National Employer Initiative on

Specialty Drugs & Biopharma

Employer Focused, Employer Driven

Employers Becoming More Savvy about Specialty Pharmacy, but Need More Cost Controls

Contributor: Jenny Herr, Health Leaders InterStudy

Employers are becoming more aware of specialty pharma costs, according to a recent survey from the Midwest Business Group on Health, but they still have a lot of work to do in managing these drug benefits. The MBGH is a nonprofit, Chicago-based coalition of large employers whose members represent over 4 million lives and who spend more than $4 billion on healthcare benefits annually; in other words, these are organizations that should have the resources to understand specialty pharma. But in MBGH’s first survey on specialty pharma in 2011, 53 percent of respondents said they had a low level of understanding these benefits. That improved considerably in the 2012 survey, when none indicated a low level and only 4 percent indicated very little understanding. MBGH interviewed 68 employers about their benefit design for specialty drugs and biologics for the survey.

A growing awareness is encouraging since rising specialty pharmacy costs will eventually force employers to take notice: specialty pharmacy is estimated to make up 40 percent of an employer’s total pharmacy spend by 2020. But many don’t even keep track of what they’re spending on specialty pharmacy. In 2011 and 2012, the greatest number of respondents (29 and 25 percent respectively) did not know how much their specialty pharmacy benefit costs had increased. Of those that did know, 19 percent said their costs had risen 11 to 20 percent over three years in 2011 and 21 to 30 percent over three years in 2012.

While the growth in understanding is positive, most employers are still using traditional benefit design with traditional use of copays and coinsurance to manage specialty drugs, which MBGH says isn’t the best way to manage these costs. However, some are catching on: the number of employers with a special tier for these drugs with copay or coinsurance has grown in the last year.

Since more management and awareness is necessary, MBGH offers an online toolkit to employers to help them find ways to manage costs. Employers need to target case management for their workers’ top disease states. The survey shows that three diseases account for more than half of all employers’ specialty pharmacy spend: arthritis, multiple sclerosis and cancer. Most employers still need to offer incentives to get employees to take certain actions; these include waiving copays or coinsurance for using a specialty pharmacy, participating in case management or adhering to medications. Only about a third are now doing that. And eliminating 90-day fill requirements can also save money when a patient may take a week’s worth of expensive pills and then switch to something else because it’s not working.

The growing number of specialty drugs and biologics will continue to drive healthcare costs higher. Employers will be looking for creative ways to manage these drugs and ensure adherence; they will also be looking to pharma to show a strong value proposition for these expensive drugs.