For a majority of Americans, prescription-filling means heading to the local pharmacy and making a small covered service payment. However, for people who are in need of specialty medications – new drugs to treat complex or chronic conditions – things aren’t that straightforward. It’s certainly true that specialty drugs have found seat amongst the elite within the pharmaceutical industry, for their ability to give a new lease of life for people with hepatitis C, cancer, Parkinson’s disease, multiple sclerosis, rheumatoid arthritis, psoriasis, etc.
That said, these drugs don’t come cheap. For instance, Soliris that cures two fatal blood diseases, costs more than $400,000 annually. Though Soliris typically represents the higher end of the spectrum, there are many other drugs in the U.S. that fall in the same price bracket.
According to Leigh Purvis, the health services research director at AARP, there are many great drugs and pills in the market, but the steep costs are keeping them out of the reach of common people – especially seniors who are in their retirement or individuals stuck with a fixed income.
In addition, these specialty drugs are among the major reasons behind escalating health care costs, putting a major burden on the whole health care system. In fact, more than 50% (19 out of 23, to be precise) of the 2013 FDA-approved drugs were of the specialty breed. This is the third consecutive year when specialty drugs have been among the majority of the approved drugs. As per CVS Caremark, expenditure on specialty drugs is likely to increase four times by 2020, inching close to $400 billion – or vaguely 9 percent of the total estimated health care expenses of the country.
The medical landscape is changing quickly as per several experts, which includes National Coalition on Health Care’s CEO and president, John Rother. He alerts a flurry of expensive drugs and pills is about to literally loot the American health care setup.
The difficulties relating to specialty medicines took center stage in 2013 with Sovaldi’s introduction – a medicine that can cure close to 90% of common hepatitis C cases, which could damage the liver or may lead to liver cancer, cirrhosis, and even death – if left untreated. A 3-month supply of the drug (the ideal treatment period) sets the patient back by $84,000, and a projected 3.2 million U.S. citizens would find the drug handy – 75% of the infected being boomers.
And, as per expert arguments, Sovaldi’s cost and other expenses of hepatitis C treatments may bring along challenges for state insurance covers catering to several boomers.
The way by which insurance companies compute the costs of prescribed medicines is a bit complicated. Usually, drug manufacturers place a sticker value and insured people can base their arguments over the set price, based on the levels of competition faced by the medicine. Since freestanding specialty medicines aren’t completely challenged yet, insurers mostly go with the label price and try covering the cost by sharing it in consumer plans.
To ascertain the total cost a consumer remits, a plan puts together covered medicines as tiers. At the base, a non-branded medicine may need a consistent $10 copayment. However, drugs at the fifth or fourth tier, which represent specialty medicines, may need patients to remit a cost percentage, as high as 33%.
During 2013, 23% of nationwide workers were part of a plan with cost-sharing existing in more than four tiers for prescription medicines, as per the Kaiser Family Foundation. This was up from 3% in 2004.
The number is much bigger in Medicare. In other words, close to or above 95% of all prescription medicine schemes had a minimum of one specialty drug tier, up from the 50% figure in 2006. In fact, the number of drugs or the percentage getting housed within the specialty tier, Medicare. Part D, is going up every year.
Not similar to Veterans Affairs and Medicaid, Medicare is legally forbidden from utilizing its number strength to broker lower prices. Instead, the negotiating talks are taken care of by private insurance firms (companies offering medicine coverage within Medicare stipulations), who then determine the specific drugs that must be put into plans, along with their cost-sharing and price rules. A mind-boggling range of plans come through and wither every year, and several hundreds of them stay rooted with revised rules and prices.
CMS officials opine the specialty tier – Part D – was put in place to inspire newer plans that accommodated expensive drugs. However, the Center for Medicare and Medical Services’ definition of ‘expensive’ or ‘costly’ hasn’t updated itself to changing times. It has been rigid ever since 2008.
To keep their perspectives in place, drug-making companies say they don’t have an option and have to charge higher prices for specialty drugs. If they cannot recover their drug development and research costs, which is close to $2.6 billion for every drug, the newer and more effective treatments won’t be available for patients to benefit from.
According to Senior VP of research and policy at PhRMA ( the consumer-spendingtrade association for the drug industry), they can accommodate new drugs for hepatitis C, Alzheimer’s and other diseases, and who also alludes to the 20% cancer death rate decline over the past 20 yeconsumer spending for specialty drugs is likely to go up in conjunction with total health care expenses through 2023.
Drug manufacturers are also quick to put in their case, specifically indicating their expenses – approximately $4 billion/ year, as per a particular estimate – on medical programs providing the affected with specialty medicines at zero cost or assist them take care of the copays. And in reality, programs sponsored by manufacturers have supported several million patients address their medical expenses.
Lawmakers say they are trying hard so that Medicare is permitted to negotiate with drug manufacturers for lowering the prices of prescription drugs.
However, that is certainly not the case, especially with so many patients on the Medicare roll. While people enrolling for Part D can accept medicines from their manufacturers at zero cost, Medicare prohibits drug makers from providing any kind of financial or copay assistance. The legal ban emanates from the notion that assistance of such nature may comprise unlawful inducements – within the realms of the anti-kickback federal statute – for enrollees to utilize a specific drug manufacturer’s products.
Assistance programs for patients, either from charities or drug makers, are not good enough to assist the ever-growing crowd that needs specialty drugs. Efforts to alter the scenario are setting in from several directions. NCH – comprising close to 80 health care providers, medical societies, insurers and related factions – has initiated the Sustainable Rx Pricing Campaign, to highlight brands and their specialty drug prices it considers abusive and unsustainable.
A few states are also moving in the same direction. Some six states have embraced legislation that caps the prices consumers must bear for specialty medicines. And a Congress bill would put fresh limits on private health specialty tier plans.
For people on Medicare, a few lawmakers are also pushing hard to enable Medicare negotiate with drug makers to lower the prices of prescription drugs.
Drug manufacturers are also being asked to exhibit some transparency. According to Karen Ignagni, the CEO and president of America’s Health Insurance Plans, drug makers must reveal to the public the marketing and R&D costs they incur, similar to how insurers disclose their administrative and medical care expenses.
At the moment, people only know new specialty drugs are rolling out of the factory, but they aren’t sure at what profit margins.