Third-party administrators (TPAs), employers and employees are increasingly concerned about the growing cost of specialty drugs. Relief, WellDyneRx believes, will come to those employers and TPAs that (1) encourage specific public policy changes and (2) partner with pharmacy benefit managers (PBMs) that own best-of-breed specialty pharmacies.

1. The Spiraling Cost
of Specialty Drugs
Third-party administrators
(TPAs), employers and
employees are increasingly
concerned about the growing
cost of specialty drugs. Relief,
WellDyneRx believes, will come
to those employers and TPAs
that (1) encourage specific
public policy changes and
(2) partner with pharmacy
benefit managers (PBMs)
that own best-of-breed
specialty pharmacies.
Public Policy, Best-of-Breed Specialty Pharmacies
Can Help TPAs and Employers Control Spend
8.2015 ©WellDyne
Nicole Hancy, PharmD
Director of Clinical Services
WellDyneRx

2. Specialty Medication Costs Will Rise Dramatically
Specialty drug spend is predicted to
increase 63% between 2014 and 2016.
Specialty medications constitute a growing share of the prescription drug spend in
America. Overall drug costs in 2012 totaled $262.3 billion. Specialty drugs comprised
25 percent of the total, and their slice of the pie is poised to grow dramatically.1
While the cost of traditional medications will grow modestly with the entry of generics,
specialty drug spend will rise 63 percent between 2014 and 2016. Some say it will top
$400 billion by 2020. If this forecast holds, specialty medications that year will claim
half of all prescription drug spending.2
Specialty drugs are prescription medications that require special handling, administration
and monitoring. These drugs treat complex, chronic and often costly conditions, such as
multiple sclerosis (MS), rheumatoid arthritis, hepatitis C and hemophilia.
An especially costly category of specialty medications is orphan drugs. These drugs
treat diseases such as cystic fibrosis that afflict a small portion of the population, up
to 30 million Americans.3
Though small in size, the orphan-drug market packs a big financial punch. Five
recently approved orphan medications each cost $150,000 per patient per year, with
three costing $300,000 or more.4
One-third of the new molecular entities and new
therapeutic biological products approved by the FDA in 2013 were orphan drugs,5
and nearly 1,800 orphan designations fill the drug pipeline.6
In the years ahead, another factor will contribute to the rising cost of specialty
drugs: combination therapy. For example, studies have shown the efficacy of
combining two medications to treat hepatitis C patients who cannot tolerate
interferons (interferon injections can cause intense flu-like symptoms). The FDA
gave the green light and providers have begun prescribing a combination of
Sovaldi and Olysio – two capsules – for these patients. Alone, each drug is expensive.
Combined, monthly dosing exceeds $55,000. Also, drug makers have produced costly
fixed-dose combination products (Harvoni©
). Under either scenario, employers with
afflicted workers will pay a high price for pharmaceutical therapy.
Public Policy Can Help Control Costs
Shortened exclusivity would save
$3.3 billion over 10 years.
Public policy presents one path to controlling the growing cost of specialty drugs.
Together, the employer and TPA communities can advocate a number of health care
policy changes.
They can urge Congress to shorten the exclusivity period for biologics. Brand name
biologic drugs enjoy a 12-year exclusivity following FDA approval, which precludes
free-market competition. When a specialty drug attains approval, it is not possible to
moderate its price point through competition from competitor brands or a generic
equivalent. By shortening the exclusivity period, policymakers would enable lower-
cost, generic biologic drugs to enter the market sooner, bringing economic relief to
employers and employees alike. The Obama Administration has projected that
shortened exclusivity would save $3.3 billion over 10 years.7
Combination
therapies
contribute to the
rising cost of
specialty drugs.
LESS THAN
1%OF PATIENTS USE
SPECIALTY DRUGS
AND REPRESENT
GREATER THAN
30%OF DRUG SPEND

3. $14.1 Billion Specialty Generic Opportunity
Building on the Affordable Care Act (ACA), TPAs and employers should advocate the
adoption of value-based insurance designs (VBIDs) throughout the self-funded and fully
insured markets. The ACA acknowledged the important role of VBID in optimizing both
cost and patient outcomes in pharmaceutical treatments and medical services generally.
Section 1001 of the law created a new section 2713 of the Public Health Service Act that
supported the VBID approach. The Administration continues to support VBID. In the
spring of 2012, the Department of Health and Human Services recognized the value and
benefits of VBID in the Actuarial Value and Cost-Sharing Reductions Bulletin, which read:
“We also recognize the need to accommodate innovative plan design features that are
meaningful to consumers, such as value-based insurance designs that vary the copayment
or coinsurance for items and services based on expected value.’’8
In short, VBID works. Washington State’s evidence-based prescription drug program
has saved $20-$30 million per year, a 5 percent reduction in medication costs across
state programs for state workers, as well as Medicaid.9
Best-of-Breed Specialty Pharmacies Manage
Spend and Optimize Outcomes
In addition to policy advocacy, TPAs and employers should revisit their PBM relationships.
Specifically, they should look to partner with a PBM that owns a best-of-breed specialty
pharmacy. These entities employ a range of proven approaches to providing measurable
cost-management solutions and optimized therapeutic outcomes.
A best-of-breed specialty pharmacy fields a team of patient care coordinators.
These coordinators deliver personalized care, guiding patients through benefits,
educating them about cost-effective choices, providing ongoing clinical support
and monitoring compliance.
TPAs and self-funded employers should choose a specialty pharmacy that practices
“personalized medicine.” Personalized medicine takes a systematic, person-centered
approach to providing each patient with the right drug at the right dose at the right
time. It does this through the highly consultative tailoring of treatment to the
characteristics, needs and preferences of the patient during all stages of therapy.
8.2015 ©WellDyne
Best-of-breed
pharmacies
practice
personalized
medicine
and leverage
key industry
development
to help TPAs
and employers
contain costs.
20192018201720162015 Copaxone 20mg/mL
Depocyte
Fuzeon
Tracleer
Trelstar
Xenazine
$1.6
$3.1
$2.7
$3.3$3.4
Gleevec
Epzicom
Kaletra Tabs
Lupron Depot
Visudyne
Acthar
Arranon
Reyataz
Sandostatin LAR
Somavert
Sustiva (600mg)
Viread (300mg)
Adcirca
Clolar
Letairis
Lexiva
Makena
Viread
Zytiga
Gilenya
Exjade
Firazyr
Zyrem

4. The best specialty pharmacies employ a multi-pronged approach to
managing costs, including:
Additionally, best-of-breed specialty pharmacies go beyond the core business of
dispensing medications to track key industry developments. They leverage such
developments to help TPAs and employers contain costs. Drug trends provide a
good example. While there were just four drugs that treated MS in 2004, today there
are 11 products, providing an opportunity to tier the medications by relative cost and
effectiveness.10
The best specialty pharmacies are consistently the first to leverage the
opportunity presented by MS and other maturing therapy classes to the benefit of TPAs
and self-funded businesses.
In conclusion, while the cost of traditional medications is expected to rise
modestly, today’s significant specialty drug spend is projected to rise dramatically.
A two-pronged approach – advocating policy changes and partnering with a PBM
that owns a best-of-breed specialty pharmacy – will enable TPAs and their employer
customers to manage and moderate their specialty medication spend.
Footnotes
1. “Specialty Drugs – Issues and Challenges,” Issue Brief, America’s Health Insurance Plans,
June 2014.
2. Ibid.
3. U.S. Food and Drug Administration, http://www.fda.gov/Drugs/ResourcesForYou/Consumers/
ucm143563.htm, March 15, 2012.
4. Silverman, Ed, “Tiger in the Fiscal Room: Beware the Increasing Cost and Number of
Orphan Drugs,” Managed Care, March 2013.
5. Lee, Jaimy, “New Drugs Carry Hefty Price Tags,” Modern Healthcare, Oct. 5, 2013.
6. Op. cit., Silverman.
7. National Health Expenditure Projections, 2012-2022, U.S. Department of Health and
Human Services, Centers for Medicare Medicaid Services, www.cms.gov.
8. Actuarial Value and Cost-Sharing Reductions Bulletin, U.S. Department of Health and
Human Services, spring 2012.
9. “Washington State: A Integrated Approach to Evidence-Based Drug Purchasing,” The
Commonwealth Fund, http://www.commonwealthfund.org/publications/newsletters/states-in-
action/2006/mar/march-2006/profiles--in-depth-looks-at-initiatives-that-are-making-a-difference/
washington-state--an-integrated-approach-to-evidence-based-drug-purchasing, March 29, 2006.
10. Multiple Sclerosis Association of America, http://www.mymsaa.org/about-ms/treatments/,
last updated Aug. 19, 2014.
Prior authorization
This can effectively help avoid inappropriate drug use and promote the use of evidence-based
drug therapy. The efficient and effective use of health care resources can minimize costs,
improve member access to more affordable medications and improve clinical outcomes.
Step edits
This therapy approach ensures the patient uses a lower-cost, equally efficacious drug before
authorizing a more complex and often more expensive medication.
Quantity level limits
Such limits include duration of therapy, quantity over a period of time and maximum daily dose
edits. Drug benefit coverage limits are based on FDA-approved durations and dosing.
Reporting
Effective specialty drug management is informed by timely information about utilization,
intervention, coordination and outcomes. TPAs and employers should partner with a specialty
pharmacy that provides comprehensive, in-depth reporting and access to all aspects of data.
Trend analysis
The best specialty pharmacies meet with TPAs and self-funded employers to review how their
plans are running and address opportunities for cost containment, improved utilization and
member education about medical conditions and drug therapies.