Specialty drugs and health care costs
As the year came to a close, many employers were reviewing 2014 expenses to help plan spending for the new year. One of the main expenses for many organizations is the cost of employees' health care. These costs seem to go up every year, but why?
According to America's Health Insurance Plans, a national trade association representing the health insurance industry, health care spending nationwide rose at its fastest pace in 10 years in the fourth quarter of 2013. The main reasons behind health care cost increases are the rising costs of medical services such as hospital care, costly new prescription drugs and medical technologies, and the impact of hospitals and physician offices consolidating, leaving less competition.
One of these reasons may surprise employers namely, the availability of new and costly prescription drugs, also known as specialty drugs. What are specialty drugs, and why are they so expensive?
Specialty drugs are used to treat complex conditions such as cancer, cystic fibrosis, hemophilia, multiple sclerosis or psoriasis. For example, you may have seen advertisements or news reports about the drugs Humira for treating inflammatory conditions such as rheumatoid arthritis or Crohn's disease, and Harvoni for treating hepatitis C.
Specialty drugs are usually injected or infused, but may also be taken orally. And many of these drugs are showing great results in treating complex, chronic conditions and allowing patients to live fuller, longer lives.
Since specialty drugs are used to treat serious conditions and can be complex to manufacture, the cost of using these drugs can be significant. In fact, the 2014 EMD Serono Specialty Digest reports that 3.6 percent of patients who use specialty drugs account for 25 percent of all health care costs.
Data from Express Scripts, a national pharmacy benefits manager, shows the average cost of filling a specialty drug prescription for one month is $1,800 compared to $54 for other prescription drugs. CVS Caremark also projects that the costs of the entire specialty drug market will reach $402 billion by 2020. Why? Thanks to advanced medical research, more than 900 specialty drugs are currently in various stages of development.
What does this mean for employers and the cost of health care for employees?
Knowing that an employee who has a complex medical condition such as cancer now has access to new and better treatments is certainly good news. But employers must also understand that when health care costs increase for employees, so do health insurance premiums. The National Institute of Health Care Management Foundation attributes 97 percent of the rise in premium spending between 2006 and 2010 to increased spending by insurers to cover the actual health care costs of members.
We encourage employers to be aware of the drivers of health care costs and health insurance premiums and to work with their health insurer to help manage those costs.
For example, many health insurers implement utilization management procedures to help ensure that members are receiving coverage for the right medications to treat the right conditions.
Many insurers work with employers to offer workers access to lower cost generic drugs when appropriate, and most also offer case and disease management programs to help chronically ill workers stay on track with self-management.
At Blue Cross of Northeastern Pennsylvania, we utilize a team of clinical professionals including pharmacists, doctors and nurses to conduct ongoing reviews of specialty drug use to ensure that our members have coverage for appropriate medications to treat their complex conditions.
This review also helps ensure that specialty drug treatment is working effectively and is helping the member get better.
As 2014 comes to an end, employers should take the time to review their health care costs and work with their insurer to find ways to better manage those costs, including understanding two of the biggest drivers of health care costs specialty and prescription drugs.
Dr. Nina M. Taggart is vice president of Clinical Operations and chief medical officer at Blue Cross of Northeastern Pennsylvania.