Specialty Pharmaceuticals

Complex new drugs hold great promise for people with chronic and life-threatening conditions. The drugs are also a driver of spending growth.

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Specialty pharmaceuticals are a rapidly growing share of total drug expenditures by public and private health plans. These drugs, typically used to treat chronic, serious, or life-threatening conditions, such as cancer, rheumatoid arthritis, growth hormone deficiency, and multiple sclerosis, are often priced much higher than traditional drugs. Total costs can be in the thousands of dollars a month and can exceed $100,000 a year for some products. There are usually few if any low-cost generic equivalents.

These high costs represent an increasing burden on payers, including governments and employers. Because health plans often require substantial cost sharing for specialty drugs, there is also a large impact on patients who need such medicines. Some are concerned that cost sharing could discourage the use of these drugs, perhaps leading to adverse health outcomes.

Research into specialty drugs is attractive to biopharmaceutical companies from both a medical innovation and business perspective. The ability for the market to sustain the relatively high cost of these products creates substantial incentives for companies to research and develop products that address serious, unmet health needs. Also, in some cases, companion diagnostic tests are used to identify patient subpopulations in which the specialty product generates a differential response, either negative or positive. As a result, specialty products have stimulated diagnostic research. Given the level of investment, this means that patients and payers can expect continued innovation and research to develop such medicines and companion diagnostics in the future.

Payers are interested in steps they can take to control the contribution that specialty pharmaceuticals make to the growth in premium costs while ensuring that patients can access those drugs that will improve their health and quality and length of life. Biopharmaceutical manufacturers and patient advocates are concerned that restrictions on specialty pharmaceuticals could discourage research and harm patient care. Pharmacists are also concerned that some plans to control the use and cost of specialty pharmaceuticals will limit their opportunities to serve patients

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65%

of spending on new drugs in 2012 was on specialty pharmaceuticals.