If you've been wondering why the high cost of a new hepatitis C cure has ignited such a fierce public debate over the past few months, it's because more specialty drugs like Sovaldi are going to flood the market in coming years. This class of drugs accounted for less than 1 percent of all prescriptions in 2013, but about 25 percent of all prescription drug spending — and spending on specialty drugs is projected to increase 63 percent by 2016, according to Express Scripts.
These complex and expensive specialty drugs cost on average $3,000 per month and, by one count, are about 50 times more expensive than traditional drugs. So it seems like a useful exercise to ask what these expensive drugs actually buy.
A new study finds that new specialty drugs often provide substantially much higher health benefits than the traditional drugs, but the specialty drugs also come with significantly higher costs, according to research published in this month's Health Affairs journal.
"Our study suggests that although specialty drugs often have higher costs than traditional drugs, they also tend to confer greater benefits and hence may still offer reasonable value for money," wrote the researchers at the Boston-based Center for Value and Risk in Health, which is funded in part by the pharmaceutical industry.
They judged the drugs' performance by a metric known as quality-adjusted life years (QALY) — which essentially speaks to how much these new treatments actually enhanced a patient's quality of life when compared to previously available care. To make this determination, researchers analyzed the scientific literature evaluating the performance of 58 specialty drugs and 44 traditional drugs approved by the FDA between 1999-2011.
On average, the specialty drugs provided QALY gains of .183 compared to .002 for traditional drugs, meaning that new specialty drugs were comparatively far better at improving a patient's quality of life. This wasn't the case across the board, though. About a quarter of the expensive, specialty drugs had a QALY score below zero, so they didn't represent an improvement over past treatments. But, as the following chart shows, specialty treatments did account for 13 of the top 15 drugs based on QALY scores.
The researchers said it's not entirely surprising that the new specialty drugs provided greater health gains. They often represented treatments for complex diseases with few or no previously effective options, while the traditional drugs were mostly for ailments with already-effective treatment options for most patients.
But the difference in price further sets these drugs apart. The new traditional drugs, when compared to previous treatments, represented a median increase of $784. For specialty drugs, it was $12,238 — about 15 times higher. Determining whether these new treatments were more cost-effective was difficult, the researchers said.
The challenge for the health-care industry, though, is how to make sure people can afford these cures, without hurting the financial incentives for drugmakers to invest in research leading to additional innovative cures. There is no one "magic bullet" for this problem, CVS executives write in another Health Affairs article this month.
WellPoint chief medical officer Sam Nussbaum expressed some of the insurance industry's angst over specialty drug prices during a Brookings Institution forum on specialty drug pricing last week. While health insurers are moving more toward value-based care — that is, rewarding care providers for keeping patients healthier, instead of paying for each service — he said there is no comparable model for drugs. About 36 percent of WellPoint's business is now in value-based payment arrangements, he said, but drugs have been the outlier.
"Drugs are really a price and volume business," Nussbaum said. "Value-based payment, something we all wish to achieve, has been difficult to pursue."
Unfortunately for patients, the answer so far has been to make consumers pay more out of pocket for these specialty drugs. Some new health plans are are requiring customers to pay as much as half of the cost of these drugs, though the Affordable Care Act caps annual out-of-pocket costs at $6,350 for an individual and $12,700 for a family. Those costs could still be a burden, though, and advocacy groups representing HIV and AIDS patients have filed anti-discrimination lawsuits against insurers using these specialty drug tiers.
At the same Brookings forum last week, Darius Lakdawalla, a professor the USC Schaeffer Center for Health Policy and Economics, highlighted a key tension in our health-care system. Those who are being asked to pay for these high-cost specialty drugs may not be the ones to accrue the benefits of a healthier patient 10, 15, 20 years down the road, he said. That's partly why health-care payers, like insurers, employers and states, have been so hesitant to pay for these new hepatitis C cures, he said.
Further, he said, hepatitis C is "by no means the only disease that has problems like that."