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Understanding Specialty Drugs

1. What are they?

The definition of a specialty drug has become a moving target. There is no standard scientific definition. In general, they are:

• High cost products.

• Precision therapies or “magic bullets” for complex and rare diseases.

• Require close clinical monitoring and oversight.

• Have novel manufacturing techniques including living cells (“Biologics”).

• Many have special handling and distribution requirements.

• Many require special administration ( Infusion / Injection / Implantation ).

The term ‘biologic’ is often used interchangeably with specialty drugs as many are made with living cells. As most biologics are proteins, they must be injected and require special handling and storage (Humira, Remicade). More drugs are now available that are not biologics. These include Sovaldi (Sofosbuvvir), Harvoni (ledipasvir/sofosbuvir), Tasigna (Nilotinib), and Gleevec (Imatinib). Because they are not biologics, they can be taken orally and do not require special handling, storage, or cold chain custody requirements.

The Specialty Drug Industry is growing 25 times faster than the conventional drug industry. Specialty drugs currently impact only 2% of claimants but prescribing by Physicians is rising exponentially. The broader category of Specialty Drugs now equates to over 50% of overall drug spend. There are many reasons for this, not just technology breakthroughs in research and development. More self–administered injectables and oral preparations are coming to the market, therefore avoiding IV administration and infusion therapies in health centers.

These drugs are highly effective. If applied correctly in a therapeutic regimen, they can change the course of many serious diseases.

The cost of these drugs is exorbitant, in many cases up to $600,000 per year. An Employer Sponsor’s self-insured drug plan was never designed to manage the absurd cost of some of these drugs. Simply put, Specialty Drugs are posing a clear and present danger to the very survival of many self-insured drug benefit plans. The pipeline for future similar products is flowing rapidly. The affordability issue for patients is going to become even more acute.

The top specialty drug categories by spend are for Hepatitis, Cancer, Multiple Sclerosis, and Rheumatoid Arthritis. While these are relatively common conditions more products are being released to treat what are known as “rare diseases” such as Cystic Fibrosis and Paroxysmal Nocturnal Haemoglobinuria (PNH). Soliris for PNH costs up to $600,000 per year per claimant. Additionally, there are new specialty cholesterol self-injectables and oral cancer medications being launched on a quarterly basis. The new PCSK9 Inhibitors for lowering cholesterol include Alirocumab (Praluent) and Evolocumab (Repatha). Compare their $12,000 per year cost with now genericized products like Rosuvastatin (Crestor) or Atorvastatin (Lipitor) for literally less than a few hundred dollars a year. Remember these are “maintenance drugs” for high cholesterol abnormalities, a condition that can be controlled but not cured. These are therefore recurring costs for life.

2. What can you do to manage rising costs?

The financial consequences of the alarming growth of the Specialty Drug category necessitates a multi-facetted approach to containing drug spend as an urgent priority for all self-insured drug plans. The United States healthcare system is the most expensive in the world. Drugs cost up to 1000% more in the United States compared to 10 other highly developed countries. The United States healthcare system underperforms on most metrics finishing consistently last for 16 years behind 10 other highly developed countries including Canada, New Zealand, Australia, and Great Britain. (See Exhibit ES-1)

Advances in research and development have led to the availability of multiple Specialty Drugs in oral preparations that do not have special handling characteristics or cold chain custody requirements. A patient, with a valid US Attending Physician’s prescription, can voluntarily “elect” to personally import (PI) any of these preparations from a high street, bricks and mortar pharmacy like ADV-Care pharmacy in Canada fulfilling the same prescriptions to local clientele. We are staffed by fully licensed English speaking pharmacists and function in highly regulated environments in Canada, a Tier 1 jurisdictions. Many of these oral preparations, made by the same originating Drug Company are up to 80% less expensive than in the United States.

See Exhibit ES-1 overleaf from WHO and OECD

The United States health care system is the most expensive in the world. This report and prior editions prepared by the WHO and OECD consistently show the United States underperforms relative to other countries on most metrics of performance. Among the 11 nations studied in this report— Canada, Australia, New Zealand, Great Britain, France, Germany, the Netherlands, Norway, Sweden, Switzerland, and the United States—the U.S. ranks last, as it did in the 2010, 2007, 2006, and 2004 report.

Exhibit ES-1