This document discusses specialty drug management solutions from PwC. It notes that specialty drugs are the fastest growing component of pharmacy costs, accounting for 32% of costs while only representing 1% of prescriptions. There are concerns about the high and increasing costs of specialty drugs, variations in their management across pharmacy and medical benefits, and lack of transparency. PwC's approach involves diagnosing spending trends, formulating management strategies like innovative pricing and site of care optimization, and implementing programs to realize annual savings of 5-15% or $186,000-$558,000 for a typical employer.

1. www.pwc.com
Specialty Drug Management Solutions
The issue
Specialty drugs are the fastest growing component
of pharmacy benefit costs and are a key driver to overall
healthcare cost trends.i These drugs are characterized by:
 High cost therapies for rare and complex diseases;
 Special handling and close monitoring required;
 High risk of side effects; and
 Limited distribution network.
Currently, there are more than 400 specialty drugs in 25
disease categories, with another 700 drugs in the
pipeline.
Key concerns for plan sponsors
 High cost drugs- Specialty drugs are only 1% of
prescriptions, but account for 32% of pharmacy
benefit costs.
 High drug trends- Costs for specialty drugs
covered under the pharmacy benefit are rising with a
trend toward 50% by 2018.ii
 Variations in management -Specialty drugs are
billed through
pharmacy and
medical benefit
delivery channels,
resulting in
variations member
cost share, clinical
coverage rules, and
fee schedules for same or comparable drugs.
 Lack of transparency and insight- Oversight
across delivery channels is complex.
 Higher risk of side effects and potential for
waste-Prescribed uses of specialty drugs can result
in additional medical costs due to high risk of adverse
events.
Key challenges for plan sponsors
Employers are hesitant to restrict or decrease access and
would prefer cost sharing parity across these benefit
channels. Faced with the former challenges, they also
have to contend with the following:
 Consumers remain in the dark about
biosimiliars. Results of a recent PwC Health
Research Institute survey found that 67% did not
know what a biosimilar was.
 Specialty drug approvals continue to race
ahead. They have surpassed traditional drugs in the
past five years and, based on the FDA pipeline, this
trend will continue.
 New molecular entities are driving trend.
This includes
oral agents
and
breakthrough
therapies.iii
Successful
strategies
for management
Strategies will need to balance expectations of employees
with cost containment management programs. This will
require educating consumers, leveraging site of care
optimization, enhancing clinical programs, and assuring
appropriate use to reduce waste and improve value.
Do you have a strategy to control specialty drug utilization and costs?
Do you have visibility into both medical and pharmacy specialty utilization?
Do you understand the drug and delivery dynamics affecting specialty drug costs?
17%
14%
4%13%
5%
36%
11%
Specialty pipeline
Cancer Hep C HIV Inflam MS Orphan Other

2. Our approach to specialty drug
management
Step 1: Start with diagnostics:
 Identify top cost drivers in medical and
pharmacy channels.
 Perform competitive benchmarking of Rx channel
costs
and discounts.
 Assess coverage rules and benefits for pharmacy vs.
medical.
 Identify potential waste.
 Assess sites of care to identify cost efficiencies.
 Identify leading industry management practices.
Step 2: Strategy formulation:
Demonstrated savings opportunities ranging from 5-
15%:
 Innovative pricing;
 Enhance clinical rules to maximize control ;
 Contract benchmarking;
 Generic programs;
 Performance/Exclusive networks; and
 Site of care optimization.
Step 3 – Implementation & monitoring
 Program development and implementation;
 Trend reporting;
 Performance dashboards; and
 Vendor oversight programs.
Savings Example: Typical employer
healthcare costs, proportion of costs associated
with specialty drugs and potential savings
Plan costs (5,000 lives) Cost
Total cost (medical + pharmacy)* $64,000,000
Specialty (% of total cost) 5.8%
Total specialty cost $3,720,000
% conservative savings 5-15%
Annual savings $186,000-$558,000
PMPY Up to $111.60
Source: * Total plan cost based on 2015 PwC Touchstone Survey
results.
We would expect this saving to be realized annually over
a three year period but these savings could increase by
an additional 10-15% annually as members with high
cost diseases are newly diagnosed.
Why PwC?
We deliver strategy and execute across healthcare. PwC
can support clients with strategy and execution across
the entire healthcare ecosystem including: employers,
providers, payers, technology, pharmacy, life science,
and emerging new entrants.
Our experience includes:
 Conducting analysis of specialty drug claim
payment accuracy, utilization, contracts,
contract compliance and assessment of the
application of clinical rules.
 Conducting side by side analysis of specialty
drug utilization by medical or pharmacy
distribution channel.
Our team of experienced clinicians and professionals
provides clients with independent advice, market leading
insight, and analytic and strategic consulting
capabilities.
Let’s talk
For more information please contact:
Allan Zimmerman Greg Mansur John Grossomanides
(913) 239-9441 (213) 270-8790 (401) 602-8231
allan.zimmerman@pwc.com greg.mansur@pwc.com john.grossomanides@pwc.com
i PwC Health Research Institute, Medical Cost Trends: 2015 Behind the Numbers, June 2014.
ii Sources: CVS 2014 Insights Report, Express Scripts 2014 Drug Trends Report, PwC Health Research Institute Specialty Drug Report- “The cost of innovation: A
closer look at specialty drugs”, Strategy& analysis
iii Sources: ESI research
Benefit
Design
2%
Optimizing
Site of
Care
3%
Exclusive
Networks
1%
Enhanced Clinical Rules
6%
Innovative
Pricing
1%
Generic
Programs
2%
Benchmarking
2%
Strategy contributions to
savings potential