus on the lifestyle changes and circumstances usually associated with the administration of a specialty drug therapy into a patient’s life.

Patient counseling is truly centered around mitigating the adverse effects of specialty drug therapy and establishing a relationship that fosters support and assistance with any underlying consequences that may hinder or prevent a patient from maintaining a high level of adherence to their medications.

Managing specialty costs can seem to be as complicated as the conditions that they are designed to treat. However, with the proper attention to detail, and a vigilant fidelity to the aforementioned strategies aimed at addressing the high costs associated with specialty drugs, we can ensure that proper spending, distribution, consumption and the level of support needed to increase the quality of life for the patients who need them.

About the Author

Ryan Stept, MSc, earned his Masters of Science in Healthcare Administration from Saint Joseph's University and has recently earned his Masters of Pharmacy Business Administration program from the University of Pittsburgh. Currently, Ryan works for the University of Pittsburgh, School of Pharmacy, Program Evaluation and Research Unit as a program implementation specialist. Ryan’s work is primarily focused on the opioid epidemic and provides technical assistance to stakeholders across the commonwealth in their mutual efforts to reduce opioid death rates in Pennsylvania. Ryan strives to continue his work as a healthcare professional and utilize his in-depth understanding of the business of medicines.

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