How to Stop Specialty Drugs From Driving Up Employee Health Care Costs

Aon Hewitt, a global health solutions consultancy, reports that U.S. pharmacy costs for active employees and pre- and post-65 retirees are expected to drift into the 10 percent by 2016.

“This is primarily due to high price brand inflation for brand and specialty drugs,” said Tim Nimmer, global chief actuary for Aon Health. Another major contributing factor is the robust pipeline of specialty drugs, including the new hepatitis C treatments.

Indeed, according to the American Pharmacists Association, specialty drug spend accounted for approximately $87 billion in 2012, or about 3.1 percent of the overall drug spend in the U.S. By 2020, those numbers are expected to be $400 billion, or about 9.1 percent of the national drug spend.

Emblematic of the rise of specialty drugs is the prediction that, within four years, seven of the top 10 drugs in terms of sales will be specialty products. Multiple drugs for oncology, hepatitis C, and immunology are already in the pipeline.

What employers can do

Fortunately, Aon notes that there are a number of steps employers can take to implement competitive yet cost-effective pharmacy management systems, including:

  • Encouraging the use of generic drugs.
  • Designing specialty benefits to ensure that employees receive the right specialty medication through the most appropriate setting.
  • Setting appropriate measurement criteria to measure the effectiveness of the benefit and better control spend.

What Kaiser Permanente is doing

At Kaiser Permanente (formerly Group Health), we’ve already taken steps to enact these recommendations. We encourage our members to choose generic drugs whenever possible. (The FDA estimates that generics cost up to 85 percent less than their brand name counterparts.) And our efforts have not gone unnoticed.

In comparing five local health plans in terms of pharmaceutical management, the Washington Health Alliance ranked Kaiser Permanente (as Group Health) first in their 2014 eValue8 survey.

Results were based upon performance in value-based formulary, generic prescribing and appropriate drug use, specialty pharmaceuticals, and quality and safety of outpatient prescribing.

Another cost-saving measure is to encourage your employees to have their prescriptions delivered by mail. Kaiser Permanente members reduce their copay by about one-third when they order a 3-month supply of certain drugs.

The Kaiser Permanente Specialty Pharmacy

The biggest step we’ve taken is forming our own Specialty Pharmacy, staffed by a team of board-certified specialty pharmacists and trained clinicians. Together, they dispense and, equally important, manage specialty drugs. They review all patient medications for possible interactions, discuss protocol and possible side effects with patients, and contact the prescribing physician if revised treatment is warranted.

In 2014, the online Specialty Pharmacy Times listed 10 trends in specialty pharmacy, one of which stated that as drug costs go up adherence goes down. To guard against this, our Specialty Pharmacy team schedules regular follow-up calls with patients to check on adherence and tolerance.

Rather than dispense a full year’s supply of a specialty medication, we often urge a trial period to monitor the drug’s efficacy and watch for any interactions. When you consider that some hepatitis C drugs cost $84,000 for a course of treatment or $1,000 a pill, it’s in everyone’s best interests to make sure the medication is having the desired effect.

Fight back

Next to hospitalization and doctor costs, prescriptions take up the highest percentage of an employers health care costs. And with the influx of specialty drugs, that percentage is only going to increase. By offering your employees a health plan that stresses generic drugs and has an established specialty pharmacy, you can help mitigate the impact specialty drugs have on your bottom line.


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All plans offered and underwritten by Kaiser Foundation Health Plan of Washington or Kaiser Foundation Health Plan of Washington Options, Inc.