Rising cost of ‘specialty’ drugs prompts employers to limit their use

When Kathi Ryness’s multiple sclerosis worsened in 2000, she began taking Avonex, a drug that helps slow the progression of the disease and reduces the number of relapses. At the time, her health plan covered the drug in full.

But in 2009, she and her husband, Gary, were forced to switch plans. Under their new coverage, the Alamo, Calif., couple owed $660 every four weeks for the weekly Avonex injections, 30 percent of the $2,200 cost. Within a year, the cost went up again, leaving Kathi, who is now 62, and Gary, 66, on the hook for $800 every four weeks.

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The coinsurance was killing them. “It was a choice between that and eating,” Gary Ryness says.

Working with an insurance consultant, they switched from a preferred provider organization to a health maintenance organization that didn’t have coinsurance charges for self-injectable drugs such as Avonex. Now, they pay nothing for the drug.

“Everybody has different ways of classifying these drugs,” Gary says.

In coming years, experts say, more people will have to navigate the confusing and expensive terrain of such “specialty” medications.

While most drugs are made from chemicals and can have generic as well as brand-name versions, a typical specialty drug is biologic — that is, derived from living organisms — and has no substitute. In addition to treating MS, these drugs are used for such complex, serious conditions as cancer, rheumatoid arthritis and Crohn’s disease. Growth in spending on specialty drugs is far outpacing spending on traditional drugs, and many new ones are in the pipeline.

“In the next five to 10 years, the consensus of all the experts we spoke to was that a much larger proportion of consumers will be eligible for some kind of specialty drug,” says Ha Tu, a senior researcher at the Center for Studying Health System Change. She was the lead author on a recent report about managing spending on specialty drugs.

Health plans’ spending for each patient using these drugs often exceeds $1,200 per month, according to the center’s report. Although they account for just 1 percent of prescriptions, specialty drugs make up 17 percent of drug spending, according to IMS Health, a health-care information and services company.

Employers that provide their workers with health insurance are struggling with how to manage these costs.

Many plans have placed specialty drugs in a tier where, instead of a flat co-payment — $20, $50 or some other amount — patients must pay a percentage of the medications’ cost. For people who need specialty drugs, that can amount to tens of thousands of dollars annually.

Some plans cap the amount a patient must pay out-of-pocket for specialty drugs at $1,000 or $2,000 annually, says Allan Zimmerman, national pharmacy practice leader in the human resources group at PwC, a business-services company formerly known as PricewaterhouseCoopers.

Employers also seek to reduce costs through intensive case management, providing their workers with education and coaching about specialty-drug dosages, side effects and adverse reactions, says Julie Stone, a senior consultant with benefits consultant Towers Watson.