Sticker Shock: The National Debate Over Specialty Drugs

For patients diagnosed with serious health conditions and rare diseases, specialty drugs are often considered their front-line defense. But the results come at a price.

There’s a battle brewing in America over a class of medication that some claim is pushing spending on prescription drugs to unsustainable levels. Although they can produce life-changing medical results, these ‘specialty drugs’  can come with six-figure price tags.

For patients diagnosed with serious health conditions and rare diseases such as cancer, hepatitis C, hemophilia or multiple sclerosis, to name a few, specialty drugs are considered their front-line defense. But their results come at a price—from thousands of dollars annually to hundreds of thousands.

The debate over specialty medication prices flared yet again this summer over Spinraza™, a new drug used to treat spinal muscular atrophy—a rare and often fatal generic spinal disorder. The manufacturer price for Spinraza is causing widespread sticker shock: $750,000 for the first year of treatment and $375,000 thereafter.

When properly managed, specialty products can be an important component of high-value health care.

New U.S. Food and Drug Administration chief Scott Gottlieb, a physician and a cancer survivor, expressed concerns over the prices of some prescription drugs before a congressional subcommittee recently. “Simply put, too many patients are priced out of the medicines they need,” Gottlieb said.

Pharmaceutical companies argue that specialty medication prices are driven by market demand and the need to recoup research costs and to fund other drug-related innovation. And while they represent only a fraction of the $450 billion spent nationally in 2015 for all prescription drugs, specialty medications are the fastest-growing segment of that spend, according to the Blue Cross and Blue Shield Association.

According to the Association’s Health of America report, total spending on the top 15 specialty drugs among Blue Cross and Blue Shield plans nationally rose to $18.4 billion in 2014 — a 26 percent increase from the previous year. Nationally, spending on specialty drugs could quadruple by 2020 to about $350 billion, according to the report.

Health insurers typically cover more than 98 percent of prescription drug costs for people who need more than $100,000 in medicines per year, the BCBSA said. While the national debate continues over how to determine equitable costs for drugs that can bring life-changing results, insurers are working to help ensure the appropriate patients receive the appropriate drugs.

“Although expensive, when properly managed specialty products can be an important component of high-value health care,” said Dr. Matthew Fontana, senior vice president and chief medical officer of pharmacy for the Blue Cross and Blue Shield Plans in Illinois, Montana, New Mexico, Oklahoma and Texas. “Maximizing this value requires careful planning and integration of services across both the medical and pharmacy benefit.”

Planning and integration of services is especially critical when it comes to rare diseases. The National Organization of Rare Diseases estimates 30 million Americans—1 in 10 people, most of whom are children — are affected by one of 7,000 rare diseases. The drugs used to treat these diseases are often called “orphan drugs.”

Until today, the number of orphan drugs submitted for regulatory approval to the FDA was slow and measured. Submissions for new drugs are now at an all-time high, representing 41 percent of the drugs the agency approved in 2016, including Spinraza. The drugs carry a large price tag.

“With Spinraza, we may have hit the tipping point in costs,” Dr. Fontana said. “There are only so many resources to go around. The question for the health care industry becomes, ‘What’s a fair price?’ Until that is determined, we are focusing on working with our provider networks to control costs.”

Patients receiving specialty drugs may help control costs by deciding where to have the drugs administered. Dr. Larry Kosinski of the Illinois Gastroenterology Group said, for example, patients receiving the specialty drug Remicade for Crohn’s disease — a chronic inflammatory bowel condition — may save up to $100,000 annually by having the drug administered in a doctor’s office instead of a hospital outpatient facility.

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